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UNITED
  STATES
  SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM
  10-K

FOR
  ANNUAL AND TRANSITIONAL REPORTS
  PURSUANT TO SECTIONS 13 OR 15(d) OF
  THE SECURITIES EXCHANGE ACT OF 1934

ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934

For
  the Fiscal Year Ended December 31, 2003

o TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission
  File Number 0-19635GENTA
  INCORPORATED(Exact name of Registrant as specified in its certificate
  of incorporation)

|Delaware                                                             |  | 33-0326866                                
|-------------------------------------------------------------------- |  | ------------------------------------------
|(State
      or other jurisdiction of incorporation or organization) |  | (IRS
      Employer Identification Number)
|                                                                     |  |                                           
|Two
      Connell Drive
      Berkeley Heights, New Jersey           |  | 07922                                     
|(Address
      of principal executive offices)                       |  | (Zip
      Code)                          

(908)
  286-9800(Registrants telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: NONE

Securities
  registered pursuant to Section 12(g) of the Act:
  Common Stock, $.001 par value(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing requirements
  for the past 90 days. Yes ý No o

Indicate
  by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
  S-K is not contained herein, and will not be contained, to the best of registrants
  knowledge, in definitive proxy or information statements incorporated by reference
  in Part III of this Form 10-K or any amendment to this Form 10-K.
  o

Indicate
  by check mark whether the registrant is an accelerated filer (as defined in
  Rule 12b-2 of the Securities Exchange Act of 1934). Yes ý
  No o

The
  approximate aggregate market value of the voting and non-voting common equity
  held by non-affiliates of the registrant was $508,349,195 as of June 30, 2003
  (the last business day of the registrants most recently completed second
  fiscal quarter). For purposes of determining this number, 36,307,738 shares
  of common stock held by affiliates as of June 30, 2003 are excluded. For purposes
  of making this calculation, the registrant has defined affiliates as including
  all directors, executive officers and beneficial owners of more than ten percent
  of the common stock of the Company.

As
  of March 11, 2004, the registrant had 77,722,489 shares of Common Stock outstanding.

Documents
  Incorporated by Reference

Certain
  provisions of the registrants definitive proxy statement to be filed not
  later than April 30, 2004 pursuant to Regulation 14A are incorporated by reference
  in Items 10 through 13 of Part III of this Annual Report on Form 10-K.

1



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Genta
  Incorporated
  Table of Contents

|Part
      I   |              
|-------------- | -------------
|               | Item
      1.
|               | Item 2.      
|               | Item 3.      
|               | Item 4.      
|Part
      II  |              
|               | Item 5.      
|               | Item 6.      
|               | Item 7.      
|               | Item 7A.     
|               | Item 8.      
|Part
      III |              
|               | Item 9.      
|               | Item 9A.     
|               | Item 10.     
|               | Item 11.     
|               | Item 12.     
|               | Item 13.     
|               | Item 14.     
|Part
      IV  |              
|               | Item 15.     
|Signatures     | 70           
|Certifications | 77           



|(1) |  | The information required
      in these items is incorporated by reference from the Companys definitive
      proxy statement to be filed not later than April 30, 2004 pursuant to Regulation
      14A of the General Rules and Regulations under the Securities Exchange Act
      of 1934, as amended.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2

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Table of Contents

|Part
      I  
|--------------
|              
|              
|              
|              
|Part
      II 
|              
|              
|              
|              
|              
|Part
      III
|              
|              
|              
|              
|              
|              
|              
|Part
      IV 
|              
|Signatures    
|EX-10.16      
|EX-10.17      
|EX-21         
|EX-23.1       
|EX-31.1       
|EX-31.2       
|EX-32.1       
|EX-32.2       



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The
  statements contained in this Annual Report on Form 10-K that are not historical
  are forward-looking statements within the meaning of Section 27A of the Securities
  Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
  as amended, including statements regarding the expectations, beliefs, intentions
  or strategies regarding the future. The Company intends that all forward-looking
  statements be subject to the safe harbor provisions of the Private Securities
  Litigation Reform Act of 1995. These forward-looking statements reflect the
  Companys views as of the date they are made with respect to future events
  and financial performance, but are subject to many risks and uncertainties,
  which could cause actual results to differ materially from any future results
  expressed or implied by such forward-looking statements. Forward-looking statements
  include, without limitation, statements about:

- U.S. Federal Drug Administration
    ("FDA") approval or failure to approve Genasense;
- the Company's ability
    to develop, manufacture and sell its products;
- the safety and efficacy
    of the Company's products;
- the commencement and
    completion of pre-clinical and clinical trials;
- the Company's ability
    to obtain necessary regulatory approvals;
- the Company's contractual
    collaborative arrangements;
- the adequacy of the
    Company's capital resources;
- the ability to obtain
    sufficient financing to maintain the Company's planned operations;
- the possibility and
    effect of patent infringement claims;
- the impact of competitive
    products and market conditions;
- the other risks
    described under Certain Risks and Uncertainties Related to the Companys
    Business.

The
  Company does not undertake to update any forward-looking statements.

We
  make available free of charge on our internet website (http://www.genta.com)
  our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
  on Form 8-K and amendments to these reports filed or furnished pursuant to Section
  13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
  practicable after we electronically file such material with, or furnish it to,
  the Securities and Exchange Commission. The content on the Companys website
  is available for informational purposes only. It should not be relied upon for
  investment purposes, nor is it incorporated by reference into this Form 10-K.

3

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PART
  I

Item
  1. Business

A.
  Overview

Genta
  Incorporated (Genta or the Company) was incorporated
  in Delaware on February 4, 1988. Genta is a biopharmaceutical company dedicated
  to the identification, development and commercialization of novel drugs for
  cancer and related diseases. Our research portfolio consists of two major areas
  of focus:

- DNA/RNA Medicines,
    which are drugs based on chemical modifications of either deoxyribonucleic
    acid, or DNA, or ribonucleic acid, or RNA; and
- Small Molecules.

We
  began marketing our first commercial product, Ganite, which is part of
  our Small Molecule program in October 2003. Ganite has been approved by
  the U.S. Food and Drug Administration (FDA), for treatment of cancer-related
  hypercalcemia that is resistant to hydration. The drug is being marketed and
  sold exclusively by Genta in the United States by our dedicated sales force.

The
  Companys lead investigational antisense drug is called Genasense
  (oblimersen sodium), a molecule that is designed to block the production of
  a protein known as Bcl-2. Current science suggests that Bcl-2 is a fundamental
  (although not sole) cause of the inherent resistance of cancer cells to current
  anticancer treatments, such as chemotherapy, radiation, or monoclonal antibodies.
  While Genasense has displayed some anticancer activity when used by itself,
  the Company is developing the drug solely as a means of amplifying the effects
  of other anticancer therapy by pre-treating patients with Genasense.

In
  September 2003, Genta reported Phase 3 clinical data for Genasense in
  patients with advanced malignant melanoma. We included these data in our FDA
  New Drug Application (NDA), for Genasense, which we initiated
  on a rolling basis in August 2003 (i.e., we filed the NDA in several sections
  with each section being filed when completed). We completed the NDA filing for
  use of Genasense in combination with chemotherapy for patients with advanced
  malignant melanoma on December 8, 2003. The FDA accepted our NDA filing on February
  5, 2004 and granted Priority Review status to the application, which
  targets an agency action on or before June 8, 2004. On February 10, 2004, we
  were invited by the FDA to meet on May 3, 2004 with the FDA Oncology Drugs Advisory
  Committee.

We
  are pursuing further testing of both Ganite and Genasense in additional
  indications. Ganite is currently undergoing clinical testing for use as
  a cancer chemotherapy drug, especially in patients with non-Hodgkins lymphoma,
  or NHL. Genasense is being tested as a drug that can increase the effectiveness
  of current types of cancer therapy. We have completed patient enrollment in
  two additional randomized Phase 3 trials that test the efficacy of Genasense
  in patients with multiple myeloma and chronic lymphocytic leukemia, or CLL.
  Genasense is also being tested in earlier clinical trials for treating
  more than 10 other cancer types, including non-small cell lung cancer, small
  cell lung cancer, NHL, acute and chronic leukemias, cancers of the prostate,
  colon and breast and other diseases. Genasense has received designations
  as Fast Track and Orphan Drug from the FDA in the advanced
  malignant melanoma, multiple myeloma and CLL indications.

We
  have a series of agreements with Aventis to develop and commercialize Genasense.
  Aventis and Genta will co-promote Genasense in the United States; Aventis
  is a major participant in the worldwide oncology market and possesses one of
  the largest oncology sales forces in the U.S. Under these agreements, Aventis
  has committed to provide up to $476.9 million in initial payments, milestone
  payments and for the purchase from us of equity and convertible notes. In addition,
  Aventis is responsible for 75% of development costs related to any U.S. NDA
  incurred by Genta or Aventis, and substantially all other development, marketing
  and sales costs incurred worldwide in connection with Genasense. Aventis
  has agreed to pay us royalties on its exclusive worldwide net sales of Genasense,
  and to reimburse a portion of our expense in building Gentas sales force
  to market Genasense in the United States.

4

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Our
  pre-clinical pipeline of DNA/RNA Medicines includes technologies known as antisense,
  RNA inhibitor molecules, or RNAi, and decoys, as well as novel delivery system
  formulations that can increase the entry of these drugs into cells. In August
  2003 we acquired a private company, Salus Therapeutics, Inc., or Salus, in order
  to strengthen our research and development activities in the DNA/RNA Medicines
  program. The acquisition of Salus provides a proprietary screening system that
  rapidly identifies hot spots or key target areas in messenger RNA,
  which can be targeted using both antisense oligonucleotides and RNAi; methods
  of using single-stranded small interfering RNA and micro-RNA molecules to knockdown
  gene expression in target cells; and a proprietary delivery platform designed
  to improve the pharmaceutical properties of oligonucleotides.

In
  addition to Ganite, current activities in the Small Molecule program include
  development of an oral formulation of a gallium-containing compound.

We
  carry out our strategy by identifying and licensing or acquiring from third
  parties early to mid-stage products and well-characterized targets. We design
  and manage the pre-clinical and clinical testing of promising products, which
  is carried out for us by contract research organizations. Generally we expect
  to scale up, validate, conduct late-stage clinical trials and commercialize
  our products either alone or in partnership with established businesses, such
  as Aventis and Avecia for Genasense. Our own product quality and regulatory
  staffs oversee FDA-regulated activities conducted by us or by our business partners.

In
  2003, sales of Ganite accounted for $1.4 million, or 21%, of our consolidated
  revenues. License fees and development funding revenues received from Aventis
  pursuant to our collaborative agreement related to Genasense accounted
  for $1.0 million, or 15% and $4.2 million, or 63% of our consolidated revenues
  respectively. In 2002 license fees and development funding revenues received
  from Aventis accounted for $0.8 million, or 22% and $2.8 million, or 78% of
  our consolidated revenues respectively. In 2001 license fees and royalties derived
  from non-exclusive sub-license agreements involving antisense technology accounted
  for $0.1 million, or 100% of consolidated revenues.

B. Summary of Business
  and Research and Development Programs

Our
  goal is to establish Genta as a biopharmaceutical leader and preferred partner
  in the oncology market, and as direct marketers of our products in the United
  States. Our key strategies and objectives in this regard are:

- Build on our
    foundation in oligonucleotide therapeutics to establish a leadership position
    in the treatment of cancer.

We
  believe that drugs based on DNA and RNA are an important next-generation development
  that Genta is well positioned to commercialize. We are committed to the discovery,
  clinical development and commercialization of these next-generation oncology
  drugs.

- Establish Genasense
    as the preferred chemosensitizing drug for use in combination with other cancer
    therapies in a variety of human cancer types.

We
  believe that Genasense will be more effective as a cancer drug used in
  conjunction with chemotherapy. We are testing Genasense in a variety of
  cancer types in order to establish its utility across many indications. The
  FDA accepted our filing on February 5, 2004 and granted Priority Review
  status to the application, which targets an agency action on or before June
  8, 2004. Assuming FDA approval, we intend to launch Genasense in the United
  States via a co-promotion with Aventis. Aventis plans to file for regulatory
  approval for Genasense in advanced malignant melanoma in countries outside
  the United States. We are entitled to royalties on all sales of Genasense
  by Aventis. We have completed enrollment in Phase 3 clinical testing of Genasense
  in patients with multiple myeloma and CLL. We expect to complete data analysis
  and report our results from those clinical trials in 2004. If one or both of
  these trials proves positive, we believe we can submit a follow-on NDA for Genasense
  in at least one of those diseases in 2004. In addition, in collaboration with
  Aventis and the National Cancer Institute, or NCI, we plan to initiate both
  non-randomized and randomized trials for treating eligible patients, based on
  their disease state, suffering from some of the most prevalent cancers, including
  lung, breast, prostate and colon cancers and NHL.

5

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- Establish Ganite
    for the treatment of NHL and other diseases.

In
  October 2003, we launched Ganite in the United States for the treatment
  of cancer-related hypercalcemia, and we intend to continue to commercialize
  the product for that indication. However, Ganite was originally developed
  as a chemotherapy agent, and published Phase 1 and Phase 2 studies have shown
  a high degree of clinical activity in several diseases, including NHL and bladder
  cancer. We are currently investigating the use of Ganite in Phase 2 clinical
  trials in patients with NHL, and we intend to pursue the clinical development
  of Ganite in this and other indications with the initiation of new clinical
  trials.

- Continue to
    develop and strengthen our portfolio of R&D projects through internal
    development, licensing and acquisitions.

We
  intend to continue to develop our other pipeline products for the treatment
  of patients with cancer, including DNA/RNA Medicines (antisense, siRNA and decoys)
  and Small Molecules (oral gallium). We intend to continue to evaluate licensing
  and acquisitions of complementary technologies.

- Establish a
    strong presence in the U.S. oncology market.

We
  plan to seek opportunities to license or acquire attractive new products, well-characterized
  targets, and technologies that could enable us to expand our internal applied
  research and pre-clinical capabilities. We will continue to strengthen our core
  competencies in clinical development and regulatory and quality assurance. We
  also are planning to build our U.S. sales and marketing capabilities.

Antisense
  Technology

Most
  of a cells functions, including whether the cell lives or dies, are carried
  out by proteins. The genetic code for a protein is contained in DNA, which is
  made up of bases known as nucleotides that are arranged in a specific sequence.
  The specificity of the sequence accounts for the production of a specific protein.
  In order for DNA to produce a protein, an intermediate step is required. In
  this step, DNA is transcribed into messenger RNA, or mRNA. The sequence of mRNA
  that encodes a protein is oriented in only one direction, which is known as
  the sense orientation.

Antisense
  drugs are short sequences of chemically modified DNA bases that are called oligonucleotides,
  or oligos. The oligos are engineered in a sequence that is exactly opposite
  (hence anti) to the sense coding orientation of mRNA.
  Because antisense drugs bind only short regions of the mRNA (rather than the
  whole message itself), they contain far fewer nucleotides than the whole gene.
  Moreover, since they are engineered to bind only to the matching sequence on
  a specific mRNA, antisense drugs have both high selectivity and specificity,
  which can be used to attack production of a single, disease-causing protein.
  Genasense is an antisense oligo that is designed to block the production
  of Bcl-2.

We
  have devoted significant resources towards the development of antisense oligos
  that contain a second generation phosphorothioate backbone, which
  is the nucleotide chain comprised of ribose and phosphate groups. However, we
  also have patents and technologies covering later third generation
  technologies that involve mixed phosphorothioate and methylphosphonate backbones,
  as well as sterically fixed chemical bonds, that may further enhance the molecules
  ability to bind to the intended target. Moreover, we have developed certain
  formulations of polymers that can be used to more efficiently increase the uptake
  of oligos into cells. Some of these advanced technologies may be incorporated
  into new DNA/RNA Medicines.

Programmed
  Cell Death

The
  programmed death of cells is necessary to accommodate the billions of new cells
  that are produced daily, and also to eliminate aged or damaged cells. However,
  abnormal regulation of the programmed cell death process can result in diseases.

Cancer
  is commonly associated with the over- or under-production of many types of proteins.
  These proteins may be directly cancer-causing (i.e., oncogenic)
  or they may contribute to the malignant nature of cancer (for instance, by increasing
  the longevity of cancer cells or making them more likely to spread throughout
  the body). We believe that the ability to selectively halt the production of
  certain proteins may make the treatment of certain diseases more effective.
  The process of programmed cell death is regulated by a large number of proteins,
  particularly members of the Bcl-2 protein family. In an effort to make existing
  cancer therapy more effective, Genta is developing Genasense to target
  and block the production of Bcl-2, a protein that is central to the process
  of programmed cell death also known as apoptosis.

6

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Bcl-2
  as an Inhibitor of Programmed Cell Death

Normally,
  when a cancer cell is exposed to treatment, such as with chemotherapy, radiation
  or immunotherapy, a death signal is sent to an organelle within
  the cell called the mitochondrion. The mitochondrion then releases a factor
  known as cytochrome C that activates a series of enzymes called caspases. These
  enzymes cause widespread fragmentation of cellular proteins and DNA, which ultimately
  causes cell death.

Bcl-2
  is normally found in the mitochondrial membrane where it regulates the release
  of cytochrome C. High levels of Bcl-2 are associated with most types of human
  cancer, including major hematologic cancers such as lymphomas, myeloma, and
  leukemia, and solid tumors such as melanoma and cancers of the lung, colon,
  breast, and prostate. In these diseases, Bcl-2 inhibits the release of cytochrome
  C that would ordinarily be triggered by cancer therapy. Thus, Bcl-2 appears
  to be a major contributor to both inherent and acquired resistance to cancer
  treatments. Overcoming resistance to chemotherapy poses a major challenge for
  cancer treatment.

In
  cancer cells, Bcl-2 inhibits the process of programmed cell death, thereby allowing
  cells to survive for much longer than normal cells. Genasense has been
  developed as a chemosensitizing drug to block production of Bcl-2, thereby dramatically
  increasing the sensitivity of cancer cells to standard cancer treatment.

Genasense

The
  lead product from our DNA/RNA Medicines program is Genasense, an antisense
  oligonucleotide molecule that is designed to block the production of a protein
  known as Bcl-2. Current science suggests that Bcl-2 is a fundamental cause of
  the inherent resistance of cancer cells to current cancer treatments, such as
  chemotherapy, radiation or monoclonal antibodies. Blocking Bcl-2, therefore,
  may enable cancer treatments to be more effective. While Genasense has
  displayed some anticancer activity when used by itself, we believe it is more
  effective as a means of amplifying the effectiveness of other cancer therapies,
  principally by pre-treatment of patients with Genasense. Accordingly,
  we are seeking FDA approval of Genasense in conjunction with chemotherapy.

Overview of Preclinical
  and Clinical studies of Genasense

Genasense
  Preclinical Studies

The
  Development of Genasense

A
  number of pre-clinical studies in cell lines and in animals have shown enhancement
  of tumor cell killing when Bcl-2 antisense was used in combination with standard
  cancer therapies, including anti-metabolites, alkylating agents, corticosteroids,
  other cytotoxic chemotherapy, radiation, and monoclonal antibodies. Several
  studies have demonstrated enhanced antitumor activity and durable tumor regression
  in animals engrafted with human cancers that were treated with Bcl-2 antisense
  followed by antitumor agents that induce programmed cell death. These studies
  include human lymphoma, melanoma, breast cancer and prostate cancers, which
  were treated with Genasense in combination with cyclophosphamide, dacarbazine,
  docetaxel and paclitaxel, respectively.

Genasense
  has been in clinical trials since 1995 in both the United States and Europe.
  We currently have efficacy and safety data on over 1,400 patients in Phase 1,
  Phase 2 or Phase 3 clinical trials. These studies have been conducted in patients
  with a wide variety of tumor types, including advanced malignant melanoma, several
  types of leukemia, NHL and cancers of the prostate, colon, lung, breast and
  other tumor types. Since 2001, Genta and the NCI have jointly approved the initiation
  of approximately 20 new clinical trials. In addition to making Genasense
  available to more physicians and patients, these trials allow us to evaluate
  Genasense in certain diseases (and in combination with other chemotherapy
  drugs) that would otherwise be outside our initial priorities for clinical development.
  The overall results of clinical trials performed to date suggest that Genasense
  can be administered to cancer patients with acceptable side-effects, and that
  such treatment may reduce the level of Bcl-2 protein in cancer cells.

7

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The
  following chart sets forth the progress of our clinical trials with respect
  to various potential indications for Genasense:

|Indication                                       | Status                                                                                                            
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------
|Advanced Malignant
      Melanoma                | Phase 3 fully enrolled;
      NDA filed and accepted for "Priority Review"; target FDA action date June
      2004
|Multiple Myeloma                                 | Phase 3 (fully enrolled);
      
      Phase 1-2                                                                  
|Chronic Lymphocytic
      Leukemia (CLL)         | Phase 3 (fully enrolled);
      
      Phase 2                                                                    
|Acute Myelocytic Leukemia                        | Phase 2                                                                                                           
|Non-Small-Cell Lung
      Cancer                 | Phase 2 (randomized)                                                                                              
|Prostate Cancer                                  | Phase 2                                                                                                           
|Small-Cell Lung Cancer                           | Phase 2 (randomized)                                                                                              
|Breast Cancer                                    | Phase 1-2                                                                                                         
|Colorectal Cancer                                | Phase 1-2                                                                                                         
|Non-Hodgkin's Lymphoma
      (NHL)               | Phase 1-2; Phase 2                                                                                                
|Kidney Cancer                                    | Phase 2                                                                                                           
|Pancreatic Cancer
      (and other solid tumors) | Phase 1-2                                                                                                         
|Waldenstrom's macroglobulinemia                  | Phase 1-2                                                                                                         
|Hepatocellular Carcinoma                         | Phase 1-2                                                                                                         
|Childhood Solid Tumors                           | Phase 1                                                                                                           

To
  date, we have completed patient enrollment in three randomized Phase 3 trials,
  as follows:

Phase
  3 Trial of Genasense Plus Chemotherapy in Patients with Advanced Malignant
  Melanoma

On
  September 10, 2003, we and Aventis announced results from our Phase 3 clinical
  study of Genasense plus chemotherapy in patients with advanced malignant
  melanoma. The trial enrolled patients at 140 sites from 12 different countries.
  A total of 771 patients who had not been previously treated with chemotherapy
  were randomly assigned to receive dacarbazine, a standard chemotherapy drug,
  alone or in combination with Genasense. The primary endpoint of this trial
  was to compare the overall survival between the two treatment arms. Secondary
  endpoints included comparative analyses of progression-free survival and tumor
  response. The following results were obtained:

- Analysis of all
    patients on an intent-to-treat basis showed that the addition of Genasense
    to dacarbazine resulted in an estimated median survival of 9.1 months, compared
    with 7.9 months for patients treated with dacarbazine alone. The result was
    not statistically significant, as measured by a P-value of 0.184. Accordingly,
    we did not reach our primary endpoint. However, in part because both groups
    in the trial lived longer than we originally projected and because a substantial
    number of patients were accrued at a late stage into the trial, the analysis
    also revealed that a number of patients had not been followed for sufficiently
    long periods to establish the final median survival of this trial. For the
    480 patients treated per-protocol who had completed a minimum follow-up of
    12 months, the addition of Genasense resulted in a median survival of
    10.1 months, compared with 8.1 months for dacarbazine alone. The P-value of
    this result was 0.035, which was statistically significant.
- For the 771 patients
    from the intent-to-treat analysis, patients treated with Genasense plus
    dacarbazine showed a significant increase in median progression-free survival
    to 78 days, compared with 49 days for patients treated with dacarbazine alone.
    The P-value of this result was 0.001, which was statistically significant.

8

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- For the intent-to-treat
    population, 11.7% of the patients treated with Genasense plus dacarbazine
    experienced a 30% reduction in size of skin lesion (using RECIST criteria),
    compared with 6.8% for patients treated with dacarbazine alone. The P-value
    of this result was 0.019, which was statistically significant.
- The addition of
    Genasense to dacarbazine did not appear to be associated with serious,
    previously unreported adverse reactions compared with the use of dacarbazine
    alone.

Data
  from this trial comprised the basis of a rolling NDA for Genasense,
  a process that we initiated in August 2003 and completed in December 2003. The
  FDA accepted our NDA filing on February 5, 2004 and granted Priority Review
  status to the application, which targets an agency action on or before June
  8, 2004. On February 10, 2004, we were invited by the FDA to meet on May 3,
  2004 with the FDA Oncology Drugs Advisory Committee.

Phase
  3 Trial of Genasense Plus Chemotherapy in Patients with Multiple Myeloma

We
  expect to report results in 2004 of a Phase 3 trial of Genasense plus
  chemotherapy in patients with multiple myeloma. This trial is directed at patients
  whose disease progressed despite chemotherapy. The primary goal of this trial
  is to increase the time to progression of disease in patients treated with Genasense
  plus high-dose dexamethasone compared with dexamethasone alone. This trial completed
  enrollment of 220 patients in December 2002, and follow-up of these patients
  is continuing.

Phase
  3 Trial of Genasense Plus Chemotherapy in Patients with Chronic Lymphocytic
  Leukemia

We
  expect to report results in 2004 of a Phase 3 trial of Genasense plus
  chemotherapy in patients with CLL. This trial is directed at patients whose
  disease progressed despite chemotherapy. The primary goal of this trial is to
  increase the proportion of patients who achieve a complete (or nodular partial)
  response after treatment with Genasense plus fludarabine/cyclophosphamide
  compared with fludarabine/cyclophosphamide alone. This trial completed enrollment
  of 241 patients in the second quarter of 2003, and follow-up of these patients
  is continuing.

Current
  Phase 1 and Phase 2 Trials

In
  addition to the Phase 3 trials described above, Genasense is currently
  the subject of a number of other clinical trials, as indicated in the foregoing
  table, including randomized trials in patients with non-small cell lung cancer
  and small cell lung cancer, and non-randomized trials in patients with NHL,
  acute and chronic leukemias, various solid tumors and other disorders.

Regulatory
  Status

We
  completed the submission of our NDA for Genasense to the FDA in December
  2003. The FDA accepted our NDA filing on February 5, 2004 and granted Priority
  Review status to the application, which targets an agency action on or
  before June 8, 2004. On February 10, 2004, we were invited by the FDA to meet
  on May 3, 2004 with the FDA Oncology Drugs Advisory Committee. We believe we
  are well-positioned for FDA approval of Genasense in 2004 for use in advanced
  malignant melanoma patients. However, the approval is subject to a number of
  uncertainties, and we cannot assure you that Genasense will be approved
  in this time frame or at all. The FDA has granted several designations to Genasense
  that may expedite its regulatory review. These designations include:

- Priority review
    for advanced malignant melanoma NDA. Priority review is a designation
    granted by the FDA for a NDA after it has been submitted for review. Under
    the Food and Drug Administration Modernization Act, priority designation is
    intended for those products that address unmet medical needs. In general,
    the designation of priority review indicates that the FDA will render a decision
    on the approvability of a drug for marketing within six months from the date
    of filing.

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- Fast track
    status for advanced malignant melanoma, multiple myeloma and CLL. The
    FDA fast track program is designed to facilitate the development and expedite
    the review of new drugs that are intended to treat serious or life-threatening
    conditions and that demonstrate the potential to address unmet medical needs.
    The program allows sponsors to submit an NDA on a rolling basis,
    which means that portions of the application can be submitted separately as
    they are completed, rather than waiting to compile and submit the entire NDA
    as a whole.
- Orphan drug
    designation for advanced malignant melanoma, multiple myeloma and CLL.
    An orphan drug is a drug that is intended to treat conditions that affect
    fewer than 200,000 people in the United States. Designation as an orphan drug
    allows the sponsors of drugs for rare diseases to qualify for tax credits
    and certain marketing exclusivity incentives under the Orphan Drug Act.

For
  additional background information on the drug application process and clinical
  trials, see Government Regulation.

We
  have applied for similar designations from regulatory agencies in Europe.

Commercialization
  Plan

In
  April 2002, we announced an exclusive agreement with Aventis to jointly develop
  and commercialize Genasense. We have agreed with Aventis that only Aventis
  may sell Genasense. Genta will supply Aventis with Genasense on
  a global basis. Aventis will pay us a royalty for all worldwide sales of Genasense.
  Genta retains sole ownership of and exclusive title to the intellectual property
  with respect to Genasense. We have jointly established an alliance management
  committee consisting of representatives from both Genta and Aventis to oversee
  the alliance. The agreement contains provisions that allow for assignment to
  a successor in the event of a merger of Aventis, such that the terms of the
  agreement remain unchanged.

