SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

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

                      For Fiscal Year Ended March 31, 2003

                         Commission File Number 0-23252

                            IGEN INTERNATIONAL, INC.
               (Exact name of Company as specified in its charter)

            DELAWARE                                     94-2852543
  (State or other jurisdiction of              (IRS Employer Identification No.)
   incorporation or organization)

                 16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877
               (Address of principal executive offices) (Zip Code)

                                  301/869-9800
                (Company'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
                                                            $0.001 par value
                                                            ----------------
                                                             (Title of Class)

Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes __X___ No _______

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 the  Company'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. ________

Indicate by check mark whether the registrant is an accelerated filer (as
defined on Rule 12b-2) of the Exchange Act.
                              Yes ___X__ No_______


The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Company as of September 30, 2002, computed by reference to
the closing sale price of such stock quoted on the Nasdaq National Market, was
approximately $539,519,000

The number of shares outstanding of the Company's Common Stock as of June 13,
2003 was 23,763,107.

                       DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or parts thereof) are incorporated by reference into
the following parts of this Form 10-K. Certain information required in Part III
of this Form 10-K is incorporated from the Company's definitive Proxy Statement
relating to its 2003 Annual Meeting of Shareholders.

                                       1
<PAGE>


PART I

In addition to historical information,  this Form 10-K contains  forward-looking
statements  within the  meaning of the "safe  harbor"  provision  of the Private
Securities Litigation Reform Act of 1995. All statements that are not statements
of historical fact,  including  statements about markets and potential  markets,
market growth for diagnostic products, potential impact of competitive products,
our expectations  regarding  future royalties and revenue,  the potential market
for products in  development,  prospects for future business  arrangements  with
third  parties,  financing  plans,  the  outcome  of our  litigation  with Roche
Diagnostics  GmbH, which we refer to in this Form 10-K as the Roche  litigation,
the  description  our plans and  objectives for future  operations,  assumptions
underlying  such  plans  and  objectives,  the  need  for  and  availability  of
additional  capital and other  forward-looking  statements  included in ITEM 7 -
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" (MD&A), are forward-looking  statements.  The words "may," "should,"
"will," "expect," "could," "anticipate," "believe," "estimate," "plan," "intend"
and   similar   expressions   have  been  used  to   identify   certain  of  the
forward-looking   statements   in  this  Form   10-K.   We  have   based   these
forward-looking  statements on management's current expectations,  estimates and
projections  and they  are  subject  to a number  of  risks,  uncertainties  and
assumptions  which could cause actual  results to differ  materially  from those
described in the  forward-looking  statements.  The following  factors are among
those   that  may  cause   actual   results  to  differ   materially   from  our
forward-looking statements:

o    the outcome of the Roche litigation and our relationship with Roche
     Diagnostics GmbH, which we refer to in this Form 10-K as Roche;

o    our ability to develop and introduce new or enhanced products;

o    our ability to enter into new collaborations on favorable terms, if at all;

o    our ability to expand the commercialization of existing products;

o    the demand for rapid testing products in each of our markets;

o    our  ability  to expand  our  manufacturing  capabilities  or find a
     suitable manufacturer on acceptable terms or in a timely manner;

o    our ability to develop our selling, marketing and distribution
     capabilities;

o    our and our licensees' ability to obtain FDA and other governmental
     approvals for our and their clinical testing products;

o    the ability of our licensees to effectively develop and market products
     based on the technology we license to them;

o    domestic and foreign governmental and public policy changes, particularly
     related to health care costs, that may affect new investments and purchases
     made by customers;

o    availability of financing and financial resources in the amounts, at the
     times and on the terms required to support our future business;

o    rapid technological developments in each of our markets and our ability to
     respond to those changes in a timely, cost-effective manner;

o    protection and validity of patent and other intellectual property rights;

o    changes in general economic, business and industry conditions; and
                                       2
<PAGE>

o    the other factors  discussed below under the heading  "Business-Risk
     Factors" and elsewhere in this Form 10-K.

We disclaim any intent or obligation to update these forward-looking statements.

As used herein,  "IGEN", "we", "us" and "our" refer to IGEN International,  Inc.
and    its     subsidiaries.     ORIGEN(R)    refers    to    our    proprietary
electrochemiluminescence  technology.  ORIGEN,  IGEN,  M-SERIES,  TRICORDER  and
PATHIGEN(R)  are our  trademarks.  This  Form 10-K also  contains  brand  names,
trademarks  or  service  marks  of  other  companies,  and  these  brand  names,
trademarks or service marks are the property of those other holders.

ITEM 1.  BUSINESS

SUMMARY

We and our licensees develop, manufacture and market products based on our
proprietary electrochemiluminescence technology, which we call ORIGEN. We
believe that our ORIGEN technology, which permits the detection and measurement
of biological substances, offers significant advantages over competing detection
and measurement methods by providing a unique combination of speed, sensitivity,
flexibility and throughput in a single technology platform. Our ORIGEN
technology is incorporated into our and our licensees' instrument systems and
related consumable reagents, which are the fluids used in the performance of
tests, or assays, on such instrument systems. In addition, we offer assay
development and other services used to perform analytical testing.

Our strategy for our ORIGEN technology has been and continues to be based on
entering into license arrangements and collaborations with third parties that
can assist in our commercialization efforts while at the same time directly
developing and commercializing our own products.