In
  the United States, Genta and Aventis will jointly develop and co-promote Genasense.
  Joint teams have been created under our collaborative agreement, including a
  U.S. commercialization team that is responsible for coordinating the development
  and implementation of commercialization of Genasense in the United States.
  Genta is responsible for filing, prosecuting and maintaining all patent applications
  and patents in the United States. Aventis will reimburse Genta for the cost
  of an escalating number of Genta sales representatives throughout the United
  States.

In
  all countries outside of the United States, Aventis will have exclusive development
  and marketing rights and regulatory responsibilities. Genta retains responsibility
  for filing, prosecuting and maintaining all patent applications and patents
  outside of the United States.

Ganite

Hypercalcemia

On
  October 6, 2003, we began marketing Ganite for the treatment of cancer-related
  hypercalcemia. Ganite is our first drug to receive marketing approval
  and our sales force is now promoting the product in the United States.

Hypercalcemia
  is a life-threatening condition caused by excessive buildup of calcium in the
  bloodstream, which may occur in up to 20% of cancer patients. Gallium nitrate
  was originally studied by the NCI as a new type of cancer chemotherapy. More
  than 1,000 patients were treated in Phase 1 and Phase 2 trials, and the drug
  showed promising antitumor activity against NHL, bladder cancer and other diseases.
  In the course of these studies, gallium nitrate was also shown to strongly inhibit
  bone resorption. Gallium nitrate underwent additional clinical testing and was
  approved by the FDA in 1991 as a treatment for cancer-related hypercalcemia.
  Lower doses of Ganite were also tested in patients with less severe bone
  loss, including bone metastases, a cancer that has spread to bone, Pagets
  disease, an affliction of older patients that causes pain and disability, and
  osteoporosis.

Side
  effects of Ganite include nausea, diarrhea and kidney damage. (A complete
  listing of Ganites side effects is contained in the products Package
  Insert that has been reviewed and approved by the FDA.) We believe the development
  of methods to administer Ganite in the outpatient setting will improve
  the commercial prospects for Ganite as compared to when it was originally
  introduced.

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The
  extension for an important patent covering the use of Ganite for its approved
  indication will expire in 2005. Genta has filed and continues to file patent
  applications seeking intellectual property protection for Ganite. In addition,
  Genta intends to seek orphan drug designation for the use of Ganite for
  the treatment of NHL.

Non-Hodgkins
  Lymphoma and Other Cancer Types

Based
  on previously published data, we believe that Ganite may also be an effective
  treatment for patients with certain types of cancer, particularly NHL. We have
  been granted an investigational new drug exemption, or IND, and we have commenced
  clinical trials of Ganite for the treatment of patients with relapsed
  NHL. If our trials suggest that Ganite is safe and effective, we plan
  to seek expanded marketing approval for this indication. Approximately 54,000
  new cases of NHL are diagnosed in the United States each year. We are also planning
  to evaluate Ganite in other indications, such as bladder cancer. Previous
  clinical trials of Ganite showed that it does not cause significant myelosuppression,
  a decrease of bone marrow activity often associated with cancer therapy, which
  can cause increased susceptibility to bleeding and infection. We believe this
  feature may allow Ganite to be readily incorporated into combination chemotherapy
  regimens that employ other drugs that cause myelosuppression.

Regulatory
  Status

In
  April 2000, we acquired assets, rights, licenses to patents, and technology
  relating to gallium-containing compounds for treatment of bone loss, and to
  Ganite (gallium nitrate injection), the liquid injectable product. The
  acquired assets included the ownership of an approved NDA relating to Ganite.
  Since this acquisition, we have worked with the FDA to address certain regulatory
  issues and to update certain aspects of drug manufacturing. In the first quarter
  of 2003, we filed a supplemental NDA for Ganite for the treatment of cancer-related
  hypercalcemia that has not responded to hydration. On September 18, 2003, we
  received approval from the FDA to market Ganite for the treatment of cancer-related
  hypercalcemia that is resistant to hydration.

Given
  the extensive published data on the anticancer activity of gallium nitrate,
  we filed a new IND request for Ganite with the Oncology Drug Products
  Division at the FDA for the treatment of patients with relapsed NHL. Under this
  IND, we initiated a clinical trial of Ganite in NHL patients in 2002.

Other
  Pipeline Products and Technology Platforms

Oral
  Gallium

We
  are currently planning to develop new formulations of gallium-containing compounds
  that can be taken orally. These formulations may be useful for diseases in which
  long-term low-dose therapy is deemed desirable. We believe that such formulations
  will be useful for the treatment of patients who have chronic bone loss diseases,
  such as bone metastases, Pagets disease and osteoporosis. Such patients
  are commonly afflicted by bone pain and susceptibility to fractures.

Decoys

In
  addition to the antisense program, we are developing compounds known as decoys,
  which are short strands of DNA or RNA that bind certain proteins known as transcription
  factors. Normally, transcription factors bind to specific portions of DNA known
  as response elements and regulate the functions of genes in a positive or negative
  fashion (i.e., they can turn genes on or off). When
  a cell is flooded with an excess of decoys, these decoys compete with normal
  DNA response elements to bind transcription factors and inactivate them. By
  selectively inactivating the transcription factor, the function of the gene
  can be regulated in a positive or negative manner. This type of control could
  potentially be used to regulate genes that are critically involved in cancer
  progression.

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In
  December 2000, Genta licensed patents and technology relating to decoys from
  the NIH. Our current program is targeting a transcription factor known as the
  cyclic adenosine monophosphate response element binding protein, or CRE-BP.
  Pre-clinical studies conducted at the NIH have shown broad anticancer activity
  for this compound, with very low toxicity to normal cells. The CRE-BP decoy
  is currently undergoing additional pre-clinical testing.

Antisense
  and RNAi Research and Discovery

We
  have numerous oligonucleotide-based discovery programs and collaborations devoted
  to the identification of both antisense- and RNAi-based inhibitors of oncology
  gene targets. Several of these programs combine specific, clinically validated
  gene targets with our OptiSense technology to identify new therapeutic
  sequences. Other programs are longer-term projects that combine Optisense
  and oncology target validation assays to determine the therapeutic potential
  of newly discovered genes and identify new therapeutic agents simultaneously.

We
  continue to evaluate novel nucleic acid chemistries, through sponsored research
  and collaborative agreements, on an ongoing basis. These efforts will produce
  our next generation of antisense and RNAi molecules with enhanced biological
  activities.

Finally,
  our proprietary PolyBus delivery formulations, and formulations obtained
  through expert collaborations, are being used to enhance the pharmacokinetic
  properties of antisense and RNAi in preclinical efficacy studies.

Androgenics
  Technologies

Subsequent
  to a review of our preclinical research portolio of programs, we recently terminated
  our Androgenics program that was designed to develop inhibitors of androgen
  hormones for the treatment of patients with hormone-sensitive prostate cancer.

Patents
  and Proprietary Technology

It
  is our policy to protect our technology by filing patent applications with respect
  to technologies important to our business development. To maintain our competitive
  position, we also rely upon trade secrets, unpatented know-how, continuing technological
  innovation, licensing opportunities and certain regulatory approvals (such as
  orphan drug designations).

We
  own or have licensed several patents and applications to numerous aspects of
  oligonucleotide technology, including novel compositions of matter, methods
  of large-scale synthesis, methods of controlling gene expression and methods
  of treating disease. Genta's patent portfolio includes both U.S. and foreign
  applications and patents. To date, Genta has approximately 100 U.S. and foreign
  patent applications. Genta's portfolio of owned or licensed patents includes
  approximately 50 issued U.S. patents and approximately 13 pending U.S. patent
  applications. Genta endeavors to seek appropriate U.S. and foreign patent protection
  on its oligonucleotide technology.

In
  the United States, a patent filed on or before June 8, 1995 expires the later
  of 17 years from the issue date or 20 years from the date on which the application
  for patent was filed in the United States or the earliest claimed priority date.
  A patent filed after June 8, 1995 expires 20 years from the date on which the
  application for patent was filed in the United States or the earliest claimed
  priority date.

Genta
  has licensed six U.S. patents relating to Genasense that expire between
  2008 and 2015, two pending U.S. patent applications that relate to Genasense,
  and approximately 45 foreign patent applications that are pending relating to
  Genasense. Genta also owns three U.S. patent applications relating to
  methods of using Genasense.

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Included
  among Gentas property rights are certain rights licensed from the NIH
  covering phosphorothioate oligonucleotides. We also acquired from the University
  of Pennsylvania exclusive rights to antisense oligonucleotides directed against
  the Bcl-2 mRNA, as well as methods of their use for the treatment of cancer.
  In 1998, two U.S. patents were issued encompassing our licensed antisense oligonucleotide
  compounds targeted against the Bcl-2 mRNA and the use of these compounds outside
  of organisms. These claims cover our proprietary antisense oligonucleotide molecules,
  which target the Bcl-2 mRNA including our lead clinical candidate, Genasense.
  Other related U.S. and corresponding foreign patent applications are still pending.

The
  patent covering the use of Ganite for its approved indication will expire
  in 2005. Genta has filed and continues to file patent applications seeking intellectual
  property protection for Ganite.

In
  May 2000, we entered into a licensing arrangement with Molecular Biosystems,
  Inc. for a broad portfolio of patents and technology that relates to antisense
  for therapeutic and diagnostic applications. The arrangement included a grant
  of both exclusive and non-exclusive rights from Molecular Biosystems, Inc. to
  Genta on a royalty-free basis in return for cash and shares of common stock.

The
  patent positions of biopharmaceutical and biotechnology firms, including Genta,
  can be uncertain and can involve complex legal and factual questions. Consequently,
  even though we are currently prosecuting our patent applications with the United
  States and foreign patent offices, we do not know whether any of our applications
  will result in the issuance of any patents, or if any issued patents will provide
  significant proprietary protection, or even if successful that these patents
  will not be circumvented or invalidated. Even if issued, patents may be circumvented
  or challenged and invalidated in the courts. Because some applications in the
  United States are kept in secrecy until an actual patent issues, we cannot be
  certain that others have not filed patent applications directed at inventions
  covered by our pending patent applications, or that we were the first to file
  patent applications for such inventions. Thus, we may become involved in interference
  proceedings declared by the U.S. Patent and Trademark Office (or comparable
  foreign office or process) in connection with one or more of our patents or
  patent applications to determine priority of invention, which could result in
  substantial costs to us, as well as an adverse decision as to priority of invention
  of the patent or patent application involved.

Competitors
  or potential competitors may have filed applications for, or have received patents
  and may obtain additional patents and proprietary rights relating to, compounds
  or processes competitive with those of ours. Accordingly, there can be no assurances
  that our patent applications will result in issued patents or that, if issued,
  the patents will afford protection against competitors with similar technology.
  We cannot provide assurance that any patents issued to Genta will not be infringed
  or circumvented by others, nor can there be any assurance that we will obtain
  necessary patents or technologies or the rights to use such technologies.

We
  also rely upon unpatented trade secrets. No assurances can be given as to whether
  third parties will independently develop substantially equivalent proprietary
  information and techniques, or gain access to our trade secrets, or disclose
  such technologies to the public, or that we can meaningfully maintain and protect
  unpatented trade secrets.

We
  require our employees, consultants, outside scientific collaborators, sponsored
  researchers and other advisors to execute confidentiality agreements with us.
  These agreements generally provide that all confidential information developed
  or made known to an individual during the course of the individuals relationship
  with Genta shall be kept confidential and shall not be disclosed to third parties
  except in specific circumstances. In the case of employees, the agreement generally
  provides that all inventions conceived by the individual shall be assigned to,
  and made the exclusive property of, Genta. There can be no assurance, however,
  that these agreements will provide meaningful protection to our trade secrets,
  or guarantee adequate remedies in the event of unauthorized use or disclosure
  of confidential proprietary information, or in the event of an employees
  refusal to assign any patents to Genta in spite of his/her contractual obligation.

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Research
  and Development

In
  addition to our current focus in the areas described above, we continually evaluate
  our programs in light of the latest market information and conditions, the availability
  of third-party funding, technological advances and other factors. As a result
  of such evaluations, we change our product development plans from time to time
  and anticipate that we will continue to do so. We recorded research and development
  expenses of $82.9 million, $86.6 million, and $39.4 million during the years
  ended December 31, 2003, 2002 and 2001, respectively.

Sales
  and Marketing

On
  October 6, 2003 our oncology sales force began selling Ganite for use
  in the treatment of cancer-related hypercalcemia. We have been expanding our
  sales force to support the anticipated launch of Genasense; currently,
  the U.S. sales force is comprised of 36 people. If Genasense is approved
  for marketing by the FDA, the sales force will be partially subsidized by Aventis,
  as described below. Overall, we presently have 46 employees dedicated to sales
  and marketing.

In
  April 2002, we entered into a series of agreements relating to the development
  and commercialization of Genasense, to which we refer collectively as
  the collaborative agreement, with Aventis and its affiliates. Under the terms
  of our collaborative agreement, Genta and Aventis will jointly develop and commercialize
  Genasense in the United States, and Aventis will have exclusive development
  and marketing rights to the compound in all countries outside of the United
  States. We retain responsibility for global manufacturing and for regulatory
  filings within the United States, while Aventis has assumed all regulatory responsibilities
  outside the United States. Joint management teams, including representatives
  from both Genta and Aventis, currently oversee the joint efforts of Genta and
  Aventis in developing and commercializing Genasense in the United States.
  Under our collaborative agreement, Aventis has committed to provide up to $476.9
  million in initial payments, milestone payments and for the purchase from us
  of equity and convertible notes. In addition, we are entitled to royalties on
  Aventis exclusive worldwide net sales of Genasense, from which we
  are required to pay third-party pass-through royalties to the University of
  Pennsylvania and The National Institutes of Health, or NIH, based on net worldwide
  sales of Genasense. Furthermore, under our collaborative agreement, Aventis
  has agreed to pay 75% of development costs related to any U.S. NDA incurred
  by either Genta or Aventis subsequent to the execution of our collaborative
  agreement, and substantially all other development, marketing, and sales costs
  incurred worldwide. Aventis will also reimburse a portion of our expense in
  building our sales force to market Genasense in the United States. Genta
  has received a total of $235.7 million in initial and near-term funding, which
  included a $10.0 million licensing fee and $40.0 million in development funding,
  $10.0 million in convertible debt proceeds, $71.9 million pursuant to an at-market
  equity investment in our common stock, $68.8 million in paid expense reimbursements
  and $35.0 million in line of credit proceeds. The commercialization agreement
  may be terminated by Aventis with six months notice. For additional discussion
  of the collaborative agreement (see Note 12 to our financial statements).

Either
  alone or in partnerships with other companies, we intend to be a direct marketer
  or co-marketer of our pharmaceutical products by continuing to build a sales
  and marketing infrastructure in the United States to launch and fully realize
  the commercial potential of our products. For international product sales, we
  intend to distribute our products through collaborations with third parties.

Manufacturing
  and Raw Materials

Our
  ability to conduct clinical trials on a timely basis, to obtain regulatory approvals
  and to commercialize our products will depend in part upon our ability to manufacture
  our products, either directly or through third parties, at a competitive cost
  and in accordance with applicable FDA and other regulatory requirements, including
  current Good Manufacturing Practice regulations.

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We
  currently rely on third parties to manufacture our products. In December 2002,
  we signed a five-year manufacturing and supply agreement with Avecia Biotechnology,
  Inc., or Avecia, a leading multinational manufacturer of pharmaceutical products,
  to supply quantities of Genasense.This agreement is also renewable
  beyond the initial five-year period. In 2004, we are obligated to purchase $27.5
  million in clinical drug substance from Avecia.Pursuant to our collaborative
  agreement with Aventis, we anticipate that we will be reimbursed for at least
  75% of the drug purchases from Avecia once Genasense is shipped to the
  clinical sites or Aventis distribution sites. In addition, we have committed
  up to $5.0 million of advance financing to Avecia for facility expansion, which
  will be recovered with interest through future purchase payments to be made
  by us to Avecia. We believe these arrangements are sufficient for our medium-term
  production needs with respect to Genasense.

We
  have a three-year manufacturing and supply agreement with Johnson Matthey Inc.
  (JMI), whereby Genta will purchase a minimum of 80% of our requirements
  for quantities of Ganite.

The
  raw materials that we require to manufacture our drugs, are available only from
  a few suppliers. Under the terms of our manufacturing and supply agreement,
  Avecia is responsible for procuring the raw materials needed to manufacture
  Genasense. We believe that we have adequately addressed our needs for
  suppliers of raw materials to manufacture Genasense and Ganite and
  meet future customer demand.

Genta
  Jago

Genta
  Jago Technologies B.V. (Genta Jago) is a joint venture formed by
  SkyePharma PLC and Genta. On March 4, 1999, SkyePharma PLC (on behalf of itself
  and its affiliates) entered into an interim agreement with Genta (the Interim
  JV Agreement) pursuant to which the parties to the joint venture released
  each other from all liability relating to unpaid development costs and funding
  obligations of Genta Jago. Under the terms of the Interim JV Agreement, SkyePharma
  PLC assumed responsibility for substantially all the obligations of the joint
  venture to third parties as well as further development of the product line.
  In addition, earnings of the joint venture are to be allocated equally between
  the two parties. Accordingly, Genta recognized $0.5 million as its equity in
  net income of the joint venture during the first quarter of 2000. Since the
  first quarter of 2000, there have been only $33 thousand in net earnings of
  the joint venture allocated to Genta and we plan to seek to terminate our involvement
  with the joint venture.

Human
  Resources

As
  of December 31, 2003, Genta had 155 employees, 36 of whom hold doctoral degrees.
  As of that date, there were 96 employees engaged in research, development and
  other technical activities, 30 employees in sales and marketing and 29 in administration.
  None of Gentas employees are represented by a union. Most of the management
  and professional employees of Genta have had prior experience and positions
  with pharmaceutical and biotechnology companies. Genta believes it maintains
  satisfactory relations with its employees and has not experienced interruptions
  of operations due to labor disagreements.

C.
  Government Regulation

Regulation
  by governmental authorities in the United States and foreign countries is a
  significant factor in our ongoing research and product development activities
  and in the manufacture and marketing of our proposed products. All of our therapeutic
  products will require regulatory approval by governmental agencies prior to
  commercialization. In particular, human therapeutic products are subject to
  rigorous pre-clinical and clinical testing and pre-market approval procedures
  by the FDA and similar authorities in foreign countries. Various federal, and
  in some cases, state statutes and regulations also govern or affect the development,
  testing, manufacturing, safety, labeling, storage, recordkeeping and marketing
  of such products. The lengthy process of seeking these approvals, and the subsequent
  compliance with applicable federal and, in some cases, state statutes and regulations,
  require substantial expenditures. Any failure by Genta, our collaborators or
  our licensees to obtain, or any delay in obtaining, regulatory approvals could
  adversely affect the marketing of our products and our ability to receive products
  or royalty revenue.

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The
  activities required before a new pharmaceutical agent may be marketed in the
  United States begin with pre-clinical testing. Pre-clinical tests include laboratory
  evaluation of product chemistry and animal studies to assess the potential safety
  and efficacy of the product and its formulations. The results of these studies
  must be submitted to the FDA as part of an IND. An IND becomes effective within
  30 days of filing with the FDA unless the FDA imposes a clinical hold on the
  IND. In addition, the FDA may, at any time, impose a clinical hold on ongoing
  clinical trials. If the FDA imposes a clinical hold, clinical trials cannot
  commence or recommence, as the case may be, without prior FDA authorization
  and then only under terms authorized by the FDA.

Clinical
  trials are generally categorized into four phases.

Phase
  1 trials are initial safety trials on a new medicine in which investigators
  attempt to establish the dose range tolerated by a small group of patients using
  single or multiple doses, and to determine the pattern of drug distribution
  and metabolism.

Phase
  2 trials are clinical trials to evaluate efficacy and safety in patients afflicted
  with a specific disease. Typically, Phase 2 trials in oncology comprise 14 to
  50 patients. Objectives may focus on dose-response, type of patient, frequency
  of dosing or any of a number of other issues involved in safety and efficacy.
  Phase 2a trials are pilot studies while Phase 2b trials typically incorporate
  more patients than Phase 2a trials in order to more precisely establish efficacy.

In
  the case of products for life-threatening diseases, the initial human testing
  is generally done in patients rather than in healthy volunteers. Since these
  patients are already afflicted with the target disease, it is possible that
  such studies may provide results traditionally obtained in Phase 2 trials.

Phase
  3 trials are usually multi-center, comparative studies that involve larger populations.
  These trials are generally intended to be pivotal in importance for the approval
  of a new drug. In oncology, Phase 3 trials typically involve 100 to 1,000 patients
  for whom the medicine is eventually intended. Trials are also conducted in special
  groups of patients or under special conditions dictated by the nature of the
  particular medicine and/or disease. Phase 3 trials often provide much of the
  information needed for package insert and labeling of the medicine. A trial
  is fully enrolled when it has a sufficient number of patients to provide enough
  data for the statistical proof of efficacy and safety required by the FDA and
  others. Phase 3b trials are conducted after submission of a new drug application,
  but before the products approval for market launch. Phase 3b trials may
  supplement or complete earlier trials, or they may seek different kinds of information,
  such as quality of life or marketing. Phase 3b is the period between submission
  for approval and receipt of marketing authorization.

After
  a medicine is marketed, Phase 4 trials provide additional details about the
  products safety and efficacy.

The
  results of the pre-clinical and clinical testing, together with chemistry, manufacturing
  and control information, are then submitted to the FDA for a pharmaceutical
  product in the form of an NDA, for a biological product in the form of a biologics
  license application and for a particular medical device in the form of a premarket
  approval application in order to obtain approval to commence commercial sales.
  In responding to an NDA, biologics license application or premarket approval
  application, the FDA may grant marketing approval, request additional information
  or deny the application if it determines that the application does not satisfy
  its regulatory approval criteria. There can be no assurance that the approvals
  that are being sought or may be sought by Genta in the future will be granted
  on a timely basis, if at all, or if granted will cover all the clinical indications
  for which we are seeking approval or will not contain significant limitations
  in the form of warnings, precautions or contraindications with respect to conditions
  of use.

In
  circumstances where a company intends to develop and introduce a novel formulation
  of an active drug ingredient already approved by the FDA, clinical and pre-clinical
  testing requirements may not be as extensive. Limited additional data about
  the safety and/or effectiveness of the proposed new drug formulation, along
  with chemistry and manufacturing information and public information about the
  active ingredient, may be satisfactory for product approval. Consequently, the
  new product formulation may receive marketing approval more rapidly than a traditional
  full new drug application, although no assurance can be given that a product
  will be granted such treatment by the FDA.

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For
  clinical investigation and marketing outside the United States, we are or may
  be subject to foreign regulatory requirements governing human clinical trials
  and marketing approval for drugs. The requirements governing the conduct of
  clinical trials, product licensing, pricing and reimbursement vary widely from
  country to country. Our approach is to design our European clinical trial studies
  to meet FDA, European Economic Community, or EEC, and other European countries
  standards. At present, the marketing authorizations are applied for at a national
  level, although certain EEC procedures are available to companies wishing to
  market a product in more than one EEC member state. If the competent authority
  is satisfied that adequate evidence of safety, quality and efficacy has been
  presented, a market authorization will be granted. The registration system proposed
  for medicines in the EEC after 1992 is a dual one in which products, such as
  biotechnology and high technology products and those containing new active substances,
  will have access to a central regulatory system that provides registration throughout
  the entire EEC. Other products will be registered by national authorities under
  the local laws of each EEC member state. With regulatory harmonization finalized
  in the EEC, our clinical trials will be designed to develop a regulatory package
  sufficient for multi-country approval in our European target markets without
  the need to duplicate studies for individual country approvals. This approach
  also takes advantage of regulatory requirements in some countries, such as in
  the United Kingdom, which allow Phase 1 studies to commence after appropriate
  toxicology and pre-clinical pharmacology studies, prior to formal regulatory
  approval.

Prior
  to the enactment of the Drug Price Competition and Patent Term Restoration Act
  of 1984, or the Waxman/Hatch Act, the FDA, by regulation, permitted certain
  pre-1962 drugs to be approved under an abbreviated procedure which waived submission
  of the extensive animal and human studies of safety and effectiveness normally
  required to be in a new drug application. Instead, the manufacturer only needed
  to provide an abbreviated new drug application containing labeling, information
  on chemistry and manufacturing procedures and data establishing that the original
  pioneer product and the proposed generic product are bioequivalent when administered
  to humans.

Originally,
  the FDAs regulations permitted this abbreviated procedure only for copies
  of a drug that was approved by the FDA as safe before 1962 and which was subsequently
  determined by the FDA to be effective for its intended use. In 1984, the Waxman/Hatch
  Act extended permission to use the abbreviated procedure established by the
  FDA to copies of post-1962 drugs subject to the submission of the required data
  and information, including data establishing bioequivalence. However, approval
  of such abbreviated new drug applications was dependent upon there being no
  outstanding patent or non-patent exclusivity.

Additionally,
  the FDA allows, under section 505(b)(2) of the Food Drug and Cosmetic Act, for
  the submission and approval of a hybrid application for certain changes in drugs
  which, but for the changes, would be eligible for an effective abbreviated new
  drug application approval. Under these procedures the applicant is required
  to submit the clinical efficacy and/or safety data necessary to support the
  changes from the abbreviated new drug application-eligible drug (without submitting
  the basic underlying safety and efficacy data for the chemical entity involved)
  plus manufacturing and chemistry data and information. Approval of a 505(b)(2)
  application is dependent upon the abbreviated new drug application being subject
  to no outstanding patent or non-patent exclusivity. As compared to a new drug
  application, an abbreviated new drug application or a 505(b)(2) application
  typically involves reduced research and development costs. However, there can
  be no assurance that any such applications will be approved. Furthermore, the
  supply of raw materials must also be approved by the FDA.

We
  and our third-party manufacturers are also subject to various foreign, federal,
  state and local laws and regulations relating to health and safety, laboratory
  and manufacturing practices, the experimental use of animals and the use, manufacture,
  storage, handling and disposal of hazardous or potentially hazardous substances,
  including radioactive compounds and infectious disease agents, used in connection
  with our research and development work and manufacturing processes. We currently
  incur costs to comply with laws and regulations and these costs may become more
  significant.

17

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D.
  Competition

In
  many cases, our products under development will be competing with existing therapies
  for market share. In addition, a number of companies are pursuing the development
  of antisense technology and controlled-release formulation technology and the
  development of pharmaceuticals utilizing such technologies. We compete with
  fully integrated pharmaceutical companies that have substantially more experience,
  financial and other resources and superior expertise in research and development,
  manufacturing, testing, obtaining regulatory approvals, marketing and distribution.
  Smaller companies may also prove to be significant competitors, particularly
  through their collaborative arrangements with large pharmaceutical companies
  or academic institutions. Furthermore, academic institutions, governmental agencies
  and other public and private research organizations have conducted and will
  continue to conduct research, seek patent protection and establish arrangements
  for commercializing products. Such products may compete directly with any products
  that may be offered by us.

Our
  competition will be determined in part by the potential indications for which
  our products are developed and ultimately approved by regulatory authorities.
  For certain of our potential products, an important factor in competition may
  be the timing of market introduction of our or our competitors products.
  Accordingly, the relative speed with which we can develop products, complete
  the clinical trials and approval processes and supply commercial quantities
  of the products to the market are expected to be important competitive factors.
  We expect that competition among products approved for sale will be based, among
  other things, on product efficacy, safety, reliability, availability, price,
  patent position and sales, marketing and distribution capabilities. The development
  by others of new treatment methods could render our products under development
  non-competitive or obsolete.

Our
  competitive position also depends upon our ability to attract and retain qualified
  personnel, obtain patent protection or otherwise develop proprietary products
  or processes and secure sufficient capital resources for the often substantial
  period between technological conception and commercial sales.

E. Certain Risks and
  Uncertanties Related to the Company's Business

You
  should carefully consider the following risks and all of the other information
  set forth in this prospectus before deciding to invest in shares of our common
  stock. The risks described below are not the only ones facing our company. Additional
  risks not presently known to us or that we currently deem immaterial may also
  impair our business operations.

If
  any of the following risks actually occurs, our business, financial condition
  or results of operations would likely suffer. In such case, the trading price
  of our common stock could decline due to any of these risks, and you may lose
  all or part of your investment.

| | We
      may be unsuccessful in our efforts to obtain FDA approval for and commercialize
      Genasense or our other pharmaceutical products.
| | -----------------------------------------------------------------------------------------------------------------------------------------------

The
  commercialization of our pharmaceutical products involves a number of significant
  challenges. In particular, our ability to commercialize products, such as Ganite
  and Genasense, depends, in large part, on the success of our clinical
  development programs, our efforts to obtain regulatory approvals and our sales
  and marketing efforts directed at physicians, patients and third-party payors.
  A number of factors could affect these efforts, including:

- our ability to demonstrate
    clinically that our products are useful and safe in particular indications;
- delays or refusals by
    regulatory authorities in granting marketing approvals;
- our limited financial
    resources and sales and marketing experience relative to our competitors;
- actual and perceived
    differences between our products and those of our competitors;
- the availability and
    level of reimbursement for our products by third-party payors;
- incidents of adverse
    reactions to our products;

18

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- side effects or misuse
    of our products and the unfavorable publicity that could result;
- and the occurrence of
    manufacturing, supply or distribution disruptions.

We
  cannot assure you that Genasense will receive FDA approval in the time
  frame we expect or at all. We have filed our first new drug application, or
  NDA, with the FDA for Genasense as a treatment combined with chemotherapy
  for patients with advanced malignant melanoma. We filed and received priority
  designation, which increased the probability that the review by the FDA
  will be concluded within six months from the date of the completed application.
  The FDA may not complete its review within the time it has targeted. In addition,
  the action it takes may be to request further data or to disapprove the application.
  If Genasense is not approved by the FDA for melanoma, if the review time
  is substantially prolonged or if the FDA requires further clinical studies prior
  to approval, we have no short-term alternative for generating substantial revenue
  or income. Genasense may not be approved because the FDA may find our
  efficacy and safety data deficient or for other reasons. While we have completed
  enrollment in Phase 3 trials for other indications (including multiple myeloma
  and chronic lymphocytic leukemia), we do not yet know whether the results of
  these clinical trials will warrant submission of a NDA. Moreover, preparation
  of NDAs for either or both of these indications would entail significant delay
  relative to the melanoma application, and there can be no assurance that either
  or both of these applications would suffice for Genasense approval. Failure
  to obtain approval or a substantial delay in approval of Genasense would
  have a material adverse effect on our results of operations and financial condition.

Ultimately,
  our efforts may not prove to be as effective as those of our competitors. In
  the United States and elsewhere, our products will face significant competition.
  The principal conditions on which our product development efforts are focused
  and some of the other disorders for which we are conducting additional studies,
  are currently treated with several drugs, many of which have been available
  for a number of years or are available in inexpensive generic forms. Thus, even
  if we obtain regulatory approvals, we will need to demonstrate to physicians,
  patients and third-party payors that the cost of our products is reasonable
  and appropriate in light of their safety and efficacy, the price of competing
  products and the relative health care benefits to the patient. If we are unable
  to demonstrate that the costs of our products are reasonable and appropriate
  in light of these factors, we will likely be unsuccessful in commercializing
  our products.

We
  intend to be a direct marketer of some products in the United States. Currently
  we have a limited number of sales personnel. Our inability to build a sales
  force capable of marketing our pharmaceutical products will adversely affect
  our sales and limit the commercial success of our products.

We
  anticipate that we will incur additional losses and we may never be profitable.

We
  have not been profitable. We have incurred substantial operating losses associated
  with ongoing research and development activities, pre-clinical testing, clinical
  trials, regulatory submissions and manufacturing activities. From the period
  since our inception to December 31, 2003, we have incurred a cumulative net
  loss of $323.3 million. We may never achieve revenue sufficient for us to attain
  profitability. Achieving profitability is unlikely before Genasense becomes
  an approved drug and we receive at least a full year of royalties from Aventis
  Pharmaceuticals Inc., or Aventis, on worldwide sales pursuant to the development
  and commercialization agreements which we have entered into with Aventis. For
  a further description of our agreements with Aventis, see B. Summary of
  Business and Research and Development Programs Sales and Marketing.

Our
  business will suffer if we fail to obtain timely funding.

Our
  operations to date have required significant cash expenditures. Our future capital
  requirements will depend on the results of our research and development activities,
  pre-clinical studies and clinical trials, competitive and technological advances,
  and regulatory activities of the FDA and other regulatory authorities. Our credit
  line with Aventis terminates with respect to new borrowings upon the earlier
  of December 31, 2004 or the first FDA approval of Genasense (which triggers
  a milestone payment from Aventis), and amounts borrowed under the credit line
  are due six months after termination. In order to commercialize our products,
  we will need to raise additional funds. We may obtain those funds through public
  and private offerings of our securities, including debt or equity financing,
  or through collaborations or other arrangements with research institutions and
  corporate partners. We may not be able to obtain adequate funds for our operations
  from these sources when needed or on acceptable terms. Future collaborations
  or similar arrangements may require us to license valuable intellectual property
  to, or to share substantial economic benefits with, our collaborators. If we
  raise additional capital by issuing additional equity or securities convertible
  into equity, our stockholders may experience dilution and our share price may
  decline. Any debt financing may result in restrictions on our spending.

19

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If
  we are unable to raise additional funds, we will need to do one or more of the
  following:

- delay, scale back or
    eliminate some or all of our research and product development programs;
- license third
    parties to develop and commercialize products or technologies that we would
    otherwise seek to develop and commercialize ourselves;
- attempt to sell our
    company;
- cease operations; or
    declare bankruptcy.

Our
  business depends heavily on a small number of products.

We
  are currently marketing one product, Ganite, and we are actively seeking
  FDA approval of Genasense for advanced malignant melanoma. We do not expect
  to expand our marketed product portfolio significantly in the short term. If
  Genasense is not approved, or is commercially unsuccessful, we do not
  expect significant sales of other products to offset this loss of potential
  revenue.

To
  diversify our product line in the long term, it will be important for us to
  identify suitable technologies and products for acquisition or licensing and
  development. If we are unable to identify suitable technologies and products,
  or if we are unable to acquire or license products we identify, we may be unable
  to diversify our product line and to generate long-term growth.

| | We may
      be unable to obtain or enforce patents, other proprietary rights and licenses
      to protect our business; we could become involved
      in litigation relating to our patents or licenses that could cause us to
      incur additional costs and delay or prevent our introduction
      of new drugs to market.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
  success will depend to a large extent on our ability to:

- obtain U.S. and foreign
    patent or other proprietary protection for our technologies, products and
    processes;
- preserve trade secrets;
    and
- operate without infringing
    the patent and other proprietary rights of third parties.

Legal
  standards relating to the validity of patents covering pharmaceutical and biotechnological
  inventions and the scope of claims made under these types of patents are still
  developing, and they involve complex legal and factual questions. As a result,
  our ability to obtain and enforce patents that protect our drugs is highly uncertain.
  If we are unable to obtain and enforce patents and licenses to protect our drugs,
  our business, results of operations and financial condition could be adversely
  affected.

We
  hold numerous U.S., foreign and international patents covering various aspects
  of our technology, which include novel compositions of matter, use, methods
  of large-scale synthesis and methods of controlling gene expression. In the
  future, however, we may not be successful in obtaining additional patents despite
  pending or future applications. Moreover, our current and future patents may
  not be sufficiently broad to protect us against competitors who use similar
  technology. Additionally, our patents, the patents of our business partners
  and the patents for which we have obtained licensing rights may be challenged,
  narrowed, invalidated or circumvented. Furthermore, rights granted under our
  patents may not be broad enough to cover commercially valuable drugs or processes
  and therefore may not provide us with any competitive advantage with respect
  thereto.

20

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The
  pharmaceutical and biotechnology industries have been greatly affected by time-consuming
  and expensive litigation regarding patents and other intellectual property rights.
  We may be required to commence, or may be made a party to, litigation relating
  to the scope and validity of our intellectual property rights or the intellectual
  property rights of others. Such litigation could result in adverse decisions
  regarding the patentability of our inventions and products, the enforceability,
  validity or scope of protection offered by our patents or our infringement of
  patents held by others. Such decisions could make us liable for substantial
  money damages, or could bar us from the manufacture, sale or use of certain
  products. Moreover, an adverse decision may also compel us to seek a license
  from a third party. The costs of any license may be expensive, and we may not
  be able to enter into any required licensing arrangement on terms acceptable
  to us.

The
  cost to us of any litigation or proceeding relating to patent or license rights,
  even if resolved in our favor, could be substantial. Some of our competitors
  may be able to sustain the costs of complex patent or licensing litigation more
  effectively than we can because of their substantially greater resources. Uncertainties
  resulting from the initiation and continuation of any patent or related litigation
  could have a material adverse effect on our ability to compete in the marketplace.

We
  also may be required to participate in interference proceedings declared by
  the U.S. Patent and Trademark Office and in International Trade Commission proceedings
  aimed at preventing the importation of drugs that would compete unfairly with
  our drugs. These types of proceedings could cause us to incur considerable costs.

The
  patent covering the use of Ganite for its approved indication will expire
  in 2005. Genta has filed and continues to file patent applications seeking intellectual
  property protection for Ganite. If these applications are unsuccessful,
  competition from generic drugs may adversely affect the profitability of Ganite.

| | Many of
      our products are in an early stage of development, and we may never receive
      regulatory approval for these products.
| | ---------------------------------------------------------------------------------------------------------------------------------------

Most
  of our resources have been dedicated to the research and development of potential
  antisense pharmaceutical products such as Genasense, based upon oligonucleotide
  technology. While we have demonstrated the activity of antisense oligonucleotide
  technology in model systems in vitro and in animals, among our products,
  Genasense is our only antisense product to have been tested in humans.
  Several of our other technologies that serve as a possible basis for pharmaceutical
  products are only in pre-clinical testing. Results obtained in pre-clinical
  studies or early clinical investigations are not necessarily indicative of results
  that will be obtained in extended human clinical trials. Our products may prove
  to have undesirable and unintended side effects or other characteristics that
  may prevent our obtaining FDA or foreign regulatory approval for any indication.
  In addition, it is possible that research and discoveries by others will render
  our oligonucleotide technology obsolete or noncompetitive.

| | Clinical
      trials are costly and time consuming and are subject to delays; our business
      would suffer if the development process relating to
      our products were subject to meaningful delays.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Clinical
  trials are very costly and time-consuming. The length of time required to complete
  a clinical study depends upon many factors, including but not limited to the
  size of the patient population, the ability of patients to get to the site of
  the clinical study, the criteria for determining which patients are eligible
  to join the study and other issues. Delays in patient enrollment and other unforeseen
  developments could delay completion of a clinical study and increase its costs,
  which could also delay any eventual commercial sale of the drug that is the
  subject of the clinical trial.

Our
  commencement and rate of completion of clinical trials also may be delayed by
  many other factors, including the following:

- inability to obtain
    sufficient quantities of materials for use in clinical trials;
- inability to adequately
    monitor patient progress after treatment;
- unforeseen safety issues;
- the failure of the products
    to perform well during clinical trials;
- and government or regulatory
    delays.

21

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| | If we
      fail to obtain the necessary regulatory approvals, we cannot market and
      sell our products in the United States or in other countries.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

The
  FDA and comparable regulatory agencies in foreign countries impose substantial
  pre-market approval requirements on the introduction of pharmaceutical products.
  These requirements involve lengthy and detailed pre-clinical and clinical testing
  and other costly and time-consuming procedures. Satisfaction of these requirements
  typically takes several years or more depending upon the type, complexity and
  novelty of the product. While limited trials of some of our products have produced
  favorable results, we cannot apply for FDA approval to market any of our products
  under development until pre-clinical and clinical trials on the product are
  successfully completed. Several factors could prevent successful completion
  or cause significant delays of these trials, including an inability to enroll
  the required number of patients or failure to demonstrate adequately that the
  product is safe and effective for use in humans. If safety concerns develop,
  the FDA could stop our trials before completion. We may not market or sell any
  product for which we have not obtained regulatory approval. We cannot assure
  you that the FDA or other regulatory agencies will ever approve the use of our
  products that are under development. If the patient populations for which our
  products are approved are not sufficiently broad, or if approval is accompanied
  by unanticipated labeling restrictions, the commercial success of our products
  could be limited and our business, results of operations and financial condition
  could consequently be materially adversely affected.

| | We rely
      on our contractual collaborative arrangements with research institutions
      and corporate partners for development and commercialization
      of our products. Our business could suffer if we are not able to enter into
      suitable arrangements or if our collaborative arrangements
      are not successful in developing and commercializing products.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
  have entered into collaborative relationships relating to the conduct of clinical
  research and other research activities in order to augment our internal research
  capabilities and to obtain access to specialized knowledge and expertise. The
  loss of any of these collaborative relationships could have a material adverse
  effect on our business. In addition, our business strategy depends in part on
  our continued ability to develop and maintain relationships with leading academic
  and research institutions and with independent researchers. The competition
  for these relationships is intense, and we can give no assurances that we will
  be able to develop and maintain these relationships on acceptable terms.

We
  also seek strategic alliances with corporate partners, primarily pharmaceutical
  and biotechnology companies, to help us develop and commercialize drugs. Various
  problems can arise in strategic alliances. A partner responsible for conducting
  clinical trials and obtaining regulatory approval may fail to develop a marketable
  drug. A partner may decide to pursue an alternative strategy or focus its efforts
  on alliances or other arrangements with third parties. A partner that has been
  granted marketing rights for a certain drug within a geographic area may fail
  to market the drug successfully. Consequently, strategic alliances that we may
  enter into may not be scientifically or commercially successful. In this regard,
  Genta Jago Technologies B.V., a joint venture we entered into with SkyePharma
  PLC to develop oral controlled-release drugs, has not resulted in any commercial
  products, and we plan to seek to terminate our involvement in this joint venture.
  Moreover, we may be unable to negotiate advantageous strategic alliances in
  the future. Our failure to enter into strategic alliances, or the failure of
  a current or future strategic alliance to achieve its goals, could harm our
  efforts to develop and commercialize our drugs.

| | If the
      third party manufacturers upon which we rely fail to produce our products
      in the volumes that we require on a timely basis, or
      to comply with stringent regulations applicable to pharmaceutical drug manufacturers,
      we may face delays in the commercialization of, or
      be unable to meet demand for, our products and may lose potential revenues.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
  do not manufacture any of our products or product candidates and we do not plan
  to develop any capacity to do so. We have contracted with third-party manufacturers
  to manufacture Ganite and Genasense. The manufacture of pharmaceutical
  products requires significant expertise and capital investment, including the
  development of advanced manufacturing techniques and process controls. Manufacturers
  of pharmaceutical products often encounter difficulties in production, especially
  in scaling up initial production. These problems include difficulties with production
  costs and yields, quality control and assurance and shortages of qualified personnel,
  as well as compliance with strictly enforced federal, state and foreign regulations.
  Our third-party manufacturers may not perform as agreed or may terminate their
  agreements with us.

22

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In
  addition to product approval, any facility in which Genasense is manufactured
  or tested for its ability to meet required specifications must be approved by
  the FDA before it can manufacture Genasense. Failure of the facility to
  be approved could delay the approval of Genasense.

We
  do not currently have alternate manufacturing plans in place. The number of
  third-party manufacturers with the expertise, required regulatory approvals
  and facilities to manufacture bulk drug substance on a commercial scale is limited,
  and it would take a significant amount of time to arrange for alternative manufacturers.
  If we need to change to other commercial manufacturers, the FDA and comparable
  foreign regulators must approve these manufacturers facilities and processes
  prior to our use, which would require new testing and compliance inspections,
  and the new manufacturers would have to be educated in or independently develop
  the processes necessary for the production of our products.

Any
  of these factors could cause us to delay or suspend clinical trials, regulatory
  submissions, required approvals or commercialization of our products or product
  candidates, entail higher costs and result in our being unable to effectively
  commercialize our products. Furthermore, if our third-party manufacturers fail
  to deliver the required commercial quantities of bulk drug substance or finished
  product on a timely basis and at commercially reasonable prices, and we were
  unable to promptly find one or more replacement manufacturers capable of production
  at a substantially equivalent cost, in substantially equivalent volume and on
  a timely basis, we would likely be unable to meet demand for our products and
  we would lose potential revenues.

| | Even if
      we obtain regulatory approval, we will be subject to ongoing regulation,
      and any failure by us or our manufacturers to comply
      with such regulation could suspend or eliminate our ability to sell our
      products.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Ganite,
  Genasense, if it obtains regulatory approval, and any other product we
  may develop will be subject to ongoing regulatory oversight, primarily by the
  FDA. Failure to comply with post-marketing requirements, such as maintenance
  by us or by the manufacturers of our products of current Good Manufacturing
  Practices as required by the FDA, or safety surveillance of such products or
  lack of compliance with other regulations could result in suspension or limitation
  of approvals or other enforcement actions. Current Good Manufacturing Practices
  are FDA regulations that define the minimum standards that must be met by companies
  that manufacture pharmaceuticals and apply to all drugs for human use including
  those to be used in clinical trials as well as those produced for general sale
  after approval of an application by the FDA. These regulations define requirements
  for personnel, buildings and facilities, equipment, control of raw materials
  and packaging components, production and process controls, packaging and label
  controls, handling and distribution, laboratory controls and recordkeeping.
  Furthermore, the terms of any product candidate approval, including the labeling
  content and advertising restrictions, may be so restrictive that they could
  adversely affect the marketability of our product candidates. Any such failure
  to comply or the application of such restrictions could limit our ability to
  market our product candidates and may have a material adverse effect on our
  business, results of operations and financial condition. Such failures or restrictions
  may also prompt regulatory recalls of one or more of our products, which could
  have material and adverse effects on our business.

| | The raw
      materials for our products are produced by a limited number of suppliers,
      and our business could suffer if we cannot obtain
      needed quantities at acceptable price and quality.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
  raw materials that we require to manufacture our drugs, particularly oligonucleotides,
  are available from only a few suppliers. If these suppliers cease to provide
  us with the necessary raw materials or fail to provide us with adequate supply
  of materials at an acceptable price and quality, we could be materially adversely
  affected.

| | If third-party
      payors do not provide coverage and reimbursement for use of our products,
      we may not be able to successfully commercialize our
      products.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
  ability to commercialize drugs successfully will depend in part on the extent
  to which various third-party payors are willing to reimburse patients for the
  costs of our drugs and related treatments. These third-party payors include
  government authorities, private health insurers, and other organizations, such
  as health maintenance organizations. Third-party payors often challenge the
  prices charged for medical products and services. Accordingly, if less costly
  drugs are available, third-party payors may not authorize or may limit reimbursement
  for our drugs, even if they are safer or more effective than the alternatives.
  In addition, the federal government and private insurers have changed and continue
  to consider ways to change, the manner in which health care products and services
  are provided and paid for in the United States. In particular, these third-party
  payors are increasingly attempting to contain health care costs by limiting
  both coverage and the level of reimbursement for new therapeutic products. In
  the future, it is possible that the government may institute price controls
  and further limits on Medicare and Medicaid spending. These controls and limits
  could affect the payments we collect from sales of our products. Internationally,
  medical reimbursement systems vary significantly, with some countries requiring
  application for, and approval of, government or third-party reimbursement. In
  addition, some medical centers in foreign countries have fixed budgets, regardless
  of levels of patient care. Even if we succeed in bringing therapeutic products
  to market, uncertainties regarding future health care policy, legislation and
  regulation, as well as private market practices, could affect our ability to
  sell our products in quantities, or at prices, that will enable us to achieve
  profitability.

23

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| | Our
        business exposes us to potential product liability that may have a negative
        effect on our financial performance and our business
        generally.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
  administration of drugs to humans, whether in clinical trials or commercially,
  exposes us to potential product and professional liability risks, which are
  inherent in the testing, production, marketing and sale of human therapeutic
  products. Product liability claims can be expensive to defend and may result
  in large judgments or settlements against us, which could have a negative effect
  on our financial performance and materially and adversely affect our business.
  We maintain product liability insurance (subject to various deductibles), but
  our insurance coverage may not be sufficient to cover claims. Furthermore, we
  cannot be certain that we will always be able to maintain or increase our insurance
  coverage at an affordable price. Even if a product liability claim is not successful,
  the adverse publicity and time and expense of defending such a claim may interfere
  with or adversely affect our business and financial performance.

| | We
        are dependent on our collaborators and cannot be sure that our collaborators
        will perform as expected. Moreover, collaborations
        might produce conflicts that could delay or prevent the development or
        commercialization of our potential product candidates
        and negatively impact our business and financial condition.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
  have agreed to commercialize Genasense, if and when it is approved by
  the FDA, jointly with Aventis. Aventis will sell the product and pay us a royalty,
  and we and Aventis will cooperate on various aspects of commercialization. We
  have entered into an agreement under which Avecia Biotechnology, Inc., or Avecia,
  will manufacture Genasense if and when it is approved. We cannot control
  the resources that Aventis, Avecia or any future collaborator may devote to
  our products. Any of our present or future collaborators may not perform their
  obligations as expected. These collaborators may breach or terminate their agreements
  with us, for instance upon changes in control or management of the collaborator,
  or they may otherwise fail to conduct their collaborative activities successfully
  and in a timely manner.

Our
  commercialization agreement with Aventis may be terminated by Aventis with six
  months prior notice. Recently Aventis has been the subject of acquisition
  proposals. If Aventis is acquired, it may undergo strategic or managerial changes
  that could reduce its commitment to Genasense or lead it to terminate
  our collaborative agreement. The agreement contains provisions that allow for
  assignment to a successor in the event of a merger of Aventis, such that the
  terms of the agreement remain unchanged. In addition, our collaborators may
  elect not to develop products arising out of our collaborative arrangements
  or to devote sufficient resources to the development, regulatory approval, manufacture,
  marketing or sale of these products. If any of these events occur, we may not
  be able to develop our products or commercialize our products.

An
  important part of our strategy involves conducting multiple product development
  programs. We may pursue opportunities in fields that conflict with those of
  our collaborators. In addition, disagreements with our collaborators could develop
  over rights to our intellectual property. The resolution of such conflicts and
  disagreements may require us to relinquish rights to our intellectual property
  that we believe we are entitled to. In addition, any disagreement or conflict
  with our collaborators could reduce our ability to obtain future collaboration
  agreements and negatively impact our relationship with existing collaborators.
  Such a conflict or disagreement could also lead to delays in collaborative research,
  development, regulatory approval or commercialization of various products or
  could require or result in litigation or arbitration, which would be time consuming
  and expensive and could have a significant negative impact on our business,
  financial condition and results of operations.

24

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| | We
        may incur a variety of costs to engage in future acquisitions of companies,
        products or technologies, and the anticipated benefits
        of those acquisitions may never be realized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As
  a part of our business strategy, we may make acquisitions of, or significant
  investments in, complementary companies, products or technologies, although
  no significant acquisition or investments are currently pending. Any future
  acquisitions would be accompanied by risks such as:

- difficulties in assimilating
    the operations and personnel of acquired companies;
- diversion of our management's
    attention from ongoing business concerns;
- our potential
    inability to maximize our financial and strategic position through the successful
    incorporation of acquired technology and rights into our products and services;
- additional expense associated
    with amortization of acquired assets;
- maintenance of uniform
    standards, controls, procedures and policies; and
- impairment of
    existing relationships with employees, suppliers and customers as a result
    of the integration of new management personnel.

We
  cannot guarantee that we will be able to successfully integrate any business,
  products, technologies or personnel that we might acquire in the future, and
  our failure to do so could harm our business.

| | We
        face substantial competition from other companies and research institutions
        that are developing similar products, and we may not
        be able to compete successfully.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
  many cases, our products under development will be competing with existing therapies
  for market share. In addition, a number of companies are pursuing the development
  of antisense technology and controlled-release formulation technology and the
  development of pharmaceuticals utilizing such technologies. We compete with
  fully integrated pharmaceutical companies that have more substantial experience,
  financial and other resources and superior expertise in research and development,
  manufacturing, testing, obtaining regulatory approvals, marketing and distribution.
  Smaller companies may also prove to be significant competitors, particularly
  through their collaborative arrangements with large pharmaceutical companies
  or academic institutions. Furthermore, academic institutions, governmental agencies
  and other public and private research organizations have conducted and will
  continue to conduct research, seek patent protection and establish arrangements
  for commercializing products. Such products may compete directly with any products
  that may be offered by us.

Our
  competition will be determined in part by the potential indications for which
  our products are developed and ultimately approved by regulatory authorities.
  For certain of our potential products, an important factor in competition may
  be the timing of market introduction of our or our competitors products.
  Accordingly, the relative speed with which we can develop products, complete
  the clinical trials and approval processes and supply commercial quantities
  of the products to the market are expected to be important competitive factors.
  We expect that competition among products approved for sale will be based, among
  other things, on product efficacy, safety, reliability, availability, price,
  patent position and sales, marketing and distribution capabilities. The development
  by others of new treatment methods could render our products under development
  non-competitive or obsolete.

Our
  competitive position also depends upon our ability to attract and retain qualified
  personnel, obtain patent protection or otherwise develop proprietary products
  or processes and secure sufficient capital resources for the often substantial
  period between technological conception and commercial sales. We cannot assure
  you that we will be successful in this regard.

| | The
        nature of the business activities or positions of our principal stockholders
        and present and future officers and directors may involve
        conflicts of interest.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

One
  of our principal stockholders is Paramount Capital Asset Management, Inc. The
  sole stockholder and chairman of Paramount Capital Asset Management, Inc. is
  also the chairman of Paramount Capital Inc. and of Paramount Capital Investment
  LLC. These three companies, together with their affiliates, are collectively
  referred to as the Paramount Companies. The Paramount Companies beneficially
  own approximately 22% of our common stock, including beneficial ownership by
  Aries Select I, LLC, Aries Select II, LLC, and Aries Select, Ltd., of which
  Paramount Capital Asset Management, Inc. is the investment manager. The Paramount
  Companies have been distributing shares of Genta Incorporated to their fundholders
  and these distributions have lowered Paramount Companies beneficial ownership
  from approximately 41% as of May 1, 2003 to approximately 22% as of February
  29, 2004. In the regular course of business, the Paramount Companies evaluate
  and pursue investment opportunities in biomedical and pharmaceutical products,
  technologies and companies. We cannot assure you that these other companies
  will not have interests in conflict with ours. In addition, some of our current
  or future officers and directors may from time to time serve as officers or
  directors of other biopharmaceutical or biotechnology companies in which Paramount
  has an investment.

25

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Risks
  Related to Our Common Stock

| | Concentration
        of ownership of our stock could delay or prevent a change of control.
| | -------------------------------------------------------------------------------------------

Our
  directors, executive officers and principal stockholders the Paramount Companies
  and the Aries Funds and Garliston Limited, a subsidiary of Aventis, beneficially
  own approximately 38% of our outstanding common stock. As a result, these stockholders,
  if acting together, have the ability to significantly influence the outcome
  of corporate actions requiring stockholder approval. This concentration of ownership
  may have the effect of delaying or preventing a change in control of Genta.

In
  addition, Garliston Limited has agreed not to participate in hostile takeover
  attempts and to vote its shares in ways that may have anti-takeover effects.

| | Provisions
        in our restated certificate of incorporation and bylaws and Delaware law
        may discourage a takeover and prevent our stockholders
        from receiving a premium for their shares.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Provisions
  in our restated certificate of incorporation and bylaws may discourage third
  parties from seeking to obtain control of us and, therefore, could prevent our
  stockholders from receiving a premium for their shares. Our restated certificate
  of incorporation gives our board of directors the power to issue shares of preferred
  stock without approval of the holders of common stock. Any preferred stock that
  is issued in the future could have voting rights, including voting rights that
  could be superior to that of our common stock. The affirmative vote of 66-2/3%
  of our voting stock is required to approve certain transactions and to take
  certain stockholder actions, including the amendment of our certificate of incorporation.
  Our bylaws contain provisions that regulate how stockholders may present proposals
  or nominate directors for election at annual meetings of stockholders.

In
  addition, we are subject to Section 203 of the Delaware General Corporation
  Law, which contains restrictions on stockholder action to acquire control of
  Genta.

| | We
        have not paid, and do not expect to pay in the future, dividends on our
        common stock.
| | --------------------------------------------------------------------------------------------------------

We
  have never paid cash dividends on our common stock and do not anticipate paying
  any such dividends in the foreseeable future. We currently intend to retain
  our earnings, if any, for the development of our business.

| | We
        are dependent on our key executives and scientists, and the loss of key
        personnel or the failure to attract additional qualified
        personnel could harm our business.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
  business is highly dependent on our key executives and scientific staff. The
  loss of key personnel or the failure to recruit necessary additional or replacement
  personnel will likely impede the achievement of our development objectives.
  There is intense competition for qualified personnel in the pharmaceutical and
  biotechnology industries, and there can be no assurances that we will be able
  to attract and retain the qualified personnel necessary for the development
  of our business. We currently have an open search for a Senior Vice President,
  Research. If we are unable to fill this position or others that open, our business
  may be harmed.

26

---



Our
  stock price is volatile.