LICENSE   ARRANGEMENTS  AND   COLLABORATIONS.   We  have  entered  into  license
arrangements  and  collaborations  with  established  health care  companies  to
commercialize  our  ORIGEN  technology  for  clinical  testing,   which  is  the
diagnostic  testing of patient  samples to measure  the  presence of disease and
monitor medical conditions. Our licensees have developed multiple products lines
for this  market  based  on our  ORIGEN  technology,  and  have  sold or  placed
approximately 9,000 ORIGEN based systems with customers  worldwide.  These sales
and placements  have been made  predominantly  by Roche,  which has an exclusive
license for our ORIGEN  technology for certain  segments of the clinical testing
market and is the world's  leading  provider of clinical  testing  products.  We
refer to our license agreement with Roche in this Form 10-K as the Roche license
agreement.   Roche  has  adopted  our  ORIGEN   technology  for  its  Elecsys(R)
immunodiagnostic product line. We receive royalties and contract fees from Roche
and our other licensees,  which accounted for 66% of our total revenue in fiscal
2003. For a discussion of our relationship  with Roche and the Roche litigation,
see "--License  Arrangements and  Collaborations--Roche",  "--Risk Factors-Roche
Litigation" and ITEM 3 -- "Legal Proceedings."

DIRECT COMMERCIALIZATION EFFORTS. We also directly develop and commercialize our
ORIGEN  technology.  We have  developed,  and continue to develop,  ORIGEN-based
products for the following  worldwide market. Many of our instruments and assays
have been and are being designed to serve customers across multiple markets.

o        BIODEFENSE AND INDUSTRIAL TESTING - We are commercializing our ORIGEN
         technology for use in the emerging markets for biodefense and
         industrial testing. The biodefense market includes products for the
         detection of bacteria, viruses and toxins that may pose a military or
         public health threat.
                                       3
<PAGE>


         Over the past year, we have worked with numerous departments within the
         Department of Defense (DOD) and other U.S. government agencies to
         develop ORIGEN-based products for the detection of biological agents
         such as anthrax, staphylococcus enterotoxin B and botulinum toxin,
         among others. We are also commercializing our ORIGEN technology for use
         in the emerging industrial market for the detection of foodborne and
         waterborne disease causing pathogens. We have begun to sell our first
         products for this market, the PATHIGEN panel of tests for E. coli O157,
         Salmonella, Campylobacter and Listeria, which we sell primarily as a
         quality control test method to food producers, food processors and
         contract laboratories for the food industry.

o        LIFE SCIENCE - We are commercializing our ORIGEN technology for use in
         drug discovery and development that is performed by pharmaceutical and
         biotechnology companies, universities and other research organizations.
         Certain of our ORIGEN-based systems are used by pharmaceutical and
         biotechnology companies in all phases of drug discovery, including:

                  o        validating targets identified through genomics;

                  o        screening of large numbers of compounds generated
                           through combinatorial chemistry;

                  o        re-testing and optimization of lead compounds; and

                  o        clinical trial testing of drug candidates.

         We believe the ORIGEN-based systems used in this market provide a
         number of advantages relative to other drug discovery technologies,
         including enhanced sensitivity and greater ease and speed of assay
         formatting.

o  CLINICAL  TESTING - We are  developing  our ORIGEN  technology  to be used in
   certain fields in the clinical testing market,  particularly to perform tests
   in decentralized  sites  outside  of central  hospital  laboratories  and
   clinical reference laboratories. Our present strategy is to focus our product
   development efforts on  patient  care  centers  such as  physicians' offices,
   ambulatory  clinics, hospital emergency rooms,  surgical and intensive care
   units, hospital satellite laboratories  and nurses'  stations. We believe our
   ORIGEN  technology  permits development  of a system  that can  provide
   accurate  results  to a  physician rapidly,  thereby  permitting  the
   physician  to  make a more  timely  decision regarding the patient's course
   of treatment.

We were incorporated in California in 1982 as IGEN, Inc. and on November 19,
1996, IGEN, Inc. merged into IGEN International, Inc., a newly formed Delaware
corporation. Our executive offices are located at 16020 Industrial Drive,
Gaithersburg, Maryland 20877. Our Internet website is located at
http://www.igen.com. Information contained on our website is not part of this
Form 10-K or any other filing which may incorporate by reference this Form 10-K.
We provide to the public on our website, free of charge, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) of the
Securities Exchange Act of 1934, as amended, as soon as practicable after such
material is filed electronically with, or furnished to, the Securities and
Exchange Commission.

ORIGEN TECHNOLOGY

ORIGEN is a proprietary technology based on electrochemiluminescence. ORIGEN
permits the detection and measurement of a biological substance within a given
sample.

It works by labeling the targeted substance within a sample using a compound and
binding the newly labeled substance to magnetizable beads. The beads can then be
separated  from the rest of the sample using a magnet.  When this newly  labeled
substance is stimulated,  the label emits light at a particular wavelength.  The
light emission can be measured with a high degree of accuracy.
                                       4
<PAGE>

The level of intensity of the light emitted depends on how much of the
label is present, which in turn is determined by how much of the targeted
substance is present for the label to attach itself to. Thus, the light
emissions permit the accurate detection and measurement of the targeted
substance. ORIGEN technology provides a single basic format that can be used to
conduct a multitude of tests, including immunoassay tests, nucleic acid probe
tests and clinical chemistry tests. The ORIGEN technology is protected by
patents in the United States and internationally.

We believe that ORIGEN technology offers a unique combination of speed,
sensitivity, flexibility and throughput relative to existing technologies.
ORIGEN technology also generally lowers the cost of diagnostic procedures by
reducing the number of steps required in preparing a sample for testing. Because
the ORIGEN system directly measures electrochemiluminescence, and does not
require the use of enzymes in the detection process as is common in competing
systems, the ORIGEN system provides a simplified and more stable format that can
be used to test a broad range of substances. The ORIGEN-based systems can be
automated to provide in a uniform format a large number of immunoassay, nucleic
acid probe and clinical chemistry tests. The essential component of an
ORIGEN-based system is the flow cell, which contains a magnet to separate the
labeled substance from the sample being tested, and a light detector to measure
the electrochemiluminescence. The ORIGEN flow cell has been designed so that it
can be incorporated into a variety of instruments, ranging from large central
laboratory random-access systems to small batch systems.

The major features and benefits of ORIGEN-based systems are:

o        Simple Testing Format:  reduces time and labor in performing a test or
         series of tests.  Complete automation of testing process is possible.

o        Flexibility:  enables a single instrument to perform immunodiagnostic
         tests on large and small molecules and to perform DNA and RNA tests.

o        Cost:  reduces the cost per test by minimizing the amount of expensive
         reagents needed and the number of steps required in preparing a sample
         for testing.

o        Speed:  reduced time from assay set-up to detection produces rapid
         results.  Enables high sample throughput.

o        Sensitivity:  allows detection of targeted specimens at very low
         concentrations.

o        Precision:  provides highly-reproducible measurements.

o        Label Stability: extends the shelf-life of the reagent that contains
         the label used in testing. Improves measurement accuracy.

ORIGEN-BASED PRODUCTS AND MARKETS

We believe that our ORIGEN technology is well suited for the development and
commercialization of families of instruments that can be used in all of our
target markets. We believe the technology will permit virtually all immunoassay
and nucleic acid tests to be performed on similar instrumentation using the same
detection method.

The following table summarizes our and our licensees ORIGEN-based products and
development programs. See "--License Arrangements and Collaborations" for a
description of the commercial arrangements and license agreements we have
entered into with our licensees and collaborators.
                                       5
<PAGE>

<TABLE>
<CAPTION>



                                                                     CUSTOMER                               COMMERCIAL
            MARKET                       PRODUCT                   APPLICATION               STATUS           RIGHTS
            ------                       -------                   -----------               ------           ------

<S>                            <C>                         <C>                           <C>                   <C>
BIODEFENSE AND
INDUSTRIAL TESTING MARKETS     ORIGEN Detection System
                               and Detection of Bacteria,
                               Reagents                    Viruses and Toxins            Product Sales         IGEN


                               M-SERIES (M-1M Analyzer)    Detection of Food and
                                                           Beverage Contaminants and
                                                           Bacteria, Viruses and Toxins    Pre-Launch          IGEN

                               PATHIGEN Panel of Tests    Detection of Food and
                              (ORIGEN Detection System)   Beverage Contaminants         Product Sales          IGEN


LIFE SCIENCE MARKET            M-SERIES (M384 Analyzer and
                               Reagents                    Drug Discovery / Development  Product Sales         IGEN


                               M-SERIES (M-1R Research
                               Analyzer)                   Drug Discovery / Development  Product Sales         IGEN


                               ORIGEN Detection System and
                               Reagents                    Drug Discovery / Development  Product Sales         IGEN


                               Cell Culture Reagents       Research                      Product Sales         IGEN

                               NucliSens/NASBA QR          Nucleic Acid Probe Tests      Product Sales      BioMerieux

                               Sector HTS/Sector PR        High Throughput Drug                             Meso Scale
                                                           Discovery/ Development        Product Sales      Diagnostics



CLINICAL TESTING MARKET
Central Hospital/Clinical
Reference Laboratory Systems   Elecsys 2010/1010           Immunoassay Tests             Product Sales         Roche

                               MODULAR ANALYTICS E170      Immunoassay Tests             Product Sales         Roche

                               NucliSens/NASBA QR          Nucleic Acid Probe Tests      Product Sales      BioMerieux

                               Picolumi                    Immunoassay Tests (Japan)     Product Sales     Eisai (Japan)


                               Elecsys 2010/1010           Physicians' Office Lab
Patient Care Systems                                       Immunoassay Tests             Product Sales       IGEN (1)


                               M-SERIES (M-1M Clinical
                               Analyzer)                   Portable Physicians'
                                                           Office Lab / Hospital         Development         IGEN

</TABLE>

(1) IGEN is currently servicing customers pursuant to court judgment issued in
the Roche litigation described in "--Risk Factors--Roche Litigation" and ITEM 3
-- "Legal Proceedings".
                                       6
<PAGE>

BIODEFENSE AND INDUSTRIAL TESTING PRODUCTS AND MARKET

Our ORIGEN technology is being commercialized in the emerging market for
biodefense which involves the detection of bacteria, viruses and toxins that may
pose a military or public health threat, as well as for the detection of
foodborne and waterborne disease causing pathogens. Products based on ORIGEN
technology are already being used in several biodefense programs for homeland
security, including by the DOD. In fiscal 2003, our product sales in the
biodefense and industrial testing markets were $4.6 million. We believe there
will be an increasing opportunity to use our ORIGEN technology as a biodefense
tool in governmental and military organizations around the world, as well as in
public health. There are no dominant competitors and no ideal product solution
to the emerging testing requirements.