The
  market price of our common stock, like that of the common stock of many other
  biopharmaceutical companies, has been and likely will continue to be highly
  volatile. Factors that could have a significant impact on the future price of
  our common stock include but are not limited to:

- the results of pre-clinical
    studies and clinical trials by us or our competitors;
- announcements of technological
    innovations or new therapeutic products by us or our competitors;
- government regulation;
- developments in patent
    or other proprietary rights by us or our respective competitors, including
    litigation; and
- fluctuations in our
    operating results, and market conditions for biopharmaceutical stocks in general.

As
  of December 31, 2003, we had 75,927,033 shares of common stock outstanding and
  options, warrants, convertible preferred stock and convertible debt outstanding
  exercisable for or convertible into 19,047,612 additional shares. Future sales
  of shares of common stock by existing stockholders, holders of preferred stock
  who might convert such preferred stock into common stock and option and warrant
  holders who may exercise their options and warrants to purchase common stock
  also could adversely affect the market price of the common stock. Moreover,
  the perception that sales of substantial amounts of our common stock might occur
  could adversely affect prevailing market prices.

Item
  2. Properties

We
  lease approximately 93,000 square feet of office space in Berkeley Heights,
  New Jersey. Our annual rental costs for this space are approximately $2.5 million.
  Our lease on this space terminates in 2010.

Our
  facilities in Utah currently consist of 11,178 square feet of laboratory and
  office space at an annual rental cost of $0.2 million. Our lease on this space
  terminates in 2009.

Item
  3. Legal Proceedings

JBL
  Scientifics, Inc.

During
  May 2000, Promega notified Genta of two claims against Genta and Gentas
  subsidiary, Genko Scientific, Inc. (formerly known as JBL Scientifics, Inc.),
  for indemnifiable damages in the aggregate amount of $2.82 million under the
  purchase agreement pursuant to which Promega acquired the assets of JBL. Promegas
  letter stated that it intended to reduce to zero the principal amount of the
  $1.2 million promissory note it issued as partial payment for the assets of
  Genko Scientific, Inc. and that therefore Genta owed Promega approximately $1.6
  million. On October 16, 2000 Genta filed suit in a U.S. District Court in California
  against Promega for the non-payment of the $1.2 million note plus accrued interest.
  On November 6, 2000, Promega filed a counterclaim alleging indemnifiable damages
  in the aggregate amount of $2.8 million. During the first quarter of 2001, we
  agreed to resolve the matter with Promega, and, in connection therewith, agreed
  to restructure its $1.2 million promissory note receivable to provide for a
  $0.2 million non-interest bearing note due to be repaid by Promega upon final
  resolution of certain environmental issues related to JBL and forgave all accrued
  interest. While we have resolved one of these environmental issues, we are awaiting
  final acceptance by the EPA of our settlement offer on the other environmental
  issue before the restructured note will be repaid by Promega. We are uncertain
  as to whether and when the EPA will issue such final acceptance.

27

---



Genta
  Pharmaceutical Europe S.A.

During
  1995, Genta Pharmaceutical Europe S.A., or Genta Europe, a wholly-owned subsidiary
  of Genta, received funding in the form of a loan from ANVAR, a French government
  agency, of which the proceeds were intended to fund research and development
  activities. In October 1996, in connection with a restructuring of Gentas
  operations, Genta terminated all scientific personnel of Genta Europe. In 1998,
  ANVAR asserted that Genta Europe was not in compliance with the ANVAR Agreement,
  notified Genta Europe of its demand for accelerated repayment of the loan and
  notified Genta that it was liable as a guarantor on the note. Based on the advice
  of French counsel, Genta does not believe that ANVAR is entitled to payment
  under the terms of the ANVAR Agreement and that Genta will likely not incur
  any liability in this matter, although there can be no assurances thereof. During
  the quarter ended September 30, 2003, we reversed the accrued net liability
  of $0.2 million related to this matter, as management believes that a loss is
  not probable.

University
  of Pennsylvania

In
  October 2002, a licensing officer from the University of Pennsylvania asserted
  a claim to a portion of the initial $40.0 million development funding we received
  from Aventis pursuant to the collaborative agreement between Genta and Aventis.
  In October 2003, we reached a settlement with the University of Pennsylvania
  with respect to this claim. Under the terms of the settlement, in exchange for
  an agreement by the University of Pennsylvania to forego any and all claims
  in the future to any portion of any milestone and other payments (other than
  royalty payments on sales) made to Genta pursuant to the collaborative agreement,
  Genta has agreed to make the following payments to the University of Pennsylvania:
  (i) $750,000 on November 5, 2003, (ii) $250,000 on February 2, 2004, (iii) $1.5
  million upon the first new drug application or foreign equivalent approval of
  Genasense and (iv) provided that the first new drug application or foreign
  equivalent approval of Genasense has been received by Genta, $750,000
  on the earlier of (a) the second new drug application or foreign equivalent
  approval of Genasense or (b) December 30, 2004.

Item
  4. Submission of Matters to a Vote of Security Holders

No
  matters were submitted to a vote of security holders in the quarter ended December
  31, 2003.

28

---



PART II

Item
  5. Market For Registrants Common Equity and Related Stockholder Matters

(a)
  Market Information

The
  Companys common stock is traded on the Nasdaq National Market under the
  symbol GNTA. The following table sets forth, for the periods indicated,
  the high and low sales prices for the common stock as reported by Nasdaq.

|                     |  |  |   | High  |  |   | Low   | 
|-------------------- |  |  | - | ----- |  | - | ----- | 
|2003                 |  |  |   |       |  |   |       | 
|First
      Quarter  |  |  | $ | 8.80  |  | $ | 5.50  | 
|Second
      Quarter |  |  |   | 14.69 |  |   | 6.52  | 
|Third
      Quarter  |  |  |   | 17.65 |  |   | 11.10 | 
|Fourth
      Quarter |  |  |   | 12.90 |  |   | 8.59  | 
|                     |  |  |   |       | 
|2002                 |  |  |   |       | 
|First
      Quarter  |  |  | $ | 18.25 |  | $ | 10.88 | 
|Second
      Quarter |  |  |   | 17.74 |  |   | 6.29  | 
|Third
      Quarter  |  |  |   | 8.70  |  |   | 6.15  | 
|Fourth
      Quarter |  |  |   | 11.50 |  |   | 6.14  | 

(b)
  Holders

There
  were 704 holders of record of the Companys common stock as of March 11,
  2004.

(c)
  Dividends

The
  Company has never paid cash dividends on its common stock and does not anticipate
  paying any such dividends in the foreseeable future. The Company currently intends
  to retain its earnings, if any, for the development of its business.

(d)
  Recent Sale of Unregistered Securities

In
  August 2003, Genta issued 1.03 million shares of common stock with a fair value
  of approximately $13.0 million to Salus stockholders in exchange for all of
  the outstanding shares of Salus common stock, including those issued pursuant
  to the conversion of Salus preferred stock. The shares were issued in
  a transaction not involving a public offering and were issued in reliance upon
  the exemption from registration provided by Section 4(2) of the Securities Act
  of 1933.

29

---



Item
  6. Selected Consolidated Financial Data

|                                                      |  |  | Years
      Ended December 31, |        
|----------------------------------------------------- |  |  | ------------------------------ | -------
|(In thousands,
      except share data)               |  |  | 2003                           |        
|                                                      |  |  |                                |        
|                                                      |  |  |                                |        
|Consolidated
      Statements of Operations Data (1): |  |  |                                |        
|Revenues:                                             |  | 
|Product
      sales - net                             |  |  | $                              | 1,420  
|License
      fees and royalties                      |  |  |                                | 1,045  
|Development
      funding                             |  |  |                                | 4,194  
|                                                      |  |  |                                |        
|Total
      revenues - net:                           |  |  |                                | 6,659  
|Cost
      of goods sold                              |  |  |                                | 404    
|                                                      |  |  |                                |        
|Gross
      margin                                    |  |  |                                | 6,255  
|                                                      |  |  |                                |        
|Costs
      and expenses:                             |  | 
|Research
      and development                        |  |  |                                | 82,875 
|Selling,
      general and administrative             |  |  |                                | 29,604 
|Compensation
      expenses                           |  |  |                                | 436    
|Promega
      settlement                              |  |  |                                | --     
|                                                      |  |  |                                |        
|Total
      cost and expenses - gross                 |  |  |                                | 112,915
|Aventis
      reimbursement                           |  |  |                                | (55,891
|                                                      |  |  |                                |        
|Total
      cost and expenses - net                   |  |  |                                | 57,024 
|                                                      |  |  |                                |        
|Loss
      before other income and income taxes       |  |  |                                | (50,769
|Other
      income                                    |  |  |                                | 666    
|Income
      taxes                                    |  |  |                                | (6     
|                                                      |  |  |                                |        
|Loss
      from continuing operations                 |  |  |                                | (50,109
|Loss
      from discontinued operations               |  |  |                                | --     
|Gain
      on sale of discontinued operations         |  |  |                                | --     
|                                                      |  |  |                                |        
|Net loss                                              |  |  |                                | (50,109
|Preferred
      stock dividends                       |  |  |                                | --     
|                                                      |  |  |                                |        
|Net loss
      applicable to common shares            |  |  | $                              | (50,109
|                                                      |  |  |                                |        
|                                                      |  |  |                                |        
|Continuing
      operations                           |  |  | $                              | (0.67  
|Discontinued
      operations                         |  |  |                                | --     
|                                                      |  |  |                                |        
|Net loss
      per basic and diluted share            |  |  | $                              | (0.67  
|                                                      |  |  |                                |        
|                                                      |  |  |                                |        
|Average
      shares used in computing net            |  | 
|loss
      per basic and diluted share                |  |  |                                | 75,093 
|                                                      |  |  |                                |        

* includes
  $13,465 write-off of acquired In-Process R&D related to the acquisition
  of Salus Therapeutics, Inc. in August 2003 (see Note 5 to our financial statements).

|                                                       |  |  | As
      of December 31, |        
|------------------------------------------------------ |  |  | ------------------------ | -------
|                                                       |  |  | 2003                     |        
|                                                       |  |  |                          |        
|Consolidated
      Balance Sheet Data (1):             |  |  |                          |        
|Cash,
      cash equivalents and marketable securities |  |  | $                        | 82,929 
|Working
      capital                                  |  |  |                          | 82,281 
|Total
      assets                                     |  |  |                          | 114,675
|Total
      stockholders' equity                       |  |  |                          | 12,254 

(1) The above
  selected financial data reflects discontinued operations and balance sheet data
  of JBL as of May 10, 1999.

30

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Item
  7. Management's Discussion and Analysis of Financial Condition and Results
  of Operations

Overview

Since
  its inception in February 1988, Genta has devoted its principal efforts toward
  drug discovery and research and development. Gentas strategy is to build
  a product and technology portfolio primarily focused on its cancer-related products.
  Genta has been unprofitable to date and expects to incur substantial operating
  losses due to continued requirements for ongoing and planned research and development
  activities, pre-clinical and clinical testing, manufacturing activities, regulatory
  activities and establishment of a sales and marketing organization. From our
  inception to December 31, 2003, we have incurred a cumulative net loss of $323.3
  million. We have experienced significant quarterly fluctuations in operating
  results and we expect that these fluctuations in revenues, expenses and losses
  will continue.

Our
  financial results in 2004 may be significantly affected by FDA action with respect
  to Genasense. We have filed a New Drug Application (NDA) for
  Genasense to be used in combination with dacarbazine for the treatment
  of patients with advanced melanoma who have not previously received chemotherapy.
  The FDA accepted our NDA filing on February 5, 2004 and granted Priority
  Review status to the application, which targets an agency action on or
  before June 8, 2004. On February 10, 2004, we were invited by the FDA to meet
  on May 3, 2004 with the FDA Oncology Drugs Advisory Committee. If the FDA approves
  the NDA and qualifies Avecia, our contract manufacturer, then Aventis, Gentas
  collaborative partner, will begin to market the product in the United States,
  Avecia will begin to manufacture the product and Genta will sell the product
  to Aventis. Genta will also earn a royalty from Aventis on all sales of Genasense.

Results
  of Operations

|                                          |      |  | Summary Operating Results 
      For the years ended December 31, |        
|----------------------------------------- | ---- |  | ----------------------------------------------------------------- | -------
|                                          |      |  |                                                                   |        
|($
      thousands)                       | 2003 |  | Increase 
      (Decrease)                                        |        
|                                          |      |  |                                                                   |        
|                                          |      |  |                                                                   |        
|Revenues:                                 |      |  |                                                                   |        
|Product
      sales - net                 |      |  | $                                                                 | 1,420  
|License
      fees and royalties ..       |      |  |                                                                   | 1,045  
|Development
      funding                 |      |  |                                                                   | 4,194  
|                                          |      |  |                                                                   |        
|Net
      revenues                        |      |  |                                                                   | 6,659  
|                                          |      |  |                                                                   |        
|Cost
      of goods sold                  |      |  |                                                                   | 404    
|                                          |      |  |                                                                   |        
|Gross
      margin                        |      |  |                                                                   | 6,255  
|                                          |      | 
|Costs
      and expenses:                 |      | 
|Research
      and development            |      |  |                                                                   | 82,875 
|Selling,
      general and                |      | 
|administrative                            |      |  |                                                                   | 29,604 
|Promega
      settlement                  |      |  |                                                                   | --     
|Compensation
      expense related to     |      | 
|stock
      options                       |      |  |                                                                   | 436    
|                                          |      |  |                                                                   |        
|Total
      costs and expenses - gross .. |      |  |                                                                   | 112,915
|Less:
      Aventis reimbursement         |      |  |                                                                   | (55,891
|                                          |      |  |                                                                   |        
|Total
      costs and expenses - net      |      |  |                                                                   | 57,024 
|                                          |      |  |                                                                   |        
|Loss
      before other income and taxes  |      |  |                                                                   | (50,769
|                                          |      | 
|Other
      income, principally net       |      | 
|interest
      income                     |      |  |                                                                   | 666    
|Income
      taxes                        |      |  |                                                                   | (6     
|                                          |      |  |                                                                   |        
|Net
      loss                            |      |  | $                                                                 | (50,109
|                                          |      |  |                                                                   |        

* includes
  $13,465 write-off of acquired In-Process R&D related to the acquisition
  of Salus Therapeutics, Inc. in August 2003 (see Note 5 to our financial statements).

31

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Net
  Revenues

Net
  revenues, consisting of license fees, development funding and product sales
  were $6.7 million in 2003 compared to $3.6 million in 2002 and $0.1 million
  in 2001. License fees and development funding revenues are generated by the
  initial $10.0 million licensing fee and $40.0 million development funding received
  from Aventis in 2002 under the Collaborative Agreement (see Note 12 to our financial
  statements), along with non-exclusive sub-license agreements involving antisense
  technology. The initial payments received from Aventis are being recognized
  over the original estimated useful life of the related first-to-expire patent
  of 115 months.

In
  October 2003, the Company launched the commercial product Ganite for the
  treatment of cancer-related hypercalcemia that is resistant to hydration, generating
  $1.4 million in product sales.

Research
  and Development Expenses

Research
  and development expenses before reimbursement were $82.9 million in 2003 compared
  to $86.6 million in 2002 and $39.4 million in 2001. Research and development
  expenses in 2003 include a $13.5 million write-off of acquired in-process research
  and development resulting from the acquisition of Salus Therapeutics, Inc. (see
  Note 5 to our financial statements).

During
  2002 Genta purchased substantial amounts of drug substance to be used in Genasense
  Phase 3 clinical trials, leading to higher research and development expenses
  in 2002 than in 2001. During 2003, total research and development expenses declined,
  primarily due to significantly lower purchases of clinical drug substance. Of
  the $82.9 million in research and development expenses for the twelve months
  ended December 31, 2003, $13.5 million is related to acquired in-process research
  and development and $55.9 million is reimbursable pursuant to our collaborative
  agreement with Aventis, $15.5 million of which related to the three months ended
  December 31, 2003, is expected to be reimbursed by Aventis in the first quarter
  of 2004 (see Note 4 to our financial statements).

Services
  and capabilities that have not been retained within the Company are out-sourced
  through short-term contracts or from consultants. Substantially, all pre-clinical
  biology and clinical trial work are now conducted through such collaborations
  with external scientists and clinicians. The Company anticipates that, if sufficient
  collaborative revenues and other funding are available, research and development
  expenses may increase in future years due to requirements for pre-clinical studies,
  clinical trials and increased regulatory costs. The Company will continue to
  assess the potential cost benefit ratio of developing its own antisense oligonucleotide
  manufacturing, if and as such products are successfully developed and approved
  for marketing.

It
  is anticipated that research and development expenses will continue to increase
  in the future, as Genta expands its other product development programs. Furthermore,
  the Company is also pursuing other opportunities for new product development
  candidates, which, if successful, will require additional research and development
  expenses.

In
  an effort to focus its research and development on areas that provide the most
  significant commercial opportunities, the Company continually evaluates its
  ongoing programs in light of the latest market information and conditions, availability
  of third party funding, technological advances, and other factors. As a result
  of such evaluation, the Companys product development plans have changed
  from time to time, and the Company anticipates that they will continue to do
  so in the future.

Corporate
  Acquisitions

In
  August 2003, Genta acquired Salus Therapeutics, Inc., (Salus), a
  privately held company that specializes in the identification and development
  of DNA and RNA-based drugs including antisense, RNA interference, and delivery
  systems for DNA/RNA-based drugs. The acquisition provided enhanced laboratory
  capabilities that complement the Companys oncology drug discovery programs
  in DNA and RNA Medicines.

Under
  the terms of the merger agreement, Genta issued 1.03 million shares of common
  stock with a fair value of approximately $13.0 million to Salus stockholders
  in exchange for all of the outstanding shares of Salus common stock, including
  those issued pursuant to the conversion of Salus preferred stock. Contingent
  upon the achievement of certain preclinical and clinical milestones, an additional
  $17.0 million may be paid in stock or cash at Gentas option.

32

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The
  purchase price was allocated to the assets purchased and liabilities assumed
  based upon their respective fair values, which was determined by an independent
  valuation. Acquired in-process research and development expense represents that
  portion of the purchase price of an acquisition related to the research and
  development activities that are yet to demonstrate their technological feasibility
  and have no alternative future use. Accordingly, in-process research and development
  of $13.5 million was charged to operations in the fourth quarter of 2003.

Selling,
  general and administrative expenses

Selling,
  general and administrative expenses were $29.6 million in 2003 compared to $20.1
  million in 2002 and $8.2 million in 2001. Expenses have substantially increased
  due to the creation of a sales force, Ganite launch activities, a larger
  administrative staff and higher general corporate expenses driven by business
  growth. There were no sales and marketing related expenses reimbursable at 100%
  pursuant to our collaborative agreement with Aventis for the twelve months ended
  December 31, 2003, as sales and marketing related expenses related to Genasense are incurred by, billed to and paid by Aventis. In 2002, selling,
  general and administrative expenses include $.7 million of expense reimbursement
  from Aventis.

Aventis
  Reimbursement

Under
  the Collaborative Agreement with Aventis, (see Note 12 to our financial statements),
  Aventis will pay 75% of U.S. NDA-directed development costs incurred by either
  Genta or Aventis and 100% of all other development, marketing and sales costs
  incurred within the U.S. and elsewhere as subject to the Collaborative Agreement.
  Expense reimbursement from Aventis of $55.9 million for the year ended December
  31, 2003 increased from $28.5 million for the year ended December 31, 2002 due
  to the following factors: the comparison of twelve months of activity in 2003
  compared to eight months in 2002, greater activity resulting from the NDA filing
  for Genasense and reimbursement for 2002 and 2003 drug substance purchases
  used in Phase 3 clinical trials. A breakdown of the various third-party, drug
  supply costs and internal costs of scientific and technical personnel, (Full-Time
  Equivalents or FTEs) that Aventis is required to reimburse
  under our collaborative agreement with Aventis, follows ($ thousands) (see Note
  12 to our financial statements):

|Reimbursement
      to Genta     |  |  |   | 2003   |  |   | 2002   | 
|-------------------------------- |  |  | - | ------ |  | - | ------ | 
|                                 |  |  |   |       
|Third-party
      costs          |  |  | $ | 34,073 |  | $ | 18,168 | 
|Drug
      supply costs          |  |  |   | 16,326 |  |   | 6,879  | 
|FTE's                            |  |  |   | 7,228  |  |   | 3,404  | 
|                                 |  |  |   |       
|Amount
      due to Genta        |  |  | $ | 57,627 |  | $ | 28,451 | 
|                                 |  |  |   |        |  |   |        | 
|Reimbursement
      to Aventis   |  |  |   | 1,736  |  |   | --     | 
|                                 |  |  |   |       
|Net reimbursement
      to Genta |  |  | $ | 55,891 |  | $ | 28,451 | 
|                                 |  |  |   |       

Reimbursement
  to Aventis is comprised of our 25% share of third party costs incurred by Aventis
  and internal costs of Aventiss scientific and technical personnel.

Other
  Income

Net
  other income for the year ended December 31, 2003 declined $.7 million, or 50%
  from the comparable period in 2002, principally as a result of lower investment
  balances and higher borrowings from Aventis (see Note 15 to our financial statements).
  Net other income for the year ended December 31, 2002 declined $1.4 million,
  or 50% from the comparable period in 2001, principally as a result of lower
  investment balances and lower yields on investments. The proceeds received from
  Aventis in 2002 were not placed into any investment instruments until October
  2002.

33

---



Net
  Loss

Genta
  incurred a net loss of $50.1 million, or $0.67 per share, for the year ended
  December 31, 2003, compared to a net loss of $74.5 million, or $1.05 per share,
  for the year ended December 31, 2002 and $46.7 million, or $.84 per share in
  2001. In 2003, the improvement in net loss and per share net loss to common
  shareholders was primarily due to lower clinical drug substance purchases and
  higher reimbursement by Aventis described above. In 2002, the increases in net
  loss and per share net loss to common shareholders were attributable to increased
  research and development and selling, general and administrative expenses described
  above.

Recent
  Accounting Pronouncements

In
  May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
  Instruments with Characteristics of Liabilities, Equity, or Both. This limited
  scope statement prescribes changes to the classification of mandatorily redeemable
  preferred stock, preferred securities of subsidiary trusts and the accounting
  for forward purchase contracts issued by a company in its own stock among other
  issues. SFAS No. 150 does not apply to features that are embedded in a financial
  instrument that is not a derivative in its entirety and requires all preferred
  securities of subsidiary trusts to be classified as debt on the consolidated
  balance sheet and the related dividends as interest expense. The Company adopted
  the provisions of SFAS No. 150, including the deferral of certain effective
  dates as a result of the provisions of FASB Staff Position 150-3, Effective
  Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments
  of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
  Interests Under FASB Statement No. 150 Accounting for Certain Financial Instruments
  with Characteristics of Both Liabilities and Equity. The adoption of this
  statement did not have any impact on the Companys results of operations,
  financial position or cash flows.

In
  April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
  Instruments and Hedging Activities. SFAS No. 149 amends and clarifies financial
  accounting and reporting for derivative instruments, including certain derivative
  instruments embedded in other contracts (collectively referred to as derivatives)
  and for hedging activities under SFAS No. 133, Accounting for Derivative
  Instruments and Hedging Activities. In particular, SFAS No. 149 (1) clarifies
  under what circumstances a contract with an initial net investment meets the
  characteristic of a derivative discussed in paragraph 6(b) of SFAS No. 133,
  (2) clarifies when a derivative contains a financing component, (3) amends the
  definition of an underlying to conform it to language used in FIN 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others, and (4) amends certain other existing pronouncements.
  SFAS No. 149 is to be applied prospectively to contracts entered into or modified
  after June 30, 2003, with certain exceptions, and for hedging relationships
  designated after June 30, 2003. The adoption of this statement did not have
  any impact on the Companys results of operations, financial position or
  cash flows.

In
  January 2003, the FASB issued Interpretation No. 46 Consolidation of Variable
  Interest Entities. This interpretation defines when a business must consolidate
  a variable interest entity. This interpretation applies immediately to variable
  interest entities created after January 31, 2003 and became effective for all
  other transactions as of July 1, 2003. However, in October 2003 the FASB permitted
  companies to defer the July 1, 2003 effective date to December 31, 2003. Again
  in December 2003, the FASB permitted companies to defer the December 31, 2003
  effective date, in certain circumstances, to the first interim or annual period
  ending after March 15, 2004. The Company has determined that it is not reasonably
  probable that it will be required to consolidate or disclose information about
  a variable interest entity.

In
  November 2002, FASB Interpretation (FIN) 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others. This interpretation requires a guarantor to recognize,
  at the inception of a guarantee, a liability for the fair value of the obligation
  undertaken in issuing the guarantee. It also enhances a guarantors disclosure
  requirements to be made in its interim and annual financial statements about
  its obligations under certain guarantees it has issued. The initial recognition
  and initial measurement provisions of this interpretation are applicable on
  a prospective basis to guarantees issued or modified after December 31, 2002.
  The disclosure requirements are effective for financial statements or interim
  or annual periods ending after December 15, 2002. In the normal course of business,
  the Company does not issue guarantees to third parties; accordingly, this interpretation
  does not have an effect on the Companys financial position or results
  of operations.

34

---



Critical
  Accounting Policies

Our
  significant accounting policies are more fully described in Note 2 to the consolidated
  financial statements for the fiscal year ended December 31, 2003. In preparing
  our financial statements in accordance with accounting principles generally
  accepted in the United States of America, management is required to make estimates
  and assumptions that, among other things, affect the reported amounts of assets
  and liabilities and reported amounts of revenues and expenses. These estimates
  are most significant in connection with our critical accounting policies, namely
  those of our accounting policies that are most important to the portrayal of
  our financial condition and results and require managements most difficult,
  subjective or complex judgments. These judgments often result from the need
  to make estimates about the effects of matters that are inherently uncertain.
  Actual results may differ from those estimates under different assumptions or
  conditions. The Company believes that the following represent its critical accounting
  policies:

- Revenue recognition.
    Our policy is to recognize revenues under license arrangements when delivery
    has occurred or services have been rendered, persuasive evidence of an arrangement
    exists, the fee is fixed and determinable, and collectibility is reasonably
    assured. Royalties are recognized when earned. Consistent with Staff Accounting
    Bulletin No. 101 Revenue Recognition, initial funding of ongoing development
    received from Aventis, after the achievement of certain research and development
    milestones are being recognized on a straight-line basis over the original
    estimated useful life of the related first-to-expire patent of 115 months
    (See Note 12 to our financial statements). Any subsequent milestone payments
    that may be received from Aventis will also be recognized over the then-remaining
    estimated useful life of the related first-to-expire patent.Genta
    recognizes revenue from product sales when title to product and associated
    risk of loss has passed to the customer and we are reasonably assured of collecting
    payment for the sale. All
    revenue from product sales are recorded net of applicable allowances for returns,
    rebates and other applicable discounts and allowances. We allow return of
    our product for up to twelve months after product expiration.
- Research and
    development costs. All such costs are expensed as incurred, including
    raw material costs required to manufacture drugs for clinical trials. Reimbursements
    for applicable Genasense related costs, under the collaborative agreement
    between Genta and Aventis, will continue to be recorded as a reduction to
    expense (See Note 12 to our financial statements).
- Intangible
    assets. Our intangible assets consist primarily of licensed technology
    and capitalized patent costs, and are amortized using the straight-line method
    over their estimated useful lives. Our policy is to evaluate the appropriateness
    of the carrying values of the unamortized balances of intangible assets on
    the basis of estimated future cash flows (undiscounted) and other factors.
    If such evaluation were to indicate an impairment of these intangible assets,
    such impairment would be recognized by a corresponding write-down of the applicable
    assets. We evaluate the continuing value of patents and patent applications
    each financial reporting period. As a result of this evaluation, we may elect
    to continue to maintain, seek to out-license, or abandon these patents.
- Inventories.
    Inventories are stated at the lower of cost or market with cost being determined
    using the first-in, first-out (FIFO) method.
- Acquired in-process
    research and development. Costs to acquire in-process research and development
    projects and technologies which have no alternative future use and which have
    not reached technological feasibility at the date of acquisition are expensed
    as incurred (see Note 5 to our financial statements). Acquired in-process
    research and development is considered as part of total research and development
    expense.

35

---



Liquidity
  and Capital Resources

Since
  inception, we have financed our operations primarily through private placements
  and public offerings of our equity securities. Cash provided from these offerings
  totaled approximately $278.8 million through December 31, 2003, including net
  proceeds of $71.0 million received in 2002 and $32.2 million received in 2001.