The biological test reagents being used by the DOD are for the detection of
agents or toxins in environmental samples. U.S. Army scientists at Fort Detrick,
Maryland have developed ORIGEN-based biological assays designed to measure
specific agents and toxins. This technology platform provides the U.S. military
with products for the detection of these agents in environmental samples. We
have a contract with the DOD for the production of these tests. This contract
provides for product sales at the election of the government of up to a total of
$23 million over four years, with approximately $7 million of product sales
through June 2004. For each contract year after June 2004, the DOD, at its
option, may elect to purchase additional products from us but has no obligation
to do so. These products will be used by various laboratories and field sites of
the DOD, as well as other U.S. government agencies. For risks related to our
contracts with the government, see "--Risk Factors--Regulatory and Government
Contract Risks."

Over the past year, we have worked with the DOD and other U.S. government
agencies to expand the use of ORIGEN-based products in a variety of Homeland
Security and biodefense initiatives for the detection of biological agents such
as anthrax, staphylococcus enterotoxin B, and botulinum toxin, among others.
These early stage initiatives include:

         o       The Automated Biological Agent Testing System program (ABATS)
                 at the Edgewood Chemical and Biological Center (ECBC), Aberdeen
                 Proving Ground. ECBC, in conjunction with IGEN and Beckman
                 Coulter, is integrating an M-SERIES system with Beckman
                 Coulter's SAGIAN(TM) and Biomek(R) FX lab automation systems to
                 automate sample preparation and plate handling for ORIGEN
                 immunoassays;

         o        Our cooperative research and development agreement with the
                  U.S. Army Medical Research Institute of Infectious Diseases
                  for the development of tests for the detection of biological
                  toxins;

         o       The  development  of a botulinum  toxin test for the Centers
                 for Disease  Control and  Prevention (CDC);

         o       Our contract with the DOD to develop assays for the detection
                 of select agents in food; and

         o       Integration of ORIGEN technology into the Air Force biological
                 testing program.

These initiatives have not provided us with significant revenues to date.

The ORIGEN Detection System has been important for our developments with the
U.S. military and the initial sales of ORIGEN technology to our biodefense
customers. We plan to further develop ORIGEN-based products for the biodefense
market, such as the M-SERIES M-1M analyzer.

                                       7
<PAGE>



These plans include an instrument system that can be both miniaturized and
"ruggedized" for use by soldiers in a variety of settings, "first responders"
such as fire, police and ambulatory medical workers, hospitals, food processors,
field inspectors from the Environmental Protection Agency (EPA), U.S. Department
of Agriculture, and Food and Drug Administration (FDA), and border patrol
inspectors.

In the industrial testing market, we have commenced sales of our PATHIGEN panel
of food pathogen tests to food producers, food processors and contract
laboratories for the food industry. This panel includes tests for E. coli 0157,
Salmonella, Campylobacter and Listeria. These tests are used as a quality
control method for testing food and beverage products, such as meat used in
hamburger, for bacteria that have caused numerous outbreaks of gastrointestinal
and kidney-related disease worldwide. The PATHIGEN tests are semi-automated and
create a permanent record of test results. According to published studies by the
USDA and an independent analytical laboratory in the United Kingdom, the
PATHIGEN E. coli O157 test is significantly more sensitive than conventional
tests commonly used to screen food.

Major food and beverage producers, as well as contract testing laboratories, are
the primary targets to become users of the PATHIGEN test panel. We believe the
major advantage of the PATHIGEN tests are their ability to perform in complex
samples, like hamburger meat, in less time, and with greater sensitivity than
other available methods.

LIFE SCIENCE PRODUCTS AND MARKET

We provide products and services for the discovery and development of new drugs
to the life science market. Our commercialization efforts in this market center
on the M-SERIES systems and the ORIGEN Detection System. In fiscal 2003, our
life science product sales were $11.9 million.

Advances in the field of combinatorial chemistry, which is based on the effects
of combining different compounds to make potentially new drugs, and in the field
of biotechnology have revolutionized drug discovery. Pharmaceutical and
biotechnology companies have dramatically expanded their libraries of potential
drug candidates. Researchers have completed sequencing of the human genome,
which has greatly increased scientists' understanding of how diseases work and
the causes of disease, which in turn is expected to provide novel targets for
fighting disease.

In order to exploit these advances, pharmaceutical and biotechnology companies
are re-engineering their drug development processes. An example of this is the
use of automation and the latest advances in technology to accelerate the
screening of existing drug compounds against the disease targets of interest.
Researchers are attempting to develop new drug screening procedures that are
faster and more efficient while reducing costs and processing larger numbers of
samples.

After identifying disease targets and synthesizing chemical compounds,
researchers attempt to find compounds that are drug candidates. This drug
discovery process involves developing assay to determine whether a particular
compound has the desired effect on a target and then screening compounds using
that assay. Compounds of interest from the screening process become drug
candidates, which undergo further testing as part of "lead optimization". These
drug candidates are then subjected to pre-clinical and clinical trials before
becoming a drug.

M-SERIES SYSTEMS. We believe that the need of pharmaceutical and biotechnology
companies to rapidly identify therapeutic targets, screen thousands of compounds
per day against those targets; and then optimize the leads has created new
opportunities for our ORIGEN technology systems in the pharmaceutical and
biotechnology industry. We are selling two M-SERIES instruments - the M384 and
the M-1R - each of which build on the applications of the ORIGEN Detection
System.

                                       8
<PAGE>



These systems are compatible with multi-well microplates that are commonly used
in drug discovery and development laboratories and can be fully integrated with
many existing automation and robotic systems. They were designed to enable
researchers to test new biological targets against potential drug compounds with
higher levels of accuracy and specificity. We believe they may also perform
highly sensitive tests more quickly at a lower cost and this may permit a drug
candidate to move more rapidly into the later stages of drug development,
clinical trials and ultimately into the market.

We believe that the sensitivity and accuracy of these M-SERIES systems create
advantages over many competitive detection technologies. They allow the user (1)
to quickly adapt the ORIGEN technology to develop and then perform the specific,
desired assays, compared to the longer periods required by other existing
competing technologies, (2) to reduce the use of rare components, such as
proprietary compounds, antibodies or clinical trial samples, that must be used
to run assays and (3) to be more confident in the positive and negative results
the tests produce. Our expertise in developing assays allows us to assist
customers in determining whether a proposed assay is feasible and to assist with
the development and performance of assays that comply fully with the FDA's Good
Manufacturing Practices (GMP).

Our M-SERIES life science customers include many of the major pharmaceutical and
biotechnology companies in the United States and Europe. In addition to the
M-SERIES systems we sell or place, we typically receive commitments from our
customers for purchases of proprietary reagents. We also offer M-SERIES users
custom assay development services based on our existing library of more than 300
assays. We market the M-SERIES product family directly through our sales,
marketing and applications team dedicated to the life science market.

The newest product in the M-SERIES family is the M-1R, which was introduced to
the market in September 2002 and has commenced commercial shipments during the
spring of 2003. The M-1R was designed as a smaller and lower cost M-SERIES
system for use in drug discovery and development, as well as for basic biology
research such as the study of general biological processes, proteomics and the
understanding of the molecular basis of disease. In addition to pharmaceutical
and biotechnology researchers, the M-1R may be used by scientists at academic
and government research institutions. Academic customers typically work from
small research grants and a lower priced single detector system that works with
the standard microplate format is expected to be an alternative to the use of
radioisotopic assays or less sensitive enzyme-based methods. ORIGEN technology,
with its mix and read assay format and high sensitivity should allow researchers
to perform multiple experiments more quickly.

ORIGEN DETECTION SYSTEM. Our strategic links with pharmaceutical and
biotechnology companies and with customers in government and academic research
centers were initially forged with the launch of the ORIGEN Detection System.
The ORIGEN Detection System is the precursor to the M-SERIES product family and
established ORIGEN as a powerful detection technology for applications in life
science research.

CLINICAL TESTING PRODUCTS AND MARKET

One of the markets that we have and will continue to target by developing and
marketing products based on our ORIGEN technology is the clinical testing
market. The clinical testing market utilizes in vitro diagnostic testing, which
is the process of analyzing blood, urine and other samples to screen for,
monitor and diagnose diseases and other medical conditions or to determine the
chemical and microbiological constituents of the samples.

This market is composed of various areas of clinical testing,  including testing
by central  hospital  laboratories,  clinical  reference  laboratories and blood
banks,  as well as testing at  decentralized  sites outside of central  hospital
laboratories  and clinical  reference  laboratories  such as hospital  satellite
laboratories and at physicians' offices,  ambulatory clinics, hospital emergency
rooms,  surgical  and  intensive  care  units and  nurses'  stations.  A general
characteristic  of each of these sites is that they are at or near  patient care
centers.

                                       9
<PAGE>


HOSPITAL/REFERENCE LABORATORY SYSTEMS. One of the significant applications of
our ORIGEN technology is in large, highly automated clinical immunodiagnostic
systems used in central hospital laboratories, clinical reference laboratories
and blood banks. These laboratories currently constitute the vast majority of
the clinical diagnostic market. To serve these laboratories, systems must be
able to perform a wide variety of immunodiagnostic tests on a large number of
samples reliably, cost-effectively and quickly. We and our licensees believe
that systems based on the ORIGEN technology are well-suited to serve this market
and may surpass other systems currently available in central hospital
laboratories, clinical reference laboratories and blood banks in terms of speed,
cost effectiveness and ease of use.

Roche, a company that has an exclusive license to our technology covering
certain aspects of this market, presently sells three ORIGEN-based immunoassay
systems for the central hospital and clinical reference laboratory markets: the
Elecsys 1010, Elecsys 2010 and the MODULAR ANALYTICS E170. The Elecsys 2010 is
designed to perform multiple screenings in a random-access mode, while
simultaneously handling tests performed on clinical samples for which immediate
results are needed, without interfering with the system workflow. The Elecsys
2010 is designed so that it can be integrated with Roche's clinical chemistry
systems. The Elecsys 1010 is a system designed for central hospital and clinical
reference laboratory customers that have a lower output requirement. In
addition, Roche has developed a third instrument system, the MODULAR ANALYTICS
E170, which incorporates ORIGEN technology. The E170 is part of Roche's new
MODULAR system that allows laboratories to create customized workstations and
has the features of the existing Elecsys line together with expanded throughput
capabilities.

Roche presently offers a panel of approximately 50 assays, with the Elecsys and
E170 systems, including assays for infectious diseases, anemia, cancer, heart
attacks, thyroid disease and fertility/pregnancy. Roche continues to develop
additional assays that are expected to be introduced to the market in the
future. We work with Roche to develop a limited number of assays, and Roche
reimburses us one-half of our development costs.

See "--Risk Factors - Roche Litigation" and ITEM 3 - "Legal Proceedings" for a
description of the Roche litigation.