During
  2003, cash flow used in operating activities was $64.4 million, primarily resulting
  from a net loss of $50.1 million and lower accounts payable and accrued expenses
  of $17.4 million. Total debt increased $35.0 million, resulting from borrowings
  under the line of credit from Aventis (see Note 15 to our financial statements).
  Total cash and cash equivalents declined $7.5 million in 2003. At December 31,
  2003, we had cash, cash equivalents and marketable securities totaling $82.9
  million compared to $113.7 million at December 31, 2002 and $54.1 million at
  December 31, 2001.

During
  2002, cash flow used in operating activities was $20.4 million primarily resulting
  from a net loss of $74.5 million offset by the initial $10.0 million licensing
  fee and $40.0 million development funding received from Aventis under our collaborative
  agreement in 2003 (see Note 12 to our financial statements). The Company had
  proceeds of $71.0 million from a private placement of common stock and $10.0
  million from the sale of convertible debt to Aventis. Total cash and cash equivalents
  declined $5.4 million in 2002 from $38.1 million to $32.7 million.

In
  March 2003, Genta and Aventis negotiated a line of credit for an amount up to
  $40.0 million which terminates with respect to additional borrowings on the
  earlier to occur of FDA approval of Genasense or December 31, 2004. Loans
  under this line of credit are subject to repayment six months after termination.
  As of December 31, 2003, approximately $4.7 million remained available under
  this line of credit. FDA approval of Genasense would trigger a milestone
  payment from Aventis of $75.0 million and an obligation by Aventis to purchase
  at our option $20.0 million of convertible notes from Genta. Management believes
  that at the current rate of spending, primarily in support of ongoing and anticipated
  clinical trials, and after considering expense reimbursement and the line of
  credit provided by Aventis, we should have sufficient cash funds to maintain
  our present operations through 2004.

Our
  principal expenditures relate to our research and development activities, which
  include our on-going and future clinical trials. We expect these expenditures
  to continue. We expect increased total expenditures, prior to expense reimbursement,
  for clinical trials and drug supply related to Genasense as a result of
  our collaboration agreement with Aventis. In addition, expenditures associated
  with other products under development by us may increase as research and development
  activities become more focused and as other clinical trials are initiated.

If
  we successfully secure sufficient levels of collaborative revenues and other
  sources of financing, we expect to use such financing to continue to expand
  our ongoing research and development activities, pre-clinical testing and clinical
  trials, costs associated with the market introduction of potential products
  and expansion of our administrative activities.

We
  anticipate that significant additional sources of financing, primarily expense
  reimbursement from Aventis, will be required in order for us to continue our
  planned operations. We also anticipate seeking additional product development
  opportunities through potential acquisitions or investments. Such acquisitions
  or investments may consume cash reserves or require additional cash or equity.
  Our working capital and additional funding requirements will depend upon numerous
  factors, including: (i) the progress of our research and development programs;
  (ii) the timing and results of pre-clinical testing and clinical trials; (iii)
  the level of resources that we devote to sales and marketing capabilities; (iv)
  technological advances; (v) the activities of competitors; and (vi) our ability
  to establish and maintain collaborative arrangements with others to fund certain
  research and development efforts, to conduct clinical trials, to obtain regulatory
  approvals and, if such approvals are obtained, to manufacture and market products.

36

---



Contractual
  Obligations

Future
  contractual obligations at December 31, 2003 are as follows ($ thousands):

|                                              | Total |  | Less
      than
      1 year |         | 1
      - 3 years |   | 3
      - 5 years |  | More than 5
      years |        
|--------------------------------------------- | ----- |  | ---------------------------- | ------- | ----------------- | - | ----------------- |  | ----------------------- | -------
|                                              |       |  |                              |         |                   |   |                   |  |                         |        
|                                              |       |  |                              |         |                   |   |                   |  |                         |        
|Long
      term debt obligations (1)          |       |  | $                            | 35,000  |                   | $ | --                |  | $                       | 35,000 
|Convertible
      debt                        |       |  |                              | 10,000  |                   |   | --                |  |                         | --     
|Operating
      lease obligations             |       |  |                              | 16,067  |                   |   | 2,571             |  |                         | 5,235  
|Drug
      purchase obligations to Avecia (2) |       |  |                              | 137,500 |                   |   | 27,500            |  |                         | 110,000
|Drug
      purchase obligations to JMI (3)    |       |  |                              | 252     |                   |   | 46                |  |                         | 206    
|                                              |       |  |                              |         |                   |   |                   |  |                         |        
|Total                                         |       |  | $                            | 198,819 |                   | $ | 30,117            |  | $                       | 150,441
|                                              |       |  |                              |         |                   |   |                   |  |                         |        

(1)
  Consists of amounts under our line of credit with Aventis, which are due six
  months after termination, which will occur on the earlier of FDA approval of
  Genasense or December 31, 2004. FDA approval of Genasense would
  trigger a milestone payment from Aventis of $75 million and an obligation by
  Aventis to purchase at our option $20 million of convertible notes from us (see
  Note 15 to our financial statements).

(2)
  Consists of drug purchase obligations to Avecia which are subject to FDA approval
  of Genasense and qualification and validation of Avecias production
  facilities expansion. The amounts actually purchased will be dependent upon
  the aforementioned conditions, as well as the volume purchased in any given
  year. Pursuant to the collaborative agreement with Aventis, (see Note 12 to
  our financial statements), the Company anticipates that it will be reimbursed
  from 75% to 100% of these purchase commitments after the drug is shipped to
  Aventis for clinical use or commercial sales. For a further description of our
  agreement with Avecia, see Part I, Item 1, B. Summary of Business and Research
  and Development  Manufacturing. If Genasense is not approved or
  Avecias production facility expansion is not validated, our total drug
  purchase obligations will be $27.5 million. We may terminate our Avecia contract
  if we determine that Genasense will not be approved by the FDA. In addition,
  we have committed up to $5.0 million of advance financing to the drug substance
  manufacturer, for facility expansion, which would be recovered with interest
  through future payments determined as a function of drug substance purchases
  to be made by Genta in the future.

(3)
  Consists of drug purchase obligations to Johnson Matthey Inc. (JMI). Genta is
  obligated to purchase 80% of drug substance requirements for Ganite from
  JMI. The sales projections for Ganite are very dependent on the Companys
  ability to obtain compendial listings and/or approvals for the use of Ganite
  as a chemotherapy drug. The sales projections reflected in the contractual obligations
  reflect the current approved hypercalcemia indication and limited sales as a
  chemotherapy drug. Depending on the Companys ability to obtain additional
  compendial listings and/or approvals, the sales projections and resulting contractual
  obligations could be higher.

Item
  7A. Quantitative and Qualitative Disclosures about Market Risk

Our
  carrying values of cash, marketable securities, accounts payable,accrued expenses
  and debt are a reasonable approximation of their fair value. The estimated fair
  values of financial instruments have been determined by us using available market
  information and appropriate valuation methodologies (see Note 2 to our financial
  statements).

However,
  considerable judgment is required in interpreting market data to develop the
  estimates of fair value. Accordingly, the estimates utilized in the consolidated
  financial statements are not necessarily indicative of the amounts that we could
  realize in a current market exchange. We have not entered into, and do not expect
  to enter into, financial instruments for trading or hedging purposes. We do
  not currently anticipate entering into interest rate swaps and/or similar instruments.

Gentas
  primary market risk exposure with regard to financial instruments is to changes
  in interest rates, which would impact interest income earned on such instruments.
  We have no material currency exchange or interest rate risk exposure as of December
  31, 2003. Therefore there will be no ongoing exposure to material adverse effect
  on our business, financial condition or results of operation for sensitivity
  to changes in interest rates or to changes in currency exchange rates.

37

---



Item
  8. Financial Statements and Supplemental Data

Genta
  Incorporated
  Index to Financial Statements

|Genta
      Incorporated                                                                                         |   
|---------------------------------------------------------------------------------------------------------------- | --
|Independent
      Auditors' Report                                                                               | 39
|Consolidated
      Balance Sheets at December 31, 2003 and 2002                                                  | 40
|Consolidated
      Statements of Operations for the years ended December 31, 2003, 2002 and
      2001           | 41
|Consolidated
      Statements of Stockholders' Equity for the years ended December 31, 2003,
      2002 and 2001 | 42
|Consolidated
      Statements of Cash Flows for the years ended December 31, 2003, 2002 and
      2001           | 44
|Notes
      to Consolidated Financial Statements                                                                 | 45

38

---



INDEPENDENT
  AUDITORS REPORT

To the Board of Directors
  and Stockholders of 
  Genta Incorporated

We
  have audited the accompanying consolidated balance sheets of Genta Incorporated
  and subsidiaries (the Company) as of December 31, 2003 and 2002,
  and the related consolidated statements of operations, stockholders equity,
  and cash flows for each of the three years in the period ended December 31,
  2003. These financial statements are the responsibility of the Companys
  management. Our responsibility is to express an opinion on these financial statements
  based on our audits.

We
  conducted our audits in accordance with auditing standards generally accepted
  in the United States of America. Those standards require that we plan and perform
  the audit to obtain reasonable assurance about whether the financial statements
  are free of material misstatement. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements.
  An audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial statement
  presentation. We believe that our audits provide a reasonable basis for our
  opinion.

In
  our opinion, such consolidated financial statements present fairly, in all material
  respects, the financial position of Genta Incorporated as of December 31, 2003
  and 2002, and the results of their operations and their cash flows for each
  of the three years in the period ended December 31, 2003, in conformity with
  accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Parsippany,
  New Jersey
  March 10, 2004

39

---



GENTA
  INCORPORATED 
  CONSOLIDATED BALANCE SHEETS

(In thousands, except par
  value data)

|                                                                                      |  |  | December
      31, |         
|------------------------------------------------------------------------------------- |  |  | ------------------ | --------
|ASSETS                                                                                |  |  | 2003               |         
|                                                                                      |  |  |                    |         
|Current
      assets:                                                                 |  |  |                    |         
|Cash
      and cash equivalents (Note 2)                                              |  |  | $                  | 25,153  
|Marketable
      securities (Note 3)                                                  |  |  |                    | 57,776  
|Accounts
      receivable - net(Note 4)                                               |  |  |                    | 16,675  
|Notes
      receivable                                                                |  |  |                    | 200     
|Inventory
      (Note 7)                                                              |  |  |                    | 518     
|Prepaid
      expenses and other current assets                                       |  |  |                    | 3,313   
|                                                                                      |  |  |                    |         
|Total
      current assets                                                            |  |  |                    | 103,635 
|Property
      and equipment, net (Note 8)                                            |  |  |                    | 4,917   
|Notes
      receivable (Note 6)                                                       |  |  |                    | 3,542   
|Intangibles,
      net (Note 9)                                                       |  |  |                    | 863     
|Prepaid
      royalties (Note 10)                                                     |  |  |                    | 1,268   
|Other
      assets                                                                    |  |  |                    | 450     
|                                                                                      |  |  |                    |         
|Total
      assets                                                                    |  |  | $                  | 114,675 
|                                                                                      |  |  |                    |         
|                                                                                      |  | 
|LIABILITIES
      AND STOCKHOLDERS' EQUITY                                            |  | 
|Current
      liabilities:                                                            |  | 
|Accounts
      payable and accrued expenses (Note 11)                                 |  |  | $                  | 15,319  
|Notes
      payable                                                                   |  |  |                    | 748     
|Deferred
      revenues, current portion (Note 13)                                    |  |  |                    | 5,287   
|Other
      current liabilities                                                       |  |  |                    | --      
|                                                                                      |  |  |                    |         
|Total
      current liabilities                                                       |  |  |                    | 21,354  
|Deferred
      revenues (Note 13)                                                     |  |  |                    | 36,067  
|Convertible
      debt (Note 14)                                                      |  |  |                    | 10,000  
|Long
      term debt (Note 15)                                                        |  |  |                    | 35,000  
|                                                                                      |  |  |                    |         
|Total
      liabilities                                                               |  |  |                    | 102,421 
|                                                                                      |  |  |                    |         
|Commitments
      and contingencies (Note 21)                                         |  | 
|Stockholders'
      equity (Note 19):                                                 |  | 
|Series
      A convertible preferred stock, $.001 par value; 5,000 shares authorized, |  | 
|261
      shares issued and outstanding, liquidation value of $13,025                 |  | 
|at
      December 31, 2003 and December 31, 2002 respectively                         |  |  |                    | --      
|Common
      stock, $.001 par value; 120,000 shares authorized,                       |  | 
|75,927
      and 74,168 shares issued and outstanding at December 31, 2003            |  | 
|and
      December 31, 2002, respectively                                             |  |  |                    | 76      
|Additional
      paid-in capital                                                      |  |  |                    | 335,713 
|Accumulated
      deficit                                                             |  |  |                    | (323,299
|Deferred
      compensation                                                           |  |  |                    | (261    
|Accumulated
      other comprehensive income                                          |  |  |                    | 25      
|                                                                                      |  |  |                    |         
|                                                                                      |  |  |                    | 12,254  
|Less
      cost of treasury stock: 393 shares at December 31, 2002                    |  |  |                    | --      
|                                                                                      |  |  |                    |         
|Total
      stockholders' equity                                                      |  |  |                    | 12,254  
|                                                                                      |  |  |                    |         
|Total
      liabilities and stockholders' equity                                      |  |  | $                  | 114,675 
|                                                                                      |  |  |                    |         

See accompanying
  notes to consolidated financial statements.

40

---



GENTA
  INCORPORATED
  CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                              | Years
      Ended December 31, | 
|------------------------------------------------------------- | ------------------------------ | 
|(In thousands,
      except per share data)                   | 2003                           | 
|                                                              |                                | 
|Revenues:                                                     |                                | 
|Product
      sales - net                                     |                                | 
|License
      fees and royalties                              |                                | 
|Development
      funding (Note 13)                           |                                | 
|                                                              |                                | 
|                                                              |                                | 
|Cost
      of goods sold                                      |                                | 
|                                                              |                                | 
|Gross
      margin                                            |                                | 
|                                                              |                                | 
|Costs
      and expenses:                                     |                                | 
|Research
      and development (Note 12)                      |                                | 
|Selling,
      general and administrative (Note 12)           |                                | 
|Compensation
      expense related to stock options (Note 20) |                                | 
|Promega
      settlement                                      |                                | 
|                                                              |                                | 
|Total
      costs and expenses - gross                        |                                | 
|Aventis
      reimbursement (Note 12)                         |                                | 
|                                                              |                                | 
|Total
      costs and expenses - net                          |                                | 
|                                                              |                                | 
|Loss
      before other income and income taxes               |                                | 
|Other
      income                                            |                                | 
|Income
      taxes (Note 16)                                  |                                | 
|                                                              |                                | 
|Net loss                                                      |                                | 
|                                                              |                                | 
|                                                              |                                | 
|Net loss
      per basic and diluted share                    |                                | 
|                                                              |                                | 
|                                                              |                                | 
|Shares
      used in computing net loss per                   |                                | 
|basic
      and diluted share                                 |                                | 
|                                                              |                                | 

* includes $13,465 write-off
  of acquired In-Process R&D related to the acquisiton of Salus Therapeutics,
  Inc. in August 2003 (Note 5).

See accompanying
  notes to consolidated financial statements.

41

---



GENTA
  INCORPORATED
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
  For the Years Ended December 31, 2003, 2002 and 2001

|                                           | Convertible 
      Preferred Stock |  | Common
      Stock |     | Treasury
      Stock |   | Additional
      Paid-in 
      Capital |  | Accumulated
      Deficit |        | Deferred
      Compensation |   | Accumulated
      Other
      Comprehensive
      Income (Loss) |         | Total 
      Stockholders'
      Equity |     
|------------------------------------------ | ---------------------------------- |  | ------------------ | --- | -------------------- | - | --------------------------------------- |  | ------------------------- | ------ | --------------------------- | - | --------------------------------------------------------------- | ------- | --------------------------------------- | ----
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|(In thousands)                             | Shares                             |  | Amount             |     | Shares               |   | Amount                                  |  | Shares                    |        | Amount                      |   |                                                                 |         |                                         |     
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |     
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |     
|Balance
      at January 1, 2001           |                                    |  |                    | 261 |                      | $ | --                                      |  |                           | 51,085 |                             | $ | 51                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Comprehensive
      loss:                  |                                    | 
|Net
      loss                             |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|Unrealized
      investment loss           |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |  
|Total
      comprehensive loss             |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 | (46,874 | )                                      
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Issuance
      of common stock upon        |                                    | 
|conversion
      of convertible            |                                    | 
|preferred
      stock                      |                                    |  |                    | --  |                      |   | --                                      |  |                           | 2      |                             |   | --                                                              |         |                                         | --  
|Issuance
      of common stock in          |                                    | 
|connection
      with private              |                                    | 
|placement,
      net of issuance           |                                    | 
|costs
      of $502                        |                                    |  |                    | --  |                      |   | --                                      |  |                           | 2,500  |                             |   | 3                                                               |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Issuance
      of common stock             |                                    | 
|in
      connection with exercise          |                                    | 
|of
      warrants and stock options ..     |                                    |  |                    | --  |                      |   | --                                      |  |                           | 12,245 |                             |   | 12                                                              |         |                                         | --  
|Issuance
      of common stock as          |                                    | 
|hiring
      bonus                         |                                    |  |                    | --  |                      |   | --                                      |  |                           | 6      |                             |   | --                                                              |         |                                         | --  
|Issuance
      of common stock             |                                    | 
|related
      to license agreement         |                                    |  |                    | --  |                      |   | --                                      |  |                           | 162    |                             |   | --                                                              |         |                                         | --  
|Equity
      related compensation          |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |     
|Balance
      at December 31, 2001         |                                    |  |                    | 261 |                      |   | --                                      |  |                           | 66,000 |                             |   | 66                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Comprehensive
      loss:                  |                                    | 
|Net
      loss                             |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|Unrealized
      investment loss           |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |  
|Total
      comprehensive loss             |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 | (74,437 | )                                      
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Issuance
      of common stock in          |                                    | 
|connection
      with private              |                                    | 
|placement,
      net of issuance           |                                    | 
|costs
      of $899                        |                                    |  |                    | --  |                      |   | --                                      |  |                           | 6,665  |                             |   | 7                                                               |         |                                         | --  
|Issuance
      of common stock             |                                    | 
|in
      connection with exercise          |                                    | 
|of
      warrants and stock options ..     |                                    |  |                    | --  |                      |   | --                                      |  |                           | 1,503  |                             |   | 1                                                               |         |                                         | --  
|Purchase
      of treasury stock (Note 20) |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | (393
|Equity
      related compensation          |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | --  
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |     
|Balance
      at December 31, 2002         |                                    |  |                    | 261 |                      |   | --                                      |  |                           | 74,168 |                             |   | 74                                                              |         |                                         | (393
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            

42

---



GENTA
  INCORPORATED
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
  For the Years Ended December 31, 2003, 2002 and 2001

|                                           | Convertible 
      Preferred Stock |  | Common
      Stock |     | Treasury
      Stock |   | Additional
      Paid-in 
      Capital |  | Accumulated
      Deficit |        | Deferred
      Compensation |   | Accumulated
      Other
      Comprehensive
      Income (Loss) |         | Total 
      Stockholders'
      Equity |    
|------------------------------------------ | ---------------------------------- |  | ------------------ | --- | -------------------- | - | --------------------------------------- |  | ------------------------- | ------ | --------------------------- | - | --------------------------------------------------------------- | ------- | --------------------------------------- | ---
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|(In
      thousands)                       | Shares                             |  | Amount             |     | Shares               |   | Amount                                  |  | Shares                    |        | Amount                      |   |                                                                 |         |                                         |    
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |    
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |    
|Comprehensive
      loss:                  |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |    
|Net
      loss                             |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | -- 
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Total
      comprehensive loss             |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 | (50,109 | )                                      
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Issuance
      of common stock             |                                    | 
|in
      connection with exercise          |                                    | 
|of
      warrants and stock options ..     |                                    |  |                    | --  |                      |   | --                                      |  |                           | 1,172  |                             |   | 1                                                               |         |                                         | -- 
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Purchase
      of treasury stock (Note 19) |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | (51
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Retirement
      of treasury stock         |                                    |  |                    | --  |                      |   | --                                      |  |                           | (444   | )                           |   | --                                                              |         |                                         | 444
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Issuance
      of common stock             |                                    | 
|in
      connection with Salus asset       |                                    | 
|purchase
      (Note 5)                    |                                    |  |                    | --  |                      |   | --                                      |  |                           | 1,031  |                             |   | 1                                                               |         |                                         | -- 
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            
|Equity
      related compensation          |                                    |  |                    | --  |                      |   | --                                      |  |                           | --     |                             |   | --                                                              |         |                                         | -- 
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |    
|Balance
      at December 31, 2003         |                                    |  |                    | 261 |                      | $ | --                                      |  |                           | 75,927 |                             | $ | 76                                                              |         |                                         | -- 
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                             |   |                                                                 |         |                                         |    
|                                           |                                    |  |                    |     |                      |   |                                         |  |                           |        |                            

See accompanying
  notes to consolidated financial statements.

43

---



GENTA
  INCORPORATED
  CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                     | Years
      Ended December 31, | 
|-------------------------------------------------------------------- | ------------------------------ | 
|(In thousands)                                                       | 2003                           | 
|                                                                     |                                | 
|                                                                     |                                | 
|Operating
      activities:                                          |                                | 
|Net loss                                                             |                                | 
|Items
      reflected in net loss not requiring cash:                |                                | 
|Depreciation
      and amortization                                  |                                | 
|Loss
      on disposition of equipment                               |                                | 
|Promega
      settlement                                             |                                | 
|Write-off
      of acquired in-process R&D (Note 5)                  |                                | 
|Compensation
      expense related to stock options (Note 20) ..     |                                | 
|Changes
      in operating assets and liabilities, net of effects of |                                | 
|acquisition
      of Salus Therapeutics, Inc.:                       |                                | 
|Accounts,
      notes and loan receivable (Note 4)                   |                                | 
|Notes
      receivable (Note 6)                                      |                                | 
|Inventory
      (Note 7)                                             |                                | 
|Prepaids
      and other assets                                      |                                | 
|Accounts
      payable and accrued expenses                          |                                | 
|Deferred
      revenue (Note 13)                                     |                                | 
|Other
      assets                                                   |                                | 
|                                                                     |                                | 
|Net cash
      used in operating activities                          |                                | 
|                                                                     |                                | 
|Investing
      activities:                                          |                                | 
|Purchase
      of available-for-sale short-term                      |                                | 
|investments
      (Note 3)                                           |                                | 
|Maturities
      and sales of available-for-sale short-term          |                                | 
|investments
      (Note 3)                                           |                                | 
|Purchase
      of property and equipment                             |                                | 
|Cash
      paid for acquisition of Salus, net of cash acquired .     |                                | 
|                                                                     |                                | 
|Net cash
      (used in) provided by investing activities            |                                | 
|                                                                     |                                | 
|Financing
      activities:                                          |                                | 
|Issuance
      of common stock from private                          |                                | 
|placement,
      net (Note 19)                                       |                                | 
|Borrowings
      under long term debt (Note 15)                      |                                | 
|Issuance
      of convertible debt                                   |                                | 
|Borrowings
      under note payable                                  |                                | 
|Repayments
      of note payable                                     |                                | 
|Purchase
      of treasury stock (Note 19)                           |                                | 
|Issuance
      of common stock upon exercise of warrants and         |                                | 
|options
      (Note 19 & 20)                                         |                                | 
|                                                                     |                                | 
|Net cash
      provided by financing activities                      |                                | 
|                                                                     |                                | 
|(Decrease)
      increase in cash and cash equivalents               |                                | 
|Cash
      and cash equivalents at beginning of year                 |                                | 
|                                                                     |                                | 
|Cash
      and cash equivalents at end of year                       |                                | 
|                                                                     |                                | 

See accompanying
  notes to consolidated financial statements.

44

---



GENTA
  INCORPORATED
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For
  the years ended December 31, 2003, 2002 and 2001

1.
  Organization and Business

Genta
  Incorporated (Genta or the Company) is a biopharmaceutical
  company engaged in pharmaceutical (drug) research and development, its sole
  reportable segment. The Company is dedicated to developing innovative drugs
  to treat cancer. In the past, the Companys research efforts have focused
  primarily on the development of antisense drugs, which are designed
  to selectively prevent the production of specific proteins that contribute to
  the cause or progression of disease. More recently, the Company has broadened
  its research portfolio into other DNA medicines, which, in addition
  to antisense drugs, consist of decoy aptamers and small molecules, which include
  the Companys gallium products and Androgenics compounds.

The
  Company has had recurring operating losses since inception and management expects
  that such losses will continue until Genasense receives approval from
  the FDA for commercial sales and we receive a full year of royalties from Aventis
  on worldwide sales. Although no assurances can be expressed, management believes
  that at the current rate of spending, coupled with the amounts to be reimbursed
  by and the available line of credit from Aventis, the Company should have sufficient
  cash funds to maintain its present operations to the end of 2004. Additional
  Aventis milestone payments and other funding available to the Company upon the
  anticipated NDA approval of Genasense should provide sufficient capital
  resources for beyond 2004.

The
  Company may also seek collaborative agreements, equity financing and other financing
  arrangements with potential corporate partners and other sources. However, there
  can be no assurance that any such collaborative agreements or other sources
  of funding will be available on favorable terms, if at all. The Company will
  need substantial additional funds before it can expect to realize significant
  product revenue.

2.
  Summary of Significant Accounting Policies

Basis
  of Presentation

The
  consolidated financial statements are presented on the basis of accounting principles
  generally accepted in the United States. All professional accounting standards
  that are effective as of December 31, 2003 have been considered in preparing
  the consolidated financial statements. Such financial statements include the
  accounts of the Company and all majority-owned subsidiaries. All material intercompany
  transactions and balances have been eliminated in consolidation. The preparation
  of financial statements in conformity with generally accepted accounting principles
  requires management to make certain estimates and assumptions that affect reported
  earnings, financial position and various disclosures. Actual results could differ
  from those estimates. Certain reclassifications have been made to prior-year
  amounts to conform with current-year presentation.

Revenue
  Recognition

In
  April 2002, the Company entered into a development and commercialization agreement
  (Collaborative Agreement) with Aventis Pharmaceuticals Inc. (Aventis).
  Under the terms of the Collaborative Agreement, the Company and Aventis will
  jointly develop and commercialize Genasense in the U.S. (the Alliance),
  and Aventis will have exclusive development and marketing rights to the compound
  in all countries outside of the U.S. Under the Collaborative Agreement, Aventis
  will pay 75% of U.S. NDA-directed development costs incurred by either Genta
  or Aventis, subsequent to the execution of the Collaborative Agreement, and
  100% of all other development, marketing, and sales costs incurred within the
  U.S. and elsewhere as subject to the Collaborative Agreement (Note 12). Reimbursements
  are to be made pursuant to a single net payment from one party to the other.
  Such payments are due and payable 60 days following the end of the quarter in
  which such expenses are incurred.

45

---



In
  December 2003, the SEC published Staff Accounting Bulletin (SAB) No. 104, Revenue
  Recognition. This SAB updates portions of the SEC staffs interpretive
  guidance provided in SAB 101 and codifies its guidance in applying generally
  accepted accounting principles with regard to revenue recognition. Consistent
  with both SAB 101 and SAB 104, initial funding of ongoing development received
  from Aventis after the achievement of certain research and development milestones
  (Note 12) are being recognized on a straight-line basis over the original estimated
  useful life of the related first-to-expire patent of 115 months. Any subsequent
  milestone payments that may be received from Aventis will also be recognized
  over the then remaining estimated useful life of the first-to-expire patent.

Genta
  recognizes revenue from product sales when title to product and associated risk
  of loss has passed to the customer and we are reasonably assured of collecting
  payment for the sale. All revenue from product sales are recorded net of applicable
  allowances for returns rebates and other applicable discounts and allowances.
  We allow return of our product for up to twelve months after product expiration.

Research
  and Development

Research
  and development costs are expensed as incurred, including raw material costs
  required to manufacture products for clinical trials. Reimbursements for applicable
  Genasense-related costs, under the Collaborative Agreement (Note 12),
  have been recorded as a reduction to expenses in the consolidated statement
  of operations.

Cash,
  Cash Equivalents and Marketable Securities

Cash
  and cash equivalents consisted entirely of money market funds. The carrying
  amounts of cash, cash equivalents and marketable securities approximate fair
  value due to the short-term nature of these instruments. Marketable securities
  consisted primarily of corporate notes and government securities, all of which
  are classified as available-for-sale marketable securities. Management determines
  the appropriate classification of debt and equity securities at the time of
  purchase and reassesses the classification at each reporting date. The Company
  invests its excess cash primarily in debt instruments of domestic corporations
  and government-backed securities. The Company has established guidelines relative
  to diversification and maturities that attempt to maintain safety and liquidity.
  These guidelines are periodically reviewed and modified to take advantage of
  trends in yields and interest rates.