PATIENT CARE SYSTEMS. We are independently developing ORIGEN-based products that
can be used to perform immunodiagnostic tests and chemistry tests outside of
central hospital laboratories and clinical reference laboratories. This market
includes patient care centers such as physicians' offices, ambulatory clinics,
hospital emergency rooms, surgical and intensive care units, hospital satellite
laboratories and nurses' stations. Physicians, patients and third-party payers
have created a demand for bringing laboratory testing closer to the patient in
order to provide the medical practitioner with faster results and, in turn,
prompt feed-back to the patient. Most immunodiagnostic systems for individual
physicians and group practices have had limited market penetration because of
the lengthy turnaround time for test results, the need for skilled labor in
performing the tests and the high cost of tests. We believe that the emergence
of simple and more accurate and cost-effective diagnostic products is shifting
the site of in vitro diagnostic testing from clinical reference and central
hospital laboratories to alternative sites.

We believe that significant demand exists for clinical diagnostic products that
reduce turnaround time and cost. Our patient care system is being designed to
create tests that can provide accurate results to a physician rapidly, thereby
permitting the physician to make a more timely decision regarding the patient's
course of treatment.

Our ORIGEN technology permits development of a system that is compact and simple
to operate at a low cost per test. The initial clinical  ORIGEN-based  system we
are  developing is named the M-1M Clinical  Analyzer and is part of our M-SERIES
family of products  currently used in the life science market. The broad menu of
immunoassays  that we, and  companies  working with us,  developed for the first
generation of ORIGEN-based  products can be performed on, and are expected to be
available  for use with,  future  ORIGEN-based  systems.  We are  exploring  and
negotiating    collaborative    business    arrangements   to   accelerate   the
commercialization   of   ORIGEN-based   products  for   multiple   point-of-care
applications.

                                       10
<PAGE>


We distribute clinical assays to physicians' office laboratories (POL's) in the
United States that utilize Roche's Elecsys systems. In fiscal 2003, we generated
$2.5 million from product sales to these customers; however, under the final
order of judgment issued in the Roche litigation, the U.S. District Court for
the District of Maryland enjoined Roche from marketing, selling, or distributing
its Elecsys products outside of Roche's licensed field of use, including to
POL's but did not require Roche to renew existing POL contracts. We and Roche
signed an agreement under which all of Roche's POL customers in the United
States were transferred to us, and Roche provides us with reagent supply for
these customers pending final resolution of the Roche litigation. We anticipate
that this portion of our business will decrease in size as Roche's existing POL
contracts expire. We do not know whether Roche will renew POL contracts as they
expire, and accordingly, whether our revenues in this area will decrease in the
future. See "--Risk Factors - Roche Litigation" and ITEM 3 - "Legal Proceedings"
for a description of our litigation with Roche. See also ITEM 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

LICENSE ARRANGEMENTS AND COLLABORATIONS

We have entered into license arrangements and collaborations with established
diagnostic and pharmaceutical companies. Through these license arrangements and
collaboration relationships, we grant licenses to our licensees and
collaboration partners (sometimes on an exclusive basis) and in return we
receive license fees and product development resources. In addition, we receive
ongoing royalties from our licensees' and collaborators' product sales. For the
three fiscal years ended March 31, 2003, 2002 and 2001 revenue from licensees
and collaborators, which is represented as product-based royalty income and
contract revenue, totaled $37.5 million (66% of total revenue), $27.5 million
(65% of total revenue) and $20.4 million (65% of total revenue), respectively.

ROCHE DIAGNOSTICS GMBH. In 1992, we entered into the Roche license agreement
with Roche, the largest worldwide manufacturer of diagnostic equipment and
supplies, to exclusively commercialize ORIGEN-based clinical immunoassay and
nucleic acid probe systems in certain defined fields. From fiscal year 1992
through fiscal year 2003, we generated a total of approximately $154 million in
license fees, royalties and assay development fees from Roche.

Roche currently markets three ORIGEN-based systems together with a test menu of
approximately 50 different assays, including tests for infectious diseases,
anemia, cancer, heart attacks, thyroid disease and fertility/pregnancy. Roche
has placed or sold approximately 9,000 Elecsys and E170 systems worldwide.

In 1997,  we filed a lawsuit  in the U.S.  District  Court for the  District  of
Maryland, which we refer to as the District Court, against Roche and in February
2002, the District Court issued a final order of judgment  against Roche.  Roche
appealed  certain  aspects of the final order of  judgment to the U.S.  Court of
Appeals for the Fourth  Circuit,  which we refer to as the Appellate  Court.  We
anticipate  that the decision of the Appellate Court will be issued in mid-2003.
We  have  previously  advised  Roche  that  the  Roche  license  agreement  will
automatically terminate in the event the Appellate Court affirms that portion of
the final order of judgment  holding  that Roche  materially  breached the Roche
license agreement. In the event the Roche license agreement is terminated, Roche
will no longer be  authorized  to  utilize  ORIGEN  technology  to  manufacture,
market, or sell products, including its Elecsys / E170 diagnostics product line.
See "- Risk Factors - Roche  Litigation" and ITEM 3 - "Legal  Proceedings" for a
description  of our  litigation  with  Roche.  We  recorded  royalty  income and
contract fees from Roche of $36.2 million (64% of total revenue),  $26.3 million
(63% of total  revenue) and $15.6  million (50% of total  revenue) for the three
fiscal years ended March 31, 2003, 2002 and 2001, respectively.

                                       11
<PAGE>



BIOMERIEUX. We have an agreement with BioMerieux Inc., which we refer to as
BioMerieux (formerly Organon Teknika B.V.), for development and worldwide
commercialization of ORIGEN-based nucleic acid probe systems on a co-exclusive
basis for certain segments of the clinical testing market and on a non-exclusive
basis for certain segments of the life science market. BioMerieux specializes in
hospital and blood bank products and has combined its proprietary nucleic acid
sequence based amplification technology with ORIGEN technology and markets the
NucliSens line of diagnostic virology products together with test kits for the
detection of HIV-1 RNA and CMV (cytomegalovirus). We have received $20 million
under our agreement with BioMerieux and currently receive royalties on product
sales. Our agreement with BioMerieux extends until the expiration of the patents
we license to them.

EISAI CO., LTD. We have an agreement with Eisai Co., Ltd., which we refer to as
Eisai, a leading Japanese pharmaceutical company, under which Eisai is licensed
to manufacture and market a class of ORIGEN-based diagnostic systems for the
clinical testing market in Japan on an exclusive basis. Eisai introduced its
first ORIGEN-based product under the trade name Picolumi during 1997, and we
receive royalties on product sales. Eisai is currently marketing the Picolumi
product with assays focused primarily in the area of cancer diagnosis. We
recently executed an extension of our agreement with Eisai which extends the
term of the agreement to May 10, 2010, and provides for royalty payments after
the expiration date at a reduced royalty rate.

MESO SCALE DIAGNOSTICS, LLC. Meso Scale Diagnostics,  LLC., which we refer to as
MSD, is a joint venture formed by Meso Scale Technologies,  LLC., which we refer
to  as  MST,  and  us  in  1995.  MSD  was  formed  for  the   development   and
commercialization  of products  utilizing  a  proprietary  combination  of MST's
multi-array  technology  together with our technology,  which we refer to as the
Research  Program.  MST is a  company  established  and  wholly-owned  by  Jacob
Wohlstadter,  the son of our Chief Executive Officer. In August 2001, we amended
our joint venture  agreement and certain  license and other  agreements with MSD
and MST in order to continue  the MSD joint  venture and  entered  into  various
related agreements.  We refer to these amendments and agreements entered into in
August 2001 as the MSD  agreements.  An  independent  committee  of our Board of
Directors,  with the advice of independent advisors and counsel,  negotiated and
approved the MSD agreements.

MSD  manufactures  and markets two  instrument  systems,  the Sector HTS and the
Sector PR, both of which  combine our ORIGEN  technology  and MST's  multi-array
technology.  The Sector HTS is an ultra high  throughput  drug discovery  system
engineered for  applications  such as high throughput  screening and large scale
proteomics. The Sector PR is a smaller system designed for benchtop applications
such as assay development,  research in therapeutic areas,  cellular biology and
medium  throughput  screening.  MSD  also  manufactures  and  markets  a line of
proprietary reagents,  assays and plates that are used on these systems. Product
sales  commenced in October 2002,  and during the year ended March 31, 2003, MSD
had product sales of $3.2 million and a net loss of $18.2 million.

Under the MSD agreements, our funding commitment is based on an annual budget of
MSD approved by an independent committee of our Board of Directors.  Our funding
commitment may be satisfied in part through in-kind  contributions of scientific
and administrative personnel and shared facilities.  An independent committee of
our Board of Directors  approved  funding for MSD for the period from January 1,
2003 to November 30, 2003 in an amount of $20.6 million,  subject to a permitted
variance  of  fifteen  percent.  As of March 31,  2003,  our  remaining  funding
commitment to MSD was $17.0 million. In addition, prior to November 30, 2003, we
would also pay approximately $3.7 million to MSD related to the permitted budget
variance from prior years. For the years ended March 31, 2003, 2002 and 2001, we
made  total  contributions  to MSD of  $20.5  million,  $19.6  million  and $8.3
million, respectively.

The MSD joint venture agreement will expire on November 30, 2003, unless
renewed. Following the termination or non-renewal of the joint venture
agreement, many of our licenses and other arrangements with MSD and MST will
continue indefinitely.

                                       12
<PAGE>


Under the terms of the MSD agreements, we have granted to MSD a worldwide,
perpetual, exclusive license (with certain exceptions) to our technology for use
in MSD's Research Program, which is more fully described in the MSD agreements.
If we cease to be a member of the joint venture, we will receive royalty
payments from MSD on all products developed and sold by MSD using our patents.
MST holds a worldwide, perpetual, non-exclusive sublicense from MSD for certain
non-diagnostic applications of our technology. We will receive royalty payments
from MST on any products developed and sold by MST using our patents. During the
term of the MSD joint venture, MSD is our exclusive means of conducting the
Research Program and we are obligated to refrain from developing or
commercializing any products, processes or services that are related to the
Research Program in the diagnostic field or to MSD's research technologies as
described in the MSD agreements, subject to certain exceptions. If the MSD joint
venture expires or is terminated for any reason, we have agreed not to use the
improvements granted to us by MSD to compete with MSD in its field and we have
agreed not to directly or indirectly develop or commercialize products,
processes or services related to the Research Program in the diagnostic field or
to MSD's research technologies.

For more information about the MSD agreements and our relationship with MSD, see
ITEM 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations", and ITEM 13 - "Certain Relationships and Related
Transactions."