Property
  and Equipment

Property
  and equipment is stated at cost and depreciated on the straight-line method
  over the estimated useful lives of the assets, ranging from three to five years.
  Leasehold improvements incurred in the renovation of the Companys current
  offices are being amortized over the remaining life of the leases. The Companys
  policy is to evaluate the appropriateness of the carrying value of the undepreciated
  value of long-lived assets on the basis of estimated future cash flows (undiscounted)
  and other factors. If such evaluation were to indicate an impairment of these
  intangible assets, such impairment would be recognized by a write-down of the
  applicable assets. There was no impairment incurred in accordance with Statement
  of Financial Accounting Standards (SFAS) No. 144, Accounting
  for the Impairment or Disposal of Long-Lived Assets.

Intangible
  Assets

Intangible
  assets, consisting primarily of licensed technology and capitalized patent costs,
  are amortized using the straight-line method over their estimated useful lives
  of five years. The Companys policy is to evaluate the appropriateness
  of the carrying values of the unamortized balances of intangible assets on the
  basis of estimated future cash flows (undiscounted) and other factors. If such
  evaluation were to indicate an impairment of these assets, such impairment would
  be recognized by a write-down of the applicable assets. The Company evaluates,
  each financial reporting period, the continuing value of patents and patent
  applications. Through this evaluation, the Company may elect to continue to
  maintain these patents, seek to out-license them, or abandon them. There was
  no impairment incurred in accordance with SFAS No. 144, Accounting for the
  Impairment or Disposal of Long-Lived Assets.

46

---



Inventories

Inventories
  are stated at the lower of cost or market with cost being determined using the
  first-in, first-out (FIFO) method.

Income
  Taxes

The
  Company uses the liability method of accounting for income taxes. Deferred income
  taxes are determined based on the estimated future tax effects of differences
  between the financial statement and tax bases of assets and liabilities given
  the provisions of the enacted tax laws.

The
  Company may record valuation allowances against net deferred tax assets, if
  based upon the available evidence, it is more likely than not that some or all
  of the deferred tax assets will not be realized. The ultimate realization of
  deferred tax assets is dependent upon the generation of future taxable income
  and when temporary differences become deductible. The Company considers, among
  other available information, uncertainties surrounding the recoverability of
  deferred tax assets, scheduled reversals of deferred tax liabilities, projected
  future taxable income, and other matters in making this assessment. At December
  31, 2003, the Company has reviewed its deferred tax assets and believes that
  the valuation allowance reduces such assets to an amount that is more likely
  than not to be realized.

Stock
  Options

The
  Company has two stock-based compensation plans (Note 20). The Company accounts
  for stock-based compensation arrangements in accordance with provisions of Accounting
  Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
  to Employees and complies with the disclosure provisions of SFAS No. 123,
  Accounting for Stock-Based Compensation. Under APB Opinion No. 25, compensation
  expense is based on the difference, if any, on the date of grant, between the
  fair value of the Companys stock and the exercise price. The Company accounts
  for stock options issued to non-employees in accordance with the provisions
  of SFAS No. 123, and Emerging Issues Task Force Consensus on Issue No. 96-18,
  Accounting for Equity Instruments That Are Issued to Other Than Employees
  for Acquiring, or in Conjunction with Selling, Goods or Services. The Company
  is amortizing deferred stock compensation using the graded vesting method, in
  accordance with Financial Accounting Standards Board Interpretation No. 28,
  over the vesting period of each respective option, which is generally four years.

In
  December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation
   Transition and Disclosure Amendment of FASB Statement No. 123,
  to provide alternative methods of transition for a voluntary change to the fair
  value based method of accounting for stock-based employee compensation and amends
  the disclosure requirements of Statement No. 123. The following table illustrates
  the effect on net loss and loss per share if the Company had applied the fair
  value recognition provisions of SFAS No. 123 to stock-based employee compensation:

|                                                                       | Years
      Ended December 31, | 
|---------------------------------------------------------------------- | ------------------------------ | 
|($
      thousands, except per share data)                             | 2003                           | 
|                                                                       |                                | 
|Net
      loss applicable to common shares, as reported                |                                | 
|Add:
      Equity related employee compensation expense included in    |                                | 
|reported
      net income, net of related tax effects                  |                                | 
|Deduct:
      Total stock-based employee compensation expense          |                                | 
|determined
      under fair values based method for all awards, net of |                                | 
|related
      tax effects                                              |                                | 
|                                                                       |                                | 
|Pro forma
      net loss                                               |                                | 
|                                                                       |                                | 
|                                                                       |                                | 
|Net loss
      per share attributable to common shareholders:          |                                | 
|As reported:
      Basic and diluted                                   |                                | 
|Pro forma:
      Basic and diluted                                     |                                | 

47

---



The
  pro-forma disclosure shown above were calculated for all options using the Black-Scholes
  option pricing model with the following assumptions:

|                              | Years
      Ended December 31, | 
|----------------------------- | ------------------------------ | 
|                              | 2003                           | 
|                              |                                | 
|Risk-free
      interest rate |                                | 
|Dividend
      yield          |                                | 
|Expected
      life (years)   |                                | 
|Volatility                    |                                | 

Net
  Loss Per Common Share

Basic
  earnings per share are based upon the weighted-average number of shares outstanding
  during the period. Diluted earnings per share includes the weighted average
  number of all potentially dilutive common shares such as shares outstanding,
  options, warrants and convertible preferred stock outstanding.

Net
  loss per common share for the three years ended December 31, 2003 is based on
  the weighted average number of shares of common stock outstanding during the
  periods. Basic and diluted loss per share are identical for all periods presented
  as potentially dilutive securities, including options, warrants and convertible
  preferred stock, aggregating 18.0 million, 16.7 million and 17.2 million in
  2003, 2002 and 2001, respectively, have been excluded from the calculation of
  the diluted net loss per common share because the inclusion of such securities
  would be antidilutive. Net loss per common share is based on net loss adjusted
  for imputed and accrued dividends on preferred stock.

Recently
  Issued Accounting Standards

In
  May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
  Instruments with Characteristics of Liabilities, Equity, or Both. This limited
  scope statement prescribes changes to the classification of mandatorily redeemable
  preferred stock, preferred securities of subsidiary trusts and the accounting
  for forward purchase contracts issued by a company in its own stock among other
  issues. SFAS No. 150 does not apply to features that are embedded in a financial
  instrument that is not a derivative in its entirety and requires all preferred
  securities of subsidiary trusts to be classified as debt on the consolidated
  balance sheet and the related dividends as interest expense. The Company adopted
  the provisions of SFAS No. 150, including the deferral of certain effective
  dates as a result of the provisions of FASB Staff Position 150-3, Effective
  Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments
  of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
  Interests Under FASB Statement No. 150 Accounting for Certain Financial Instruments
  with Characteristics of Both Liabilities and Equity. The adoption of this
  statement did not have any impact on the Companys results of operations,
  financial position or cash flows.

In
  April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
  Instruments and Hedging Activities. SFAS No. 149 amends and clarifies financial
  accounting and reporting for derivative instruments, including certain derivative
  instruments embedded in other contracts (collectively referred to as derivatives)
  and for hedging activities under SFAS No. 133, Accounting for Derivative
  Instruments and Hedging Activities. In particular, SFAS No. 149 (1) clarifies
  under what circumstances a contract with an initial net investment meets the
  characteristic of a derivative discussed in paragraph 6(b) of SFAS No. 133,
  (2) clarifies when a derivative contains a financing component, (3) amends the
  definition of an underlying to conform it to language used in FIN 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others, and (4) amends certain other existing pronouncements.
  SFAS No. 149 is to be applied prospectively to contracts entered into or modified
  after June 30, 2003, with certain exceptions, and for hedging relationships
  designated after June 30, 2003. The adoption of this statement did not have
  any impact on the Companys results of operations, financial position or
  cash flows.

In
  January 2003, the FASB issued Interpretation No. 46 Consolidation of Variable
  Interest Entities. This interpretation defines when a business must consolidate
  a variable interest entity. This interpretation applies immediately to variable
  interest entities created after January 31, 2003 and became effective for all
  other transactions as of July 1, 2003. However, in October 2003 the FASB permitted
  companies to defer the July 1, 2003 effective date to December 31, 2003. Again
  in December 2003, the FASB permitted companies to defer the December 31, 2003
  effective date, in certain circumstances, to the first interim or annual period
  ending after March 15, 2004. The Company has determined that it is not reasonably
  probable that it will be required to consolidate or disclose information about
  a variable interest entity.

48

---



In
  November 2002, FASB Interpretation (FIN) 45, Guarantors
  Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees
  of Indebtedness of Others. This interpretation requires a guarantor to recognize,
  at the inception of a guarantee, a liability for the fair value of the obligation
  undertaken in issuing the guarantee. It also enhances guarantors disclosure
  requirements to be made in its interim and annual financial statements about
  its obligations under certain guarantees it has issued. The initial recognition
  and initial measurement provisions of this interpretation are applicable on
  a prospective basis to guarantees issued or modified after December 31, 2002.
  The disclosure requirements are effective for financial statement or interim
  or annual periods ending after December 15, 2002. In the normal course of business,
  the Company does not issue guarantees to third parties; accordingly, this interpretation
  does not have an effect on the Companys financial position or results
  of operations.

3.
  Marketable Securities

The
  carrying amounts of the companys marketable securities, which are solely
  corporate debt securities, approximate fair value due to the short-term nature
  of these instruments. The fair value of available-for-sale marketable securities
  is as follows ($ thousands):

|                        | Amortized
      costs |  | Unrealized
      gains |        | Unrealized
      losses |   | Estimated
      fair value | 
|----------------------- | --------------------- |  | ---------------------- | ------ | ----------------------- | - | -------------------------- | 
|                        |                       |  |                        |        |                         |   |                            | 
|December
      31, 2003 |                       |  | $                      | 57,751 |                         | $ | 29                         | 
|                        |                       |  |                        |        |                         |   |                            | 
|                        |                       |  |                        |       
|December
      31, 2002 |                       |  | $                      | 80,991 |                         | $ | 42                         | 
|                        |                       |  |                        |        |                         |   |                            | 

The
  fair value of marketable securities by contractual maturity, is as follows ($
  thousands):

|                          | December
      31, | 
|------------------------- | ------------------ | 
|                          | 2003               | 
|                          |                    | 
|Due within
      one year |                    | 
|Due after
      one year  |                    | 
|                          |                    | 
|                          |                    | 
|                          |                    | 

The
  estimated fair value of each marketable security has been compared to its cost,
  and therefore, an unrealized gain of approximately $25 thousand has been recognized
  in accumulated other comprehensive income at December 31, 2003.

49

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4.
  Accounts Receivable-Net

Included
  in accounts receivable and netted against operating expenses in the consolidated
  statement of operations at December 31, 2003, is $15.5 million in net expense
  reimbursements due from Aventis for various third-party costs, internal costs
  of scientific and technical personnel (Full-time Equivalents or
  FTEs) and Genasense drug supply costs for the three
  month period ended December 31, 2003. Net expense reimbursement consists of
  the appropriate reimbursement rate (75% or 100%) for costs incurred by Genta
  and internal costs of Genta scientific and technical personnel net of our 25%
  share of expenses incurred by Aventis and internal costs of Aventis scientific
  and technical personnel. Also included in accounts receivable-net are receivables
  of $1.2 million related to the sale of Ganite, which are net of allowances
  of $0.1 million. At December 31, 2002, $14.6 million in net expense reimbursements
  due from Aventis for various third-party costs, internal costs of scientific
  and technical personnel and Genasense drug supply costs for the three
  month period ended December 31, 2002 was included in accounts receivable and
  netted against operating expenses in the consolidated statement of operations.

5.
  Salus Therapeutics, Inc. Acquisition

In
  August 2003, the Company acquired Salus Therapeutics, Inc. (Salus),
  a privately held company located in Salt Lake City, Utah. Salus specializes
  in the identification and development of drugs that are based on DNA or RNA,
  including antisense, small interfering RNAs (siRNA), and delivery systems for
  DNA/RNA-based drugs. Under the terms of the merger agreement, Genta issued 1.03
  million shares of common stock with a fair value of approximately $13.0 million
  to Salus stockholders in exchange for all of the outstanding shares of Salus
  common stock, including those issued pursuant to the conversion of Salus
  preferred stock. Approximately thirty-five percent of the initial payment (0.36
  million shares) is held in escrow and will be released on the first anniversary
  of the acquisition, assuming no event of default occurs as described in the
  merger agreement. Contingent upon the achievement of certain preclinical and
  clinical milestones, an additional $17.0 million may be paid in stock or cash
  at Gentas option.

The
  following unaudited condensed consolidated pro forma financial information has
  been prepared to give effect to Gentas acquisition of Salus. The pro forma
  adjustments are based upon available information and assumptions that Genta
  believes are reasonable. The unaudited condensed consolidated pro forma financial
  information do not purport to represent what the consolidated results of operations
  or financial position of Genta would actually have been if the acquisition had
  occurred on the dates referred to below, nor do they purport to project the
  results of operations or financial position of Genta for any future period.

The
  unaudited condensed consolidated pro forma statement of operations data was
  prepared by combining Gentas statement of operations for the years ended
  December 31, 2003 and December 31, 2002 with Salus statement of operations
  for the years ended December 31, 2003 and December 31, 2002, giving effect to
  the acquisition as though it occurred on the first day of the respective fiscal
  year.

The
  unaudited condensed consolidated pro forma statement of operations data do not
  give effect to any restructuring costs or any potential cost savings or other
  operating efficiencies that could result from the acquisition, or any non-recurring
  charges or credits resulting from the transaction such as in-process research
  and development charges.

|                                            |  |  | For
      the year ended December 31, 2003 |        
|------------------------------------------- |  |  | ------------------------------------------ | -------
|                                            |  |  | Genta                                      |        
|                                            |  |  |                                            |        
|Revenues                                    |  |  | $                                          | 6,659  
|Net loss                                    |  |  | $                                          | (50,109
|Net loss
      per basic and diluted shares |  |  | $                                          | (0.67  



|                                            |  |  | For
      the year ended December 31, 2002 |        
|------------------------------------------- |  |  | ------------------------------------------ | -------
|                                            |  |  | Genta                                      |        
|                                            |  |  |                                            |        
|Revenues                                    |  |  | $                                          | 3,559  
|Net loss                                    |  |  | $                                          | (74,528
|Net loss
      per basic and diluted shares |  |  | $                                          | (1.05  



|(1) |  | An adjustment
      was made to eliminate the revenues and net losses recorded twice in the
      table above during the period from August 21, 2003, the date Genta purchased
      Salus, through December 31, 2003 (Consolidation Period). During
      that period, Salus financial information was consolidated into Genta;
      however, to accurately depict the financial results of both entities for
      the twelve months ended December 31, 2003, both revenues and net loss were
      shown on a stand alone basis, and properly adjusted for by backing
      out the amounts during the Consolidation Period to determine the pro forma
      information.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

50

---



The
  effects of the acquisition have been presented using the purchase method of
  accounting. The total purchase price of the transaction has been allocated to
  assets and liabilities based on managements estimate of their fair values.The following represents the allocation of the purchase price over the estimated
  fair values of the acquired assets and assumed liabilities of Salus:

|Current
      assets                               |  |  | $ | 66     | 
|-------------------------------------------------- |  |  | - | ------ | 
|Property,
      plant and equipment                |  |  |   | 177    | 
|Acquired
      in-process research and development |  |  |   | 13,465 | 
|Other
      assets                                 |  |  |   | 6      | 
|                                                   |  | 
|Total
      assets acquired                        |  |  | $ | 13,714 | 
|                                                   |  | 
|                                                   | 
|Current
      liabilities                          |  |  |   | 75     | 
|Long
      term liabilities                        |  |  |   | 13     | 
|                                                   |  | 
|Total
      liabilities assumed                    |  |  |   | 88     | 
|                                                   |  | 
|Purchase
      price                               |  |  | $ | 13,626 | 
|                                                   |  | 

The
  value of $13.5 million assigned to acquired in-process research and development
  was charged to earnings in the fourth quarter of 2003.

6.
  Notes Receivable

At
  December 31, 2003, the Company had recorded $3.5 million as a note receivable
  relating to advance financing provided to Avecia Biotechnology, Inc. (Avecia)
  for facility expansion, which will be repaid with interest through future payments
  determined as a function of drug substance purchases to be made by the Company
  in the future.

|Advance
      funding for facility expansion |  |  | $ | 3,552 |  
|-------------------------------------------- |  |  | - | ----- | -
|Interest
      recorded                      |  |  |   | 95    |  
|Payments
      received                      |  |  |   | (105  | )
|                                             |  | 
|                                             |  |  | $ | 3,542 |  
|                                             |  | 

7.
  Inventories

Inventories,
  comprised of Ganite, are stated at the lower of cost or market with cost
  being determined using the first-in, first-out (FIFO) method. Inventories consisted
  of the following (in thousands):

|                      | December
      31,
      2003 | 
|--------------------- | ----------------------------- | 
|                      |                               | 
|Raw materials         |                               | 
|Work
      in process |                               | 
|Finished
      goods  |                               | 
|                      |                               | 
|                      |                               | 
|                      |                               | 

51

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8.
  Property and Equipment

Property
  and equipment is comprised of the following ($ thousands):

|                                                     |  | Estimated 
      Useful Lives |      | December
      31,  |     
|---------------------------------------------------- |  | ----------------------------- | ---- | ------------------- | ----
|                                                     |  |                               | 2003 |                     | 2002
|                                                     |  |                               |      |                     |     
|Computer
      equipment                             |  |                               |      | 3                   |     
|Software                                             |  |                               |      | 3                   |     
|Furniture
      and fixtures                         |  |                               |      | 5                   |     
|Leasehold
      improvements                         |  |                               |      | 6                   |     
|Equipment                                            |  |                               |      | Life
      of lease |     
|                                                     |  |                               |      |                     |     
|                                                     |  |                               |      |                     |     
|Less
      accumulated depreciation and amortization |  |                               |      |                     |     
|                                                     |  |                               |      |                     |     
|                                                     |  |                               |      |                     |     
|                                                     |  |                               |      |                     |     

9.
  Intangibles

Intangible
  assets consist of the following ($ thousands):

|                                     | December
      31, | 
|------------------------------------ | ------------------ | 
|                                     | 2003               | 
|                                     |                    | 
|Patent
      and patent applications |                    | 
|Less
      accumulated amortization  |                    | 
|                                     |                    | 
|                                     |                    | 
|                                     |                    | 

Future
  amortization expense related to intangibles at December 31, 2003 are as follows
  ($ thousands):

|           |  |  | Amortization
      Expense |    
|---------- |  |  | -------------------------- | ---
|           |  |  |                            |    
|2004       |  |  |                            | 577
|2005       |  |  |                            | 286
|Thereafter |  |  |                            | -- 
|           |  | 
|Total      |  |  | $                          | 863
|           |  | 

10.
  Prepaid Royalties

In
  December 2000, the Company recorded $1.3 million as the fair value for its commitment
  to issue 162,338 shares of common stock to a major university as consideration
  for an amendment to a license agreement initially executed on August 1, 1991
  related to antisense technology licensed from the university. The amendment
  provided for a reduction in the royalty percentage rate to be paid to the university
  based on the volume of sales of the Companys products containing the antisense
  technology licensed from such university. These shares were issued in the first
  quarter of 2001. The Company will amortize the prepaid royalties upon the commercialization
  of Genasense, the Companys leading antisense drug, through the term
  of the arrangement which expires twelve years from the date of first commercial
  sale.

52

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11.
  Accounts Payable and Accrued Expenses

Accounts
  payable and accrued expenses is comprised of the following ($ thousands):

|                           |  |  | December
      31, |       
|-------------------------- |  |  | ------------------ | ------
|                           |  |  | 2003               |       
|                           |  |  |                    |       
|Accounts
      payable     |  |  | $                  | 6,462 
|Accrued
      compensation |  |  |                    | 2,516 
|Accrued
      interest     |  |  |                    | 1,235 
|Other
      accrued costs  |  |  |                    | 5,106 
|                           |  |  |                    |       
|                           |  |  | $                  | 15,319
|                           |  |  |                    |       

12.
  Collaborative Agreement

In
  April 2002, the Company entered into a development and commercialization agreement
  (Collaborative Agreement) with Aventis Pharmaceuticals Inc. (Aventis).
  Under the terms of the Collaborative Agreement, the Company and Aventis will
  jointly develop and commercialize Genasense in the U.S. (the Alliance),
  and Aventis will have exclusive development and marketing rights to the compound
  in all countries outside of the U.S. The Company will retain responsibility
  for global manufacturing and for regulatory filings within the U.S., while Aventis
  will assume all regulatory responsibilities outside the U.S. Joint management
  teams, including representatives from both Genta and Aventis, will oversee the
  Alliance. Collectively, this Collaborative Agreement could provide up to $476.9
  million in cash, equity and convertible debt proceeds to the Company. In addition,
  under the Collaborative Agreement, Genta is entitled to royalties on any worldwide
  sales of Genasense, from which Genta is required to pay third-party pass-through
  royalties to the University of Pennsylvania (UPenn) and The National
  Institutes of Health (NIH) based on net worldwide sales. Furthermore,
  under the Collaborative Agreement, Aventis will pay 75% of U.S. NDA-directed
  development costs incurred by either Genta or Aventis subsequent to the execution
  of the Collaborative Agreement, and 100% of all other development, marketing,
  and sales costs incurred within the U.S. and elsewhere as subject to the Collaborative
  Agreement. An analysis of expenses reimbursed under the Collaborative Agreement
  follows ($ thousands):

|                                                          |  |  | Twelve
      Months Ended 
      December 31, |        
|--------------------------------------------------------- |  |  | --------------------------------------------- | -------
|                                                          |  |  | 2003                                          |        
|                                                          |  |  |                                               |        
|Research
      and development expenses, gross            |  |  | $                                             | 82,875 
|Less
      expense reimbursement                          |  |  |                                               | (55,891
|                                                          |  |  |                                               |        
|Research
      and development expenses, net              |  |  | $                                             | 26,984 
|                                                          |  |  |                                               |        
|                                                          |  |  |                                              
|Selling,
      general and administrative expenses, gross |  |  | $                                             | 29,604 
|Less
      expense reimbursement                          |  |  |                                               | --     
|                                                          |  |  |                                               |        
|General
      and administrative expenses, net            |  |  | $                                             | 29,604 
|                                                          |  |  |                                               |        

As
  of December 31, 2003, the Company has received a total of $235.7 million in
  initial and near-term funding, which included a $10.0 million licensing fee
  and $40.0 million in development funding, $10.0 million in convertible debt
  proceeds (Note 14), $71.9 million pursuant to an at-market equity investment
  in the Companys common stock, $68.8 million in paid expense reimbursements
  and $35.0 million in line of credit proceeds. A further $15.5 million in acquired
  expense reimbursement is due for receipt during the first quarter of 2004. The
  remaining amounts that could be received under the Collaborative Agreement,
  $280.0 million in cash and $65.0 million in convertible note proceeds, are contingent
  upon the achievement of certain research and development milestones.

53

---



13.
  Deferred Revenues

As
  of December 31, 2003, the Company had recorded $41.4 million, net of amortization
  in deferred revenues relating to the initial $10.0 million licensing fee and
  $40.0 million development funding received from Aventis under the Collaborative
  Agreement (Note 12), of which $5.3 million is included in current liabilities
  and $36.1 million is classified as long-term deferred revenues, which will be
  recognized on a straight-line basis over the estimated original useful life
  of the related first-to-expire patent of 115 months, in accordance with SAB
  104. Any subsequent milestone payments that may be received from Aventis will
  also be recognized over the then remaining estimated useful life of the related
  first-to-expire patent.

14.
  Convertible Debt

At
  December 31, 2003, the Company had $10.0 million in convertible debt that was
  issued in connection with the Collaborative Agreement (Note 12). The Company
  received $10.0 million in debt proceeds from Aventis, and issued a $10.0 million
  convertible promissory note to Aventis (Aventis Note). Interest
  accrues at the rate of 5.63% per annum until April 26, 2009 (the Maturity
  Date) and compounds annually on each anniversary date of the Aventis Note
  through the Maturity Date. The Company may redeem the Aventis Note for cash
  in whole or in part (together with any accrued and unpaid interest with respect
  to such principal amount) in amounts of not less than $0.5 million. In addition,
  the Company may convert the Aventis Note on or prior to the Maturity Date in
  whole or in part into fully paid and non-assessable shares of common stock.
  As of any date, the number of shares of common stock into which the Aventis
  Note may be converted shall be determined by a formula based on the then market
  value of the common stock (the Conversion Price), subject to a minimum
  Conversion Price of $8.00 per share.

As of
  December 31, 2003, the Company has accrued interest of $1.0 million on the Aventis
  Note.

15.
  Long Term Debt

At
  December 31, 2003, the Company had $35.0 million outstanding on a line of credit
  that was issued in connection with an amendment, dated March 14, 2003, to the
  Collaborative Agreement (Note 12) that established an up to $40.0 million line
  of credit related to the development, manufacturing and commercialization of
  Genasense (Aventis Line of Credit). This revolving debt is
  considered an advance against both past and future costs. At the time of Genasense
  NDA approval in the U.S., any outstanding balance will be offset against the
  first milestone payment that is due to Genta from Aventis. The terms of the
  Aventis Line of Credit provide for a favorable interest rate, which is set two
  days prior to the first day of each calendar quarter. The Aventis Line of Credit
  terminates upon the earlier of (i) the receipt of Genasense NDA approval
  in the U.S. or (ii) December 31, 2004, all amounts payable under the agreement
  are due six months after termination. As security for the repayment of the Aventis
  Line of Credit, Genta has granted Aventis a security interest in all of its
  accounts and/or other rights to payments under the Collaborative Agreement as
  well as all inventory related to Genasense .

As of
  December 31, 2003, the Company has accrued interest of $0.3 million on the Aventis
  Line of Credit.

54

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16.
  Income Taxes

In
  2003, the Companys tax provision is comprised of the Minimum Tax related
  to California, Massachusetts and New Jersey. In 2002, the Companys tax
  provision was comprised of $0.2 million of current state taxes related to the
  New Jersey Alternative Minimum Assessment (AMA) Tax. Significant components
  of the Companys deferred tax assets as of December 31, 2003 and 2002 and
  related valuation reserves are presented below ($ thousands):

|                                                          |  |  | December
      31, |         
|--------------------------------------------------------- |  |  | ------------------ | --------
|                                                          |  |  | 2003               |         
|                                                          |  |  |                    |         
|Deferred
      tax assets:                                |  |  |                    |         
|Deferred
      compensation                               |  |  | $                  | 658     
|Net
      operating loss carryforwards                    |  |  |                    | 90,861  
|Research
      and development credits                    |  |  |                    | 75,028  
|Purchased
      technology and license fees               |  |  |                    | 4,850   
|Deferred
      revenue - current                          |  |  |                    | 2,326   
|Deferred
      revenue - non-current                      |  |  |                    | 15,869  
|New
      Jersey Alternative Minimum Assessment (AMA) Tax |  |  |                    | 182     
|New
      Jersey R&D credit                               |  |  |                    | 4,093   
|Other,
      net                                          |  |  |                    | 241     
|                                                          |  |  |                    |         
|                                                          |  |  |                    | 194,108 
|Valuation
      allowance for deferred tax assets         |  |  |                    | (193,491
|                                                          |  |  |                    |         
|Net
      deferred tax assets                             |  |  |                    | 617     
|                                                          |  | 
|Deferred
      tax liabilities:                           |  | 
|Depreciation,
      net                                   |  |  |                    | (617    
|                                                          |  |  |                    |         
|                                                          |  |  |                    | (617    
|                                                          |  |  |                    |         
|Net
      deferred tax assets (liabilities)               |  |  | $                  | --      
|                                                          |  |  |                    |         

A
  full valuation allowance has been provided at December 31, 2003 and 2002 to
  reserve for deferred tax assets, as it appears more likely than not that net
  deferred tax assets will not be realized.

At
  December 31, 2003, the Company has federal and state net operating loss carryforwards
  of approximately $222.2 million and $145.6 million, respectively. The difference
  between the federal and state tax loss carryforwards is primarily attributable
  to the fact that the Company relocated from California to Massachusetts in 1998,
  and from Massachusetts to New Jersey in 2000. Net operating losses for state
  income tax purposes, previously generated in California and Massachusetts, cannot
  be utilized in New Jersey. The federal tax loss carryforwards began expiring
  in 2003. The Company also has federal research and development tax credit carryforwards
  of $75.0 million, which began expiring in 2003.

Federal
  and New Jersey tax laws limit the utilization of income tax net operating loss
  and credit carryforwards that arise prior to certain cumulative changes in a
  corporations ownership resulting in a change of control of the Company.
  The Companys future annual utilization of their net operating loss carryforwards
  and research and development tax credits will be limited due to ownership changes
  which occurred previously.

17. Supplemental Disclosure
  of Cash Flows Information and Non-cash Investing and Financing Activities

No
  interest was paid for the twelve months ended December 31, 2003 and 2002.

The
  market value of common stock issued for the purchase of Salus (Note 5) was $13.0
  million.

The
  value of treasury stock (Note 19) retired was $2.8 million.

55

---



18.
  Operating Leases

At
  both December 31, 2003 and December 31, 2002, the Company maintained $0.5 million
  in restricted cash balances with a financial institution related to lease obligations
  on its corporate facilities and leased fleet vehicles. Such restricted cash
  balances collateralize letters of credit issued by the financial institution
  in favor of the Companys landlord with respect to corporate facilities
  and to a financial institution with respect to leased fleet vehicles.

Future
  minimum obligations under operating leases at December 31, 2003 are as follows
  ($ thousands):

|           |  |  | Operating
      Leases |       
|---------- |  |  | ---------------------- | ------
|           |  |  |                        |       
|2004       |  |  | $                      | 2,571 
|2005       |  |  |                        | 2,566 
|2006       |  |  |                        | 2,669 
|2007       |  |  |                        | 2,661 
|2008       |  |  |                        | 2,595 
|Thereafter |  |  |                        | 3,005 
|           |  | 
|Total      |  |  | $                      | 16,067
|           |  | 

19.
  Stockholders Equity

Common
  Stock

In
  November 2001, the Company sold 2.5 million shares of common stock through a
  private placement and received proceeds of approximately $32.2 million, net
  of placement agent commissions of $0.4 million and related expenses.

In
  March 2002, the Board of Directors approved an amendment to increase the authorized
  common stock to 120.0 million shares from 95.0 million. In June 2002, shareholders
  approved this amendment at the annual meeting of stockholders.

In
  May 2002, the Company sold 6.7 million shares of common stock to Aventis in
  connection with the Collaborative Agreement (Note 12) and received proceeds
  of $71.0 million, net of investment banking fees of $0.9 million and related
  expenses.

In
  August 2003, the Company issued 1.03 million shares of its common stock, with
  a fair value of $13.0 million, to Salus stockholders, in connection with its
  purchase of Salus Therapeutics in exchange for all of the outstanding shares
  of Salus preferred stock (Note 5).

Treasury
  Stock

In
  June 2002, the Company commenced a stock repurchase program, whereby up to 5.0
  million shares of its common stock may be repurchased by the Company at prices
  deemed desirable by the Company. The Company uses the cost method to account
  for treasury stock. As of September 2003, the Company had repurchased 444,200
  shares of common stock in open-market transactions as follows:

|                                           | Shares
      Repurchased |  | Average
      Price
      per Share |        
|------------------------------------------ | ------------------------ |  | ----------------------------------- | -------
|                                           |                          |  |                                     |        
|At December
      31, 2002                 |                          |  |                                     | 392,700
|Nine
      months ended September 30, 2003 |                          |  |                                     | 51,500 
|                                           |                          |  |                                     |        
|                                           |                          |  |                                     | 444,200
|                                           |                          |  |                                     |        

On
  September 30, 2003, the Company retired all 444,200 shares of treasury stock.

56

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Preferred
  Stock

The
  Company has authorized 5.0 million shares of preferred stock and has issued
  and outstanding 260,500 shares of Series A Convertible Preferred Stock as of
  December 31, 2003. In 1999, the Board of Directors of the Company and certain
  holders of common stock, Series A and D preferred stock approved, in accordance
  with Delaware law, an amendment to the Companys Restated Certificate of
  Incorporation to remove the Fundamental Change redemption right.
  The Company has formally amended its Restated Certificate of Incorporation after
  the expiration of the 20-day period provided for in Rule 14c-5 promulgated under
  the Securities Exchange Act of 1934, as amended (the Exchange Act).

Series
  A Preferred Stock

Each
  share of Series A Preferred Stock is immediately convertible, into shares of
  the Companys common stock, at a rate determined by dividing the aggregate
  liquidation preference of the Series A Preferred Stock by the conversion price.
  The conversion price is subject to adjustment for antidilution. As of December
  31, 2003 and 2002, each share of Series A Preferred Stock was convertible into
  7.3967 and 6.8334 shares of common stock, respectively.

In
  the event of a liquidation of the Company, the holders of the Series A Preferred
  Stock are entitled to a liquidation preference equal to $50 per share, or $13.0
  million at December 31, 2003.

In
  February 2004, substantially all of the Series A Preferred Stock was converted
  into shares of the Companys Common Stock.

57

---



Warrants

Summary
  information with respect to outstanding common stock warrants at December 31,
  2003 is presented below:

|                                                 |  |  | Exercise
      
      Price |                     | Potential
      Warrant 
      Exercise
      Proceeds |   | Common 
      Equivalents |  | Expiration
      Date |          
|------------------------------------------------ |  |  | --------------------------- | ------------------- | ------------------------------------------------------ | - | ------------------------- |  | --------------------- | ---------
|                                                 |  |  |                             |                     |                                                        |   |                           |  |                       |          
|June
      1997 Private Placement :              |  |  |                             |                     |                                                        |   |                           |  |                       |          
|Placement
      & Advisory Warrants:             |  |  |                             | $0.86
      - $1.10 |                                                        | $ | 2,976,767                 |  |                       | 3,287,851
|Androgenics
      Warrants (August 1999):        |  | 
|Vested
      December 31, 1999:                  |  |  |                             | $1.25               |                                                        |   | 100,000                   |  |                       | 80,000   
|Vest
      upon achievement of various           |  | 
|milestones:                                      |  |  |                             | $1.50 - $2.50       |                                                        |   | 1,787,500                 |  |                       | 900,000  
|                                                 |  |  |                            
|                                                 |  |  |                            
|December
      1999 Private Placement (Common):  |  | 
|Related
      Party Warrants:                    |  | 
|Common
      Stock:                              |  |  |                             | $3.30               |                                                        |   | 885,667                   |  |                       | 268,384  
|Warrants:                                        |  |  |                             | $5.31               |                                                        |   | 356,285                   |  |                       | 67,097   
|Funding
      Warrants:                          |  |  |                             | $4.70               |                                                        |   | 2,487,076                 |  |                       | 529,485  
|Penalty
      Warrants (May 2000):               |  |  |                             | $4.70               |                                                        |   | 207,328                   |  |                       | 44,140   
|September
      2000 Private Placement (Common): |  | 
|Penalty
      Warrants:                          |  |  |                             | $6.75               |                                                        |   | 79,205                    |  |                       | 11,734   
|Placement
      Agent Warrants:                  |  |  |                             | $7.15               |                                                        |   | 63,728                    |  |                       | 8,913    
|Placement
      Agent Warrants:                  |  |  |                             | $7.43               |                                                        |   | 267,901                   |  |                       | 36,081   
|November
      2000 Private Placement (Common):  |  | 
|Placement
      Agent Warrants:                  |  |  |                             | $7.43               |                                                        |   | 397,542                   |  |                       | 53,541   
|                                                 |  |  |                             |                     |                                                        |   |                          
|                                                 |  |  |                             |                     |                                                        | $ | 9,608,999                 |  |                       | 5,287,226
|                                                 |  |  |                             |                     |                                                        |   |                          

In
  June 1997, in connection with an issuance of Premium Preferred Units, the placement
  agent received warrants (the Placement Warrants) to purchase up
  to 10% of the units sold in the Private Placement for 110% of the offering price
  per unit. Furthermore, the Company had entered into a financial advisory agreement
  with the placement agent pursuant to which the financial advisor received certain
  cash fees and has received warrants (the Advisory Warrants) to purchase
  up to 15% of the units sold in the Private Placement for 110% of the offering
  price per unit. This financial advisory agreement terminated in June 1999. The
  Placement Warrants and the Advisory Warrants expire on June 29, 2007.

On
  August 30, 1999, the Company acquired Androgenics Technologies, Inc. (Androgenics),
  a wholly owned entity of a related party shareholder. As consideration for the
  acquisition, the Company paid $0.1 million in cash (including reimbursements
  of pre-closing expenses and on-going research funding) and issued warrants (with
  exercise prices ranging from $1.25 to $2.50 per share) to purchase an aggregate
  of 1.0 million shares of common stock, 90% of which will not become exercisable
  until the successful conclusion of certain development milestones, ranging from
  the initial clinical patient trial through the submission of an application
  for marketing authorization. The acquisition was accounted for as a transfer
  of interest between companies under common control. The cash and warrants were
  issued in exchange for 100% of the shares of Androgenics and licensed technology
  and the assumption of a research and development agreement with the University
  of Maryland at Baltimore. The 1.0 million warrants were accounted for as a deemed
  distribution based on their fair value of $0.4 million. At December 31, 2003,
  none of the above-mentioned milestones have been met. Ten percent of the warrants
  are currently exercisable and expire in August 2006. The remaining 90% of the
  warrants would be exercisable upon the achievement of certain milestones related
  to the development of Androgenics products. We recently decided to terminate
  our Androgenics program.

58

---



On
  November 5, 1999, the Company issued 550,000 Bridge Warrants to the Aries Funds
  in full settlement of the Companys obligation under a 1997 note and warrant
  purchase agreement. The settlement of this obligation was accounted for as a
  capital distribution, since the Aries Funds are a shareholder of the Company.
  Accordingly, these warrants were accounted for at their fair value of $1.8 million
  and included in accrued dividends at December 31, 1999. In September 2001, these
  warrants were exercised for $0.2 million.

In
  December 1999, as described above, in connection with the 1999 Private Placement,
  the placement agent, a related party shareholder, received warrants (the Related
  Party Warrants) to purchase up to 10% of the Units sold in the Private
  Placement for 110% of the offering price per Unit. The Related Party Warrants
  expire on December 23, 2004. The Related Party Warrants have a fair value at
  the time of their issuance approximating $1.3 million, resulting in no net effect
  to stockholders equity. During 2001, also in connection with the 1999
  Private Placement, 57,147 penalty warrants were issued, as a result of an SEC
  registration statement not becoming effective within the prescribed 120 day
  period after closing.

In
  September 2000, as discussed above, in connection with the September 2000 private
  equity placement, 135,639 warrants were issued to the placement agent. The value
  of such warrants of $0.9 million was considered part of the cost of the placement.
  In addition, 20,641 penalty warrants were issued as a result of an untimely
  filing of an SEC registration statement within the prescribed 30-day period
  after closing.

Common
  Stock Reserved

At
  December 31, 2003, an aggregate of 19,083,303 shares of common stock were reserved
  for the conversion of preferred stock and the exercise of outstanding options
  and warrants.

20.
  Employee Benefit Plans

1991
  Plan

At
  December 31, 2003, options granted under the 1991 Plan to purchase 4,388 shares
  of common stock were exercisable with a weighted average price of approximately
  $22.41.

1998
  Plan

Pursuant
  to the Companys 1998 Stock Plan as amended (the 1998 Plan),
  17.0 million shares have been provided for the grant of stock options to employees,
  directors, consultants and advisors of the Company. On April 16, 2003, the Board
  of Directors approved an amendment to increase the total number of shares of
  common stock authorized for issuance under the 1998 Plan to 17.0 million shares
  from 15.6 million. In June 2003, the stockholders approved this amendment at
  the annual meeting of the stockholders. In March 2002, the Board of Directors
  approved an amendment to increase the total number of shares of common stock
  authorized for issuance under the 1998 Plan to 15.6 million shares from 12.1
  million. In June 2002, stockholders approved this amendment at the annual meeting
  of stockholders. Options may be designated as incentive stock options or non-statutory
  stock options; however, incentive stock options may be granted only to employees
  of the Company. Options under the 1998 Plan have a term of up to 10 years and
  must be granted at not less than the fair market value, or 85% of fair market
  value for non-statutory options, on the date of the grant. Common stock sold
  and options granted pursuant to the 1998 Plan generally vest over a period of
  four years.

59

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Grants
  to Employees and Directors  1998 Plan

During
  1999 and 2000, the Company granted to certain key employees, 6,188,250 and 325,000
  options, respectively. Such options were granted with exercise prices below
  the market value of the Companys common stock on the date of the grant.
  Accordingly, the Company recorded deferred compensation of $2.0 million and
  $0.1 million in 1999 and 2000 attributable to the intrinsic value of these options
  and amortized $0.2 million, $0.7 million and $0.7 million as non-cash equity
  related compensation expense in 2003, 2002 and 2001.

The
  Companys employees were granted 2,468,300, 1,274,400 and 1,392,300 stock
  options with exercise prices equal to the fair value on the date of grant in
  2003, 2002 and 2001, respectively.

Grants
  to Non-Employees  1998 Plan

In
  2001, the Company also granted 50,000 options to purchase common stock to members
  of Gentas Scientific Advisory Board, for which the Company recorded a
  total of $3.0 million in deferred compensation, of which $0.2 million, $0.3
  million and $0.3 million was amortized as non-cash equity related compensation
  expense in 2003, 2002 and 2001, respectively.

Summary
  information with respect to the Companys 1998 Stock Plan is as follows:

|1998
      Plan                    | Shares
      
      Under 
      Option |  | Weighted
      Average
      Exercise
      Price
      Per Share |           
|---------------------------------- | --------------------------------------- |  | ----------------------------------------------------------------- | ----------
|                                   |                                         |  |                                                                   |           
|Balance
      at December 31, 2000 |                                         |  |                                                                   | 9,696,427 
|Granted                            |                                         |  |                                                                   | 1,392,300 
|Exercised                          |                                         |  |                                                                   | (2,363,983
|Canceled                           |                                         |  |                                                                   | (429,500  
|                                   |                                         |  |                                                                   |           
|Balance
      at December 31, 2001 |                                         |  |                                                                   | 8,295,244 
|Granted                            |                                         |  |                                                                   | 1,274,400 
|Exercised                          |                                         |  |                                                                   | (871,632  
|Canceled                           |                                         |  |                                                                   | (198,400  
|                                   |                                         |  |                                                                   |           
|Balance
      at December 31, 2002 |                                         |  |                                                                   | 8,499,612 
|Granted                            |                                         |  |                                                                   | 2,468,300 
|Exercised                          |                                         |  |                                                                   | (834,400  
|Canceled                           |                                         |  |                                                                   | (262,425  
|                                   |                                         |  |                                                                   |           
|Balance
      at December 31, 2003 |                                         |  |                                                                   | 9,871,087 
|                                   |                                         |  |                                                                   |           

At
  December 31, 2003, options to purchase 5,133,948 shares of common stock were
  exercisable at a weighted average exercise price of approximately $3.95 per
  share and 3,953,831 shares of common stock were available for grant or sale
  under the Plan.

1998
  Non-Employee Directors Plan

Pursuant
  to the Companys Non-Employee Directors 1998 Stock Plan as amended
  (the Directors Plan), 3.3 million shares have been provided
  for the grant of stock options to non-employee members of the Board of Directors.
  In March 2002, the Board of Directors approved an amendment to increase the
  total number of shares of common stock authorized for issuance under the Directors
  Plan to 3.3 million shares from 2.9 million and an amendment to change the amount
  and the time when stock options are granted under the Directors Plan.
  In June 2002, shareholders approved both amendments at the annual meeting of
  stockholders. Options under the Directors Plan have a term of up to ten
  years and must be granted at not less than the fair market value on the date
  of grant. As amended and approved, each director shall be granted 24,000 options
  at the first Board of Directors meeting they attend in person. Each option granted
  shall become exercisable in full on the date of grant.

60

---



The
  Companys directors were granted stock options to purchase a total of 184,000,
  174,667, and 170,769 shares of common stock in 2003, 2002 and 2001, respectively,
  with an exercise price equal to the fair market value of the common stock on
  the date of grant.

Summary
  information with respect to the Companys 1998 Non-Employee Directors
  Plan is as follows:

|1998
      Directors' Plan         | Shares
      Under
      Option |  | Weighted
      Average
      Exercise
      Price 
      Per Share |          
|---------------------------------- | ------------------------------- |  | ------------------------------------------------------------------ | ---------
|                                   |                                 |  |                                                                    |          
|Balance
      at December 31, 2000 |                                 |  |                                                                    | 1,620,300
|Granted                            |                                 |  |                                                                    | 170,769  
|Exercised                          |                                 |  |                                                                    | (501,400 
|Canceled                           |                                 |  |                                                                    | --       
|                                   |                                 |  |                                                                    |          
|Balance
      at December 31, 2001 |                                 |  |                                                                    | 1,289,669
|Granted                            |                                 |  |                                                                    | 174,667  
|Exercised                          |                                 |  |                                                                    | (475,000 
|Canceled                           |                                 |  |                                                                    | (125,000 
|                                   |                                 |  |                                                                    |          
|Balance
      at December 31, 2002 |                                 |  |                                                                    | 864,336  
|Granted                            |                                 |  |                                                                    | 184,000  
|Exercised                          |                                 |  |                                                                    | (100,000 
|Canceled                           |                                 |  |                                                                    | (20,000  
|                                   |                                 |  |                                                                    |          
|Balance
      at December 31, 2003 |                                 |  |                                                                    | 928,336  
|                                   |                                 |  |                                                                    |          

At
  December 31, 2003, options granted under the Directors Plan to purchase
  834,335 shares of common stock were exercisable at a weighted average exercise
  price of approximately $6.70 per share and 429,478 shares of common stock were
  available for grant or sale under the Directors Plan.

In
  2001, a total of 1,563,069 options were granted pursuant to the 1998 Plan and
  the 1998 Directors Plan, of which 1,513,069 were granted at fair market value
  with a weighted average grant date fair value of $8.53 per share, and 50,000
  were granted below fair market value with a weighted average grant date fair
  value of $6.64 per share. In 2002, a total of 1,449,067 options were granted
  pursuant to the 1998 Plan and the 1998 Directors Plan at fair market value with
  a weighted average grant date fair value of $11.81 per share. No options were
  granted below fair market value. In 2003, a total of 2,652,300 options were
  granted pursuant to the 1998 Plan and the 1998 Directors Plan at fair market
  value with a weighted average grant date fair value of $9.72 per share. No options
  were granted below fair market value.

An
  analysis of all options outstanding as of December 31, 2003 is presented below:

|Range
      of
      Prices | Options 
      Outstanding |  | Weighted 
      Average 
      Remaining 
      Life in Years |            | Weighted
      
      Average 
      Exercise 
      Price |  | Options 
      Exercisable |  | Weighted 
      Average 
      Exercise 
      Price of 
      Options 
      Exercisable |      
|--------------------------- | -------------------------- |  | ------------------------------------------------------------- | ---------- | ---------------------------------------------------------- |  | -------------------------- |  | ----------------------------------------------------------------------------------------- | -----
|                            |                            |  |                                                               |            |                                                            |  |                            |  |                                                                                           |      
|$0.00
      - $3.65         |                            |  |                                                               | 5,072,762  |                                                            |  | 5.71                       |  | $                                                                                         | 2.61 
|$5.48
      - $7.00         |                            |  |                                                               | 1,233,283  |                                                            |  | 7.10                       |  |                                                                                           | 6.47 
|$7.01
      - $9.13         |                            |  |                                                               | 1,579,458  |                                                            |  | 7.90                       |  |                                                                                           | 7.92 
|$9.14
      - $10.95        |                            |  |                                                               | 1,285,500  |                                                            |  | 9.30                       |  |                                                                                           | 9.91 
|$10.96
      -$18.25        |                            |  |                                                               | 1,628,419  |                                                            |  | 8.45                       |  |                                                                                           | 13.39
|                            |                            |  |                                                               |            |                                                            |  |                            |  |                                                                                           |      
|                            |                            |  |                                                               | 10,799,422 |                                                            |  | 7.00                       |  | $                                                                                         | 6.32 
|                            |                            |  |                                                               |            |                                                            |  |                            |  |                                                                                           |      

The
  weighted-average estimated fair value of employee stock options granted were
  $9.72 and $11.81 per share during 2003 and 2002, respectively

61

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Employee
  Savings Plan

In
  January 2001, the Company initiated sponsorship of the Genta Incorporated Savings
  and Retirement Plan, a defined contribution plan under Section 401(k) of the
  Internal Revenue Code. The Companys matching contribution to the Plan
  was $0.6 million, $0.3 million and $0.1 million for 2003, 2002 and 2001, respectively.

21.
  Commitments and Contingencies

Litigation
  and Potential Claims

JBL
  Scientifics, Inc.

During
  May 2000, Promega notified Genta of two claims against Genta and Gentas
  subsidiary, Genko Scientific, Inc. (formerly known as JBL Scientifics, Inc.),
  for indemnifiable damages in the aggregate amount of $2.82 million under the
  purchase agreement pursuant to which Promega acquired the assets of JBL. Promegas
  letter stated that it intended to reduce to zero the principal amount of the
  $1.2 million promissory note it issued as partial payment for the assets of
  Genko Scientific, Inc. and that therefore Genta owed Promega approximately $1.6
  million. On October 16, 2000 Genta filed suit in a U.S. District Court in California
  against Promega for the non-payment of the $1.2 million note plus accrued interest.
  On November 6, 2000, Promega filed a counterclaim alleging indemnifiable damages
  in the aggregate amount of $2.82 million. During the first quarter of 2001,
  we agreed to resolve the matter with Promega, and, in connection therewith,
  agreed to restructure its $1.2 million promissory note receivable to provide
  for a $0.2 million non-interest bearing note due to be repaid by Promega upon
  final resolution of certain environmental issues related to JBL and forgave
  all accrued interest. While we have resolved one of these environmental issues,
  we are awaiting final acceptance by the EPA of our settlement offer on the other
  environmental issue before the restructured note will be repaid by Promega.
  We are uncertain as to whether and when the EPA will issue such final acceptance.

Genta
  Pharmaceutical Europe S.A.

During
  1995, Genta Pharmaceutical Europe S.A., or Genta Europe, a wholly-owned subsidiary
  of Genta, received funding in the form of a loan from ANVAR, a French government
  agency, of which the proceeds were intended to fund research and development
  activities. In October 1996, in connection with a restructuring of Gentas
  operations, Genta terminated all scientific personnel of Genta Europe. In 1998,
  ANVAR asserted that Genta Europe was not in compliance with the ANVAR Agreement,
  notified Genta Europe of its demand for accelerated repayment of the loan and
  notified Genta that it was liable as a guarantor on the note. Based on the advice
  of French counsel, Genta does not believe that ANVAR is entitled to payment
  under the terms of the ANVAR Agreement and that Genta will likely not incur
  any liability in this matter, although there can be no assurances thereof. During
  the quarter ended September 30, 2003, we reversed the accrued net liability
  of $0.2 million related to this matter, as management believes that a loss is
  not probable.

University
  of Pennsylvania

In
  October 2002, a licensing officer from the University of Pennsylvania asserted
  a claim to a portion of the initial $40.0 million development funding we received
  from Aventis pursuant to the collaborative agreement between Genta and Aventis.
  In October 2003, we reached a settlement with the University of Pennsylvania
  with respect to this claim. Under the terms of the settlement, in exchange for
  an agreement by the University of Pennsylvania to forego any and all claims
  in the future to any portion of any milestone and other payments (other than
  royalty payments on sales) made to Genta pursuant to the collaborative agreement,
  Genta has agreed to make the following payments to the University of Pennsylvania:
  (i) $750,000 on November 5, 2003, (ii) $250,000 on February 2, 2004, (iii) $1.5
  million upon the first new drug application or foreign equivalent approval of
  Genasense and (iv) provided that the first new drug application or foreign
  equivalent approval of Genasense has been received by Genta, $750,000
  on the earlier of (a) the second new drug application or foreign equivalent
  approval of Genasense or (b) December 30, 2004.

62

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Contractual
  Obligations

Future
  contractual obligations at December 31, 2003 are as follows ($ thousands):

|                                              | Total |  | Less
      than
      1 year |         | 1
      - 3 years |   | 3
      - 5 years |  | More than 5
      years |        
|--------------------------------------------- | ----- |  | ---------------------------- | ------- | ----------------- | - | ----------------- |  | ----------------------- | -------
|                                              |       |  |                              |         |                   |   |                   |  |                         |        
|Long
      term debt obligations (1)          |       |  | $                            | 35,000  |                   | $ | --                |  | $                       | 35,000 
|Convertible
      debt                        |       |  |                              | 10,000  |                   |   | --                |  |                         | --     
|Operating
      lease obligations             |       |  |                              | 16,067  |                   |   | 2,571             |  |                         | 5,235  
|Drug
      purchase obligations to Avecia (2) |       |  |                              | 137,500 |                   |   | 27,500            |  |                         | 110,000
|Drug purchase
      obligations to JMI (3)    | 252   |  | 46                           |         | 206               |   | --                |  | --                      |        
|                                              |       |  |                              |         |                   |   |                   |  |                         |        
|Total                                         |       |  | $                            | 198,819 |                   | $ | 30,117            |  | $                       | 150,441
|                                              |       |  |                              |         |                   |   |                   |  |                         |        

(1)
  Consists of amounts under our line of credit with Aventis, which are due six
  months after termination, which will occur on the earlier of FDA approval of
  Genasense or December 31, 2004. FDA approval of Genasense would
  trigger a milestone payment from Aventis of $75 million and an obligation by
  Aventis to purchase at our option $20 million of convertible notes from us.

(2)
  Consists of drug purchase obligations to Avecia which are subject to FDA approval
  of Genasense and qualification and validation of Avecias production
  facilities expansion. The amounts actually purchased will be dependent upon
  the aforementioned conditions, as well as the volume purchased in any given
  year. Pursuant to the collaborative agreement with Aventis, (Note 12), the Company
  anticipates that it will be reimbursed from 75% to 100% of these purchase commitments
  after the drug is shipped to Aventis for clinical use or commercial sales. For
  a further description of our agreement with Avecia, see Part I, Item 1,
  B. Summary of Business and Research and Development  Manufacturing.
  If Genasense is not approved or Avecias production facility expansion
  is not validated our total drug purchase obligations will be $27.5 million.
  We may terminate our Avecia contract if we determine that Genasense will
  not be approved by the FDA. In addition, we have committed up to $5.0 million
  of advance financing to the drug substance manufacturer, for facility expansion,
  which would be recovered with interest through future payments determined as
  a function of drug substance purchases to be made by Genta in the future.

(3)
  Consists of drug purchase obligations to Johnson Matthey Inc. (JMI). Genta is
  obligated to purchase 80% of drug substance requirements for Ganite from
  JMI. The sales projections for Ganite are very dependent on the Companys
  ability to obtain compendial listings and/or approvals for the use of Ganite
  as a chemotherapy drug. The sales projections reflected in the contractual obligations
  reflect the current approved hypercalcemia indication and limited sales as a
  chemotherapy drug. Depending on the Companys ability to obtain additional
  compendial listings and/or approvals, the sales projections and resulting contractual
  obligations could be higher.

22.
  Subsequent Event

In
  February 2004, the U.S. Food and Drug Administration (FDA) accepted the New
  Drug Application (NDA) for Genasense (oblimersen sodium), the first systemic
  antisense therapy for cancer. The NDA proposes the use of Genasense in
  combination with dacarbazine for the treatment of patients with advanced melanoma
  who have not previously received chemotherapy. In addition, the FDA granted
  Priority Review status to the application, which targets an agency action on
  or before June 8, 2004.

63

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23.
  Selected Quarterly Financial Data (Unaudited)

|2003                                       |  |  | Quarter
      Ended |       
|------------------------------------------ |  |  | ------------------- | ------
|($ thousands,
      except per share data) |  |  | Mar.
      31       |       
|                                           |  |  |                     |       
|Revenues                                   |  |  | $                   | 1,309 
|Gross
      Margin                         |  |  |                     | 1,309 
|Operating
      expenses (1)               |  |  |                     | 11,080
|Net loss                                   |  |  |                     | (9,603
|Net loss
      per common share:           |  | 
|Basic
      and diluted                    |  |  | $                   | (0.13 

|                                           |  |  |               |        
|------------------------------------------ |  |  | ------------- | -------
|2002                                       |  |  |               |        
|($ thousands,
      except per share data) |  |  | Mar.
      31 |        
|                                           |  |  |               |        
|Revenues                                   |  |  | $             | 5      
|Gross
      Margin                         |  |  |               | 5      
|Operating
      expenses (1)               |  |  |               | 12,639 
|Net loss                                   |  |  |               | (12,626
|Net loss
      per common share:           |  | 
|Basic
      and diluted                    |  |  | $             | (0.19  



|(1) |  | Excludes compensation
      expense related to stock options
|--- |  | ------------------------------------------------------------

64

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PART
  III

Item
  9. Changes in and Disagreements with Accountants on Accounting and Financial
  Disclosure

Changes
  in Accountants

None.

Disagreements
  with Accountants

None.

Item
  9A. Controls and Procedures

Evaluation
  of disclosure controls and procedures.Gentas Chief Executive Officer
  and Chief Financial Officer, after evaluating the effectiveness of the Companys
  disclosure controls and procedures (as defined in Exchange Act Rules
  13a-15(e) and 15d-15(e)) as of the end of the period covered by this report
  (the Evaluation Date), have concluded that as of the Evaluation
  Date, our disclosure controls and procedures were adequate and designed to ensure
  that material information relating to the Company would be made known to them
  by others within the Company.

Changes
  in internal controls.There were no significant changes during the Company's
  fourth fiscal quarter in our internal controls over financial reporting that
  have materially affected or are reasonably likely to materially affect the Company's
  internal controls over financial reporting.

Item
  10. Directors and Executive Officers of the Registrant

The
  information required in this item is incorporated by reference from the Companys
  definitive proxy statement to be filed not later than April 30, 2004 pursuant
  to Regulation 14A of the General Rules and Regulations under the Securities
  Exchange Act of 1934, as amended (Regulation 14A).

Item
  11. Executive Compensation

The
  information required in this item is incorporated by reference from the Companys
  definitive proxy statement to be filed not later than April 30, 2004 pursuant
  to Regulation 14A.

Item
  12. Security Ownership of Certain Beneficial Owners and Management and Related
  Stockholder Matters

The
  information required in this item is incorporated by reference from the Companys
  definitive proxy statement to be filed not later than April 30, 2004 pursuant
  to Regulation 14A.

Item
  13. Certain Relationships and Related Transactions

The
  information required in this item is incorporated by reference from the Companys
  definitive proxy statement to be filed not later than April 30, 2004 pursuant
  to Regulation 14A.

Item
  14. Principal Accounting Fees and Services

The
  information required in this item is incorporated by reference from the Companys
  definitive proxy statement to be filed not later than April 30, 2004 pursuant
  to Regulation 14A.

65

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PART
  IV

Item
  15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)
  Financial statements

| | (1) | Reference
      is made to the Index to Financial Statements under Item 8 of this report
      on Form 10-K.                                                                               
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                            
| | (2) | All schedules are omitted because they are not required, are not applicable,
      or the required information is included in the consolidated financial statements
      or notes thereto.
| |     |                                                                                                                                                                                            
| | (3) | Reference
      is made to Paragraph (c) below for Exhibits required by Item 601 of Regulation
      S-K, including management contracts and compensatory plans and arrangements.          

(b)
  Reports on Form 8-K. The Company filed the following reports on Forms 8-K:

On
  November 4, 2003 the Company filed a Current Report on Form 8-K/A disclosing
  a press release issued in October 2003 regarding the completion of Salus Therapeutics,
  Inc. acquisition.

(c)
  Exhibits required by Item 601 of Regulation S-K with each management contract,
  compensatory plan or arrangement required to be filed identified.

|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                           
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                                                                                                                         
|3.1.a                |  | Restated Certificate
      of Incorporation of the Company (incorporated by reference to Exhibit 3(i).1
      to the Company's Annual Report on Form 10-K for the year ended December
      31, 1995, Commission File No. 0-19635)                                      
|3.1.b                |  | Certificate of Designations
      of Series D Convertible Preferred Stock of the Company (incorporated by
      reference to Exhibit 3(i) to the Company's Current Report on Form 8-K filed
      on February 28, 1997, Commission File No. 0-19635)                    
|3.1.c                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).3 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)          
|3.1.d                |  | Amended Certificate
      of Designations of Series D Convertible Preferred Stock of the Company (incorporated
      by reference to Exhibit 3(i).4 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)
|3.1.e                |  | Certificate of Increase
      of Series D Convertible Preferred Stock of the Company (incorporated by
      reference to Exhibit 3(i).5 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)            
|3.1.f                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).4 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1998, Commission File No. 0-19635)          
|3.1.g                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).3 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1998, Commission File No. 0-19635)          
|3.1.h                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).8 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)          
|3.1.i                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3.1.i to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                     
|3.1.j                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3.1.j to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                     

66

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.2                  |  | Amended and Restated
      Bylaws of the Company (incorporated by reference to Exhibit 3(ii).1 to the
      Company's Annual Report on Form 10-K for the year ended December 31, 1998,
      Commission File No. 0-19635)                                                                                                                                                                                                                                                          
|4.1                  |  | Specimen Common Stock
      Certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration
      Statement on Form S-1, Commission File No. 333-110238)                                                                                                                                                                                                                                                                                                       
|10.1                 |  | Amended and Restated
      1991 Stock Plan of Genta Incorporated (incorporated by reference to Exhibit
      10.1 to the Company's Registration Statement on Form S-8, Reg. No. 333-101022)                                                                                                                                                                                                                                                                                        
|10.2                 |  | Non-Employee Directors'
      1998 Stock Option Plan, as amended and restated (incorporated by reference
      to Exhibit 4.2 to the Company's Registration Statement on Form S-8, Commission
      File No. 0-19635)                                                                                                                                                                                                                                                              
|10.3                 |  | 1998 Stock Incentive
      Plan, as amended and restated, effective June 25, 2003 (incorporated by
      reference to Exhibit 10.3 to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                                                                                                                                                                                                                                      
|10.4                 |  | Form of Indemnification
      Agreement entered into between the Company and its directors and officers
      (incorporated by reference to Exhibit 10.7 to the Company's Registration
      Statement on Form S-1, Commission File No. 0-19635)                                                                                                                                                                                                                                   
|10.5*                |  | Development, License
      and Supply Agreement dated February 2, 1989 between the Company and Gen-Probe
      Incorporated (incorporated by reference to Exhibit 10.10 to the Company's
      Registration Statement on Form S-1, Commission File No. 0-19635)                                                                                                                                                                                                                    
|10.6                 |  | Contract for Regional
      Aid for Innovation, effective July 1, 1993, between L'Agence Nationale de
      Valorisation de la Recherche, Genta Pharmaceuticals Europe S.A. and the
      Company (incorporated by reference to Exhibit 10.98 to the Company's Annual
      Report on Form 10-K for the year ended December 31, 1996, Commission File
      No. 0-19635)                                                                                                           
|10.7                 |  | Asset Purchase Agreement,
      dated as of March 19, 1999, among JBL Acquisition Corp., JBL Scientific
      Incorporated and the Company (incorporated by reference to Exhibit 10.2
      to the Company's Quarterly Report filed on Form 10-Q for the quarter ended
      March 31, 1999, Commission File No. 0-19635)                                                                                                                                                          
|10.8                 |  | Warrant Agreement,
      dated as of December 23, 1999, among the Company, ChaseMellon Shareholder
      Services, L.L.C., as warrant agent, and Paramount Capital, Inc. (incorporated
      by reference to Exhibit 10.67 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)                                                                                                                                    
|10.9                 |  | Employment Letter
      Agreement, dated as of October 28, 1999, from the Company to Raymond P.
      Warrell, Jr., M.D. (incorporated by reference to Exhibit 10.70 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 1999, Commission
      File No. 0-19635)                                                                                                                                                                                    
|10.10                |  | Stock Option Agreement,
      dated as of October 28, 1999, between the Company and Raymond P. Warrell,
      Jr., M.D. (incorporated by reference to Exhibit 10.71 to the Company's Annual
      Report on Form 10-K for the year ended December 31, 1999, Commission File
      No. 0-19635)                                                                                                                                                                                     
|10.11                |  | Letter Agreement,
      dated March 4, 1999, from SkyePharma Plc to the Company (incorporated by
      reference to Exhibit 10.72 to the Company's Annual Report on Form 10-K for
      the year ended December 31, 1999, Commission File No. 0-19635)                                                                                                                                                                                                                             
|10.12                |  | Subscription Agreement
      executed in connection with the November 26, 2001 sale of common stock to
      Franklin Small-Mid Cap Growth Fund, Franklin Biotechnology Discovery Fund,
      and SF Capital Partners Ltd., and the November 30, 2001 sale of common stock
      to SF Capital Partners Ltd. (incorporated by reference to Exhibit 10.73
      to the Company's Annual Report on Form 10-K for the year ended December
      31, 2001, Commission File No. 0-19635)
|10.13                |  | Employment Letter
      Agreement, dated as of March 27, 2001, from the Company to Loretta M. Itri,
      M.D. (incorporated by reference to Exhibit 10.74 to the Company's Annual
      Report on Form 10-K for the year ended December 31, 2001, Commission File
      No. 0-19635)                                                                                                                                                                                              
|10.14                |  | Agreement of Lease
      dated June 28, 2000 between The Connell Company and the Company (incorporated
      by reference to Exhibit 10.76 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 2001, Commission File No. 0-19635)                                                                                                                                                                                                                    
|10.14A               |  | Amendment of Lease,
      dated June 19, 2002 between The Connell Company and the Company (incorporated
      by reference to Exhibit 10.10 to the Company's Quarterly Report on Form
      10-Q for the quarter ended June 30, 2002, Commission File No. 0-19635)                                                                                                                                                                                                                 

67

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                         
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                                       
|10.15                |  | Agreement of Sublease
      dated August 13, 2001 between Expanets, Inc. and the Company (incorporated
      by reference to Exhibit 10.77 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 2001, Commission File No. 0-19635)                                                       
|10.16*               |  | U.S. Commercialization
      Agreement dated April 26, 2002, by and between Genta Incorporated and Aventis
      Pharmaceuticals Inc.                                                                                                                                                                                 
|10.16A*              |  | Amendment No. 1 dated
      March 14, 2003 to the U.S. Commercialization Agreement between Genta Incorporated
      and Aventis Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1
      to the Company's Quarterly Report on Form10-Q for the quarter ended March
      31, 2003).                      
|10.17*               |  | Ex-U.S. Commercialization
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited                                                                                                                                                                                        
|10.18*               |  | Global Supply Agreement,
      dated April 26, 2002, by and among Genta Incorporated, Aventis Pharmaceuticals
      Inc. and Garliston Limited (incorporated by reference to Exhibit 10.3 to
      the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
      2002, Commission File No. 0-19635)
|10.19*               |  | Securities Purchase
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited (incorporated by reference to Exhibit 10.4 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2002, Commission File
      No. 0-19635)                      
|10.20                |  | Standstill and Voting
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited (incorporated by reference to Exhibit 10.5 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2002, Commission File
      No. 0-19635);                   
|10.21                |  | Registration Rights
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited (incorporated by reference to Exhibit 10.6 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2002, Commission File
      No. 0-19635)                      
|10.22                |  | Convertible Note Purchase
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited (incorporated by reference to Exhibit 10.7 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2002, Commission File
      No. 0-19635)                
|10.23*               |  | 5.63% Convertible
      Promissory Note, due April 26, 2009 (incorporated by reference to Exhibit
      10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended
      June 30, 2002, Commission File No. 0-19635)                                                                                   
|10.24*               |  | Subordination Agreement,
      dated April 26, 2002, by and between Genta Incorporated and Garliston Limited
      (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report
      on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 0-19635)                                  
|10.25*               |  | Manufacture and Supply
      Agreement, dated December 20, 2002, between Genta Incorporated and Avecia
      Biotechnology Inc. (incorporated by reference to Exhibit 10.88 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 2002, Commission
      File No. 0-19635)                
|10.26                |  | Employment Agreement,
      dated as of December 1, 2002, between the Company and Raymond P. Warrell,
      Jr., M.D. (incorporated by reference to Exhibit 10.89 to the Company's Annual
      Report on Form 10-K/A for the year ended December 31, 2001, Commission File
      No. 0-19635)                        
|10.27                |  | Employment Agreement,
      dated as of August 5, 2003, between the Company and Loretta M. Itri, M.D.
      (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
      on Form 10-Q for the quarter ended June 30, 2003, Commission File No. 0-19635)                                         
|10.28*               |  | License Agreement
      dated August 1, 1991, between Genta Incorporated and the Trustees of the
      University of Pennsylvania (incorporated by reference to Exhibit 99.1 to
      the Company's Current Report on Form 8-K filed on October 28, 2003, Commission
      File No. 0-19635)                          
|10.28A*              |  | Amendment to License
      Agreement, dated December 19, 2000, between Genta Incorporated and the Trustees
      of the University of Pennsylvania (incorporated by reference to Exhibit
      99.2 to the Company's Current Report on Form 8-K filed on October 28, 2003,
      Commission File No. 0-19635)         
|10.28AA*             |  | Second Amendment to
      License Agreement, dated October 22, 2003, between Genta Incorporated and
      the Trustees of the University of Pennsylvania (incorporated by reference
      to Exhibit 99.3 to the Company's Current Report on Form 8-K filed on October
      28, 2003, Commission File No. 0-19635)   

68

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                 
|-------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                               
|10.29                |  | Settlement Agreement
      and Release, dated October 22, 2003, between Genta Incorporated and the
      Trustees of the University of Pennsylvania (incorporated by reference to
      Exhibit 99.4 to the Company's Current Report on Form 8-K filed on October
      28, 2003, Commission File No. 0-19635)
|21                   |  | Subsidiaries of the
      Registrant                                                                                                                                                                                                                                                                          
|23.1                 |  | Consent of Deloitte
      & Touche LLP                                                                                                                                                                                                                                                                        
|31.1                 |  | Certification by Chief
      Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                      
|31.2                 |  | Certification by Chief
      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                      
|32.1                 |  | ertification by Chief
      Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                  
|32.2                 |  | Certification by Chief
      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                 



---

* The
  Company has been granted confidential treatment of certain portions of this
  exhibit.

69

---



SIGNATURES

Pursuant
  to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
  1934, as amended, the Registrant has duly caused this report to be signed on
  its behalf by the undersigned, thereunto duly authorized, on this 12th day of
  March 2004.

| | Genta Incorporated                                                                
| | ----------------------------------------------------------------------------------
| |                                                                                   
| |                                                                                   
| | /s/ RAYMOND
      P. WARRELL, JR., M.D.                                           
| | Raymond P. Warrell,
      Jr., M.D.                                               
| | Chairman, President,
      Chief Executive Officer and Principal Executive Officer

Pursuant
  to the requirements of the Securities Exchange Act of 1934, as amended, this
  report has been signed below by the following persons on behalf of the registrant
  and in the capacities and on the dates indicated.

|Signature                               | Capacity                                                                                  | Date          
|--------------------------------------- | ----------------------------------------------------------------------------------------- | --------------
|                                        |                                                                                           |               
|/s/
      RAYMOND P. WARRELL, JR., M.D. | Chairman,
      President, Chief Executive 
      Officer and Principal Executive Officer | March 12, 2004
|Raymond P. Warrell,
      Jr., M.D.     |                                                                                          
|                                        |                                                                                           |               
|/s/
      WILLIAM P. KEANE              | Vice President
      and Chief Financial 
      Officer (Principal Accounting Officer)    | March 12, 2004
|William P. Keane                        |                                                                                          
|                                        |                                                                                           |               
|/s/
      JEROME E. GROOPMAN, M.D.      | Director                                                                                  | March 12, 2004
|Jerome E. Groopman,
      M.D.          |                                                                                          
|                                        |                                                                                           |               
|/s/
      BETSY MCCAUGHEY               | Director                                                                                  | March 12, 2004
|Betsy McCaughey, Ph.D.                  |                                                                                          
|                                        |                                                                                           |               
|/s/
      PETER TATTLE                  | Director                                                                                  | March 12, 2004
|Peter T. Tattle                         |                                                                                          
|                                        |                                                                                           |               
|/s/
      DANIEL D. VON HOFF, M.D.      | Director                                                                                  | March 12, 2004
|Daniel D. Von Hoff,
      M.D.          |                                                                                          
|                                        |                                                                                           |               
|/s/
      HARLAN J. WAKOFF              | Director                                                                                  | March 12, 2004
|Harlan J. Wakoff                        |                                                                                          
|                                        |                                                                                           |               
|/s/
      DOUGLAS G. WATSON             | Director                                                                                  | March 12, 2004
|Douglas G. Watson                       |                                                                                          
|                                        |                                                                                           |               
|/s/
      MICHAEL S. WEISS              | Director                                                                                  | March 12, 2004
|Michael S. Weiss                        |                                                                                          

70

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                            | Sequentially 
      Numbered Pages
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------
|                     |  |                                                                                                                                                                                                                                                                          |                                   
|3.1.a                |  | Restated Certificate
      of Incorporation of the Company (incorporated by reference to Exhibit 3(i).1
      to the Company's Annual Report on Form 10-K for the year ended December
      31, 1995, Commission File No. 0-19635)                                       |                                   
|3.1.b                |  | Certificate of Designations
      of Series D Convertible Preferred Stock of the Company (incorporated by
      reference to Exhibit 3(i) to the Company's Current Report on Form 8-K filed
      on February 28, 1997, Commission File No. 0-19635)                     |                                   
|3.1.c                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).3 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)           |                                   
|3.1.d                |  | Amended Certificate
      of Designations of Series D Convertible Preferred Stock of the Company (incorporated
      by reference to Exhibit 3(i).4 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635) |                                   
|3.1.e                |  | Certificate of Increase
      of Series D Convertible Preferred Stock of the Company (incorporated by
      reference to Exhibit 3(i).5 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)             |                                   
|3.1.f                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).4 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1998, Commission File No. 0-19635)           |                                   
|3.1.g                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).3 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1998, Commission File No. 0-19635)           |                                   
|3.1.h                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3(i).8 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)           |                                   
|3.1.i                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3.1.i to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                      |                                   
|3.1.j                |  | Certificate of Amendment
      of Restated Certificate of Incorporation of the Company (incorporated by
      reference to Exhibit 3.1.j to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                      |                                   
|3.2                  |  | Amended and Restated
      Bylaws of the Company (incorporated by reference to Exhibit 3(ii).1 to the
      Company's Annual Report on Form 10-K for the year ended December 31, 1998,
      Commission File No. 0-19635)                                                |                                   
|4.1                  |  | Specimen Common Stock
      Certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration
      Statement on Form S-1, Commission File No. 333-110238)                                                                                             |                                   
|10.1                 |  | Amended and Restated
      1991 Stock Plan of Genta Incorporated (incorporated by reference to Exhibit
      10.1 to the Company's Registration Statement on Form S-8, Reg. No. 333-101022)                                                                              |                                   
|10.2                 |  | Non-Employee Directors'
      1998 Stock Option Plan, as amended and restated (incorporated by reference
      to Exhibit 4.2 to the Company's Registration Statement on Form S-8, Commission
      File No. 0-19635)                                                    |                                   
|10.3                 |  | 1998 Stock Incentive
      Plan, as amended and restated, effective June 25, 2003 (incorporated by
      reference to Exhibit 10.3 to the Company's Registration Statement on Form
      S-1, Commission File No. 333-110238)                                            |                                   

71

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Sequentially 
      Numbered Pages
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                   
|10.4                 |  | Form
      of Indemnification Agreement entered into between the Company and its directors
      and officers (incorporated by reference to Exhibit 10.7 to the Company's
      Registration Statement on Form S-1, Commission File No. 0-19635)                                                                                                                                                                                                                                    |                                   
|10.5*                |  | Development,
      License and Supply Agreement dated February 2, 1989 between the Company
      and Gen-Probe Incorporated (incorporated by reference to Exhibit 10.10 to
      the Company's Registration Statement on Form S-1, Commission File No. 0-19635)                                                                                                                                                                                                                     |                                   
|10.6                 |  | Contract
      for Regional Aid for Innovation, effective July 1, 1993, between L'Agence
      Nationale de Valorisation de la Recherche, Genta Pharmaceuticals Europe
      S.A. and the Company (incorporated by reference to Exhibit 10.98 to the
      Company's Annual Report on Form 10-K for the year ended December 31, 1996,
      Commission File No. 0-19635)                                                                                                            |                                   
|10.7                 |  | Asset
      Purchase Agreement, dated as of March 19, 1999, among JBL Acquisition Corp.,
      JBL Scientific Incorporated and the Company (incorporated by reference to
      Exhibit 10.2 to the Company's Quarterly Report filed on Form 10-Q for the
      quarter ended March 31, 1999, Commission File No. 0-19635)                                                                                                                                                           |                                   
|10.8                 |  | Warrant
      Agreement, dated as of December 23, 1999, among the Company, ChaseMellon
      Shareholder Services, L.L.C., as warrant agent, and Paramount Capital, Inc.
      (incorporated by reference to Exhibit 10.67 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 1999, Commission File No. 0-19635)                                                                                                                                     |                                   
|10.9                 |  | Employment
      Letter Agreement, dated as of October 28, 1999, from the Company to Raymond
      P. Warrell, Jr., M.D. (incorporated by reference to Exhibit 10.70 to the
      Company's Annual Report on Form 10-K for the year ended December 31, 1999,
      Commission File No. 0-19635)                                                                                                                                                                                     |                                   
|10.10                |  | Stock
      Option Agreement, dated as of October 28, 1999, between the Company and
      Raymond P. Warrell, Jr., M.D. (incorporated by reference to Exhibit 10.71
      to the Company's Annual Report on Form 10-K for the year ended December
      31, 1999, Commission File No. 0-19635)                                                                                                                                                                                      |                                   
|10.11                |  | Letter
      Agreement, dated March 4, 1999, from SkyePharma Plc to the Company (incorporated
      by reference to Exhibit 10.72 to the Company's Annual Report on Form 10-K
      for the year ended December 31, 1999, Commission File No. 0-19635)                                                                                                                                                                                                                              |                                   
|10.12                |  | Subscription
      Agreement executed in connection with the November 26, 2001 sale of common
      stock to Franklin Small-Mid Cap Growth Fund, Franklin Biotechnology Discovery
      Fund, and SF Capital Partners Ltd., and the November 30, 2001 sale of common
      stock to SF Capital Partners Ltd. (incorporated by reference to Exhibit
      10.73 to the Company's Annual Report on Form 10-K for the year ended December
      31, 2001, Commission File No. 0-19635) |                                   
|10.13                |  | Employment
      Letter Agreement, dated as of March 27, 2001, from the Company to Loretta
      M. Itri, M.D. (incorporated by reference to Exhibit 10.74 to the Company's
      Annual Report on Form 10-K for the year ended December 31, 2001, Commission
      File No. 0-19635)                                                                                                                                                                                               |                                   
|10.14                |  | Agreement
      of Lease dated June 28, 2000 between The Connell Company and the Company
      (incorporated by reference to Exhibit 10.76 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 2001, Commission File No. 0-19635)                                                                                                                                                                                                                     |                                   
|10.14A               |  | Amendment
      of Lease, dated June 19, 2002 between The Connell Company and the Company
      (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report
      on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 0-19635)                                                                                                                                                                                                                  |                                   

72

---





|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                          | Sequentially 
      Numbered Pages
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                                        |                                   
|10.15                |  | Agreement
      of Sublease dated August 13, 2001 between Expanets, Inc. and the Company
      (incorporated by reference to Exhibit 10.77 to the Company's Annual Report
      on Form 10-K for the year ended December 31, 2001, Commission File No. 0-19635)                                                        |                                   
|10.16*               |  | U.S.
      Commercialization Agreement dated April 26, 2002, by and between Genta Incorporated
      and Aventis Pharmaceuticals Inc.                                                                                                                                                                                  |                                   
|10.16A*              |  | Amendment
      No. 1 dated March 14, 2003 to the U.S. Commercialization Agreement between
      Genta Incorporated and Aventis Pharmaceuticals Inc. (incorporated by reference
      to Exhibit 10.1 to the Company's Quarterly Report on Form10-Q for the quarter
      ended March 31, 2003).                       |                                   
|10.17*               |  | Ex-U.S.
      Commercialization Agreement, dated April 26, 2002, by and between Genta
      Incorporated and Garliston Limited                                                                                                                                                                                         |                                   
|10.18*               |  | Global
      Supply Agreement, dated April 26, 2002, by and among Genta Incorporated,
      Aventis Pharmaceuticals Inc. and Garliston Limited (incorporated by reference
      to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter
      ended June 30, 2002, Commission File No. 0-19635) |                                   
|10.19*               |  | Securities
      Purchase Agreement, dated April 26, 2002, by and between Genta Incorporated
      and Garliston Limited (incorporated by reference to Exhibit 10.4 to the
      Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
      Commission File No. 0-19635)                       |                                   
|10.20                |  | Standstill
      and Voting Agreement, dated April 26, 2002, by and between Genta Incorporated
      and Garliston Limited (incorporated by reference to Exhibit 10.5 to the
      Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
      Commission File No. 0-19635);                    |                                   
|10.21                |  | Registration
      Rights Agreement, dated April 26, 2002, by and between Genta Incorporated
      and Garliston Limited (incorporated by reference to Exhibit 10.6 to the
      Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
      Commission File No. 0-19635)                       |                                   
|10.22                |  | Convertible
      Note Purchase Agreement, dated April 26, 2002, by and between Genta Incorporated
      and Garliston Limited (incorporated by reference to Exhibit 10.7 to the
      Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
      Commission File No. 0-19635)                 |                                   
|10.23*               |  | 5.63%
      Convertible Promissory Note, due April 26, 2009 (incorporated by reference
      to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter
      ended June 30, 2002, Commission File No. 0-19635)                                                                                    |                                   
|10.24*               |  | Subordination
      Agreement, dated April 26, 2002, by and between Genta Incorporated and Garliston
      Limited (incorporated by reference to Exhibit 10.9 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2002, Commission File
      No. 0-19635)                             |                                   
|10.25*               |  | Manufacture
      and Supply Agreement, dated December 20, 2002, between Genta Incorporated
      and Avecia Biotechnology Inc. (incorporated by reference to Exhibit 10.88
      to the Company's Annual Report on Form 10-K for the year ended December
      31, 2002, Commission File No. 0-19635)                 |                                   
|10.26                |  | Employment
      Agreement, dated as of December 1, 2002, between the Company and Raymond
      P. Warrell, Jr., M.D. (incorporated by reference to Exhibit 10.89 to the
      Company's Annual Report on Form 10-K/A for the year ended December 31, 2001,
      Commission File No. 0-19635)                         |                                   
|10.27                |  | Employment
      Agreement, dated as of August 5, 2003, between the Company and Loretta M.
      Itri, M.D. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly
      Report on Form 10-Q for the quarter ended June 30, 2003, Commission File
      No. 0-19635)                                    |                                   

73

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|Exhibit
      Number |  | Description of
      Document                                                                                                                                                                                                                                                                                       | Sequentially 
      Numbered Pages
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------
|                     |  |                                                                                                                                                                                                                                                                                                                     |                                   
|10.28*               |  | License
      Agreement dated August 1, 1991, between Genta Incorporated and the Trustees
      of the University of Pennsylvania (incorporated by reference to Exhibit
      99.1 to the Company's Current Report on Form 8-K filed on October 28, 2003,
      Commission File No. 0-19635)                        |                                   
|10.28A*              |  | Amendment
      to License Agreement, dated December 19, 2000, between Genta Incorporated
      and the Trustees of the University of Pennsylvania (incorporated by reference
      to Exhibit 99.2 to the Company's Current Report on Form 8-K filed on October
      28, 2003, Commission File No. 0-19635)       |                                   
|10.28AA*             |  | Second
      Amendment to License Agreement, dated October 22, 2003, between Genta Incorporated
      and the Trustees of the University of Pennsylvania (incorporated by reference
      to Exhibit 99.3 to the Company's Current Report on Form 8-K filed on October
      28, 2003, Commission File No. 0-19635) |                                   
|10.29                |  | Settlement
      Agreement and Release, dated October 22, 2003, between Genta Incorporated
      and the Trustees of the University of Pennsylvania (incorporated by reference
      to Exhibit 99.4 to the Company's Current Report on Form 8-K filed on October
      28, 2003, Commission File No. 0-19635)      |                                   
|21                   |  | Subsidiaries
      of the Registrant                                                                                                                                                                                                                                                                                |                                   
|23.1                 |  | Consent
      of Deloitte & Touche LLP                                                                                                                                                                                                                                                                              |                                   
|31.1                 |  | Certification
      by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002                                                                                                                                                                                                      |                                   
|31.2                 |  | Certification
      by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002                                                                                                                                                                                                      |                                   
|32.1                 |  | ertification
      by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                        |                                   
|32.2                 |  | Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       |                                   

74

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