PATENTS AND OTHER PROPRIETARY RIGHTS

We pursue a policy of seeking patent protection to preserve our proprietary
technology and our right to capitalize on the results of our research and
development activities and, to the extent it may be necessary or advisable, to
exclude others from appropriating our proprietary technology. We also rely on
trade secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain our competitive position.

We prosecute and defend our intellectual property, including our patents, trade
secrets and know-how. We regularly search for third-party patents in our fields
of endeavor, both to shape our own patent strategy as effectively as possible
and to identify licensing opportunities.

As of March 31, 2003, we owned 69 issued U.S. patents and had 22 pending U.S.
patent applications in the diagnostics field. As of that date, we owned 126
additional issued patents outside of the United States and had 71 pending patent
applications outside of the U.S. in the diagnostics field. These patents and
patent applications are important to our business and cover various aspects of
our ORIGEN technology and products, as well as the methods for their production
and use. The pending patent applications may not be granted and others may
challenge our existing patents. Our business could be harmed if we lose the
patent protection we currently enjoy or if our pending patents are not issued.

Our patents begin to expire in 2005; however, patent coverage for our ORIGEN
technology continues through 2018. We continue to protect our technology with
new patent filings, which could further extend our patent coverage.

GOVERNMENT REGULATION

The research and development, manufacturing, marketing, sale and distribution of
both existing and future products based on our ORIGEN technology are subject to
comprehensive government regulation. Government regulation by various federal,
state, and local agencies, which includes detailed inspection of, and controls
over, research and laboratory procedures, safety, clinical investigations, and
manufacturing, marketing, sampling, labeling, distribution, record keeping,
storage, and disposal practices, substantially increases the time, difficulty
and costs incurred in obtaining and maintaining the approval to market newly
developed and existing products.

                                       13
<PAGE>



In particular, government regulatory actions can result in delay in the release
of our and our licensees' products, seizure or recall of our or our licensees'
products, suspension or revocation of the authority necessary for their
production and sale, and other civil or criminal sanctions.

Continuing studies of the utilization, safety, and efficacy of our or our
licensees' products and their components are being conducted by industry,
government agencies and others. Such studies, which employ increasingly
sophisticated methods and techniques, can call into question the utilization,
safety, and efficacy of products previously marketed by us or our licensees and
in some cases have resulted, and may in the future result, in the discontinuance
of marketing of such products.

International sales of products by us and our licensees are also subject to a
significant degree of government regulation, including, for example,
international standards (such as those set by the International Organization for
Standards), European Union directives and other country-specific rules and
regulations. For example, many countries, directly or indirectly through
reimbursement limitations, control the cost of most clinical testing products.
Furthermore, many developing countries limit the importation of raw materials
and finished products. International regulations may also have an impact on U.S.
regulations.

Our regulatory strategy is to pursue development and marketing approval of
products worldwide, either independently or through licensees. We intend to seek
input from the regulatory authorities at each stage of the clinical process to
facilitate appropriate and timely clinical development. The clinical development
of certain products may be the responsibility of our licensees.

Biodefense and Food Testing Products

Our biodefense products are subject to stringent federal, state, local and
foreign laws, regulations and policies governing their manufacture, storage,
sale, distribution, and export. In addition, the U.S. government has been, and
is expected to continue, to adopt new laws, regulations, and rules governing the
research, development, procurement of pathogens that may be used in a
bioterrorist attack or other agents that may cause a public health emergency and
to permit government inspection and oversight of facilities engaged in the
research, development, manufacture or sale of certain select agents. Under
several statutes recently enacted, the Department of Homeland Security, FDA,
Department of Commerce and various other regulatory authorities have been
charged with establishing and implementing programs designed to enhance the
security of food and water supplies, as well as the environment, from terrorist
attacks. These legislative initiatives include recordkeeping, registration,
notification, import, export, manufacturing and various other compliance
measures. This is a rapidly evolving regulatory landscape and many of the
possible rules and regulations have not yet been proposed or adopted. We may be
required to incur significant costs to comply with such laws and regulations in
the future, and such laws or regulations may have a material adverse effect upon
our ability to do business.

Research Products

Our products that are being sold for research use only, including the M-SERIES
systems used in the life sciences market, must be properly labeled as such, as
required by the FDA, but do not generally require FDA approval prior to
marketing. The FDA has begun to impose new distribution requirements and
procedures on companies selling research-only products, such as the requirement
that the seller receive specified certifications from its customers as to the
customers' intended use of the product. We expect that the FDA will develop
additional restrictions of this nature that may adversely affect us.

                                       14
<PAGE>



Clinical Testing Systems

The manufacture, distribution and sale in the United States of our or our
licensees' products for clinical testing purposes will require prior
authorization by the FDA. The FDA and similar agencies in foreign countries have
promulgated substantial regulations that apply to the testing, marketing, export
and manufacturing of clinical testing products. To obtain FDA approval of a new
product for clinical testing purposes, we or our licensees will in most cases be
required to submit proof of the safety and efficacy of the product, or its
"substantial equivalence" to previously marketed products. Such proof typically
entails clinical and laboratory tests. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
time consuming.

Significant difficulties or costs may be encountered in order to obtain FDA
approvals and that could delay or preclude us or our licensees from marketing
products for clinical testing purposes. Furthermore the FDA may request
additional data following the original submission. Delays imposed by the
governmental approval process may materially reduce the period during which we
or our licensees will have the exclusive right to exploit our products or
technologies.

Our and our licensees' clinical testing products are regulated as medical
devices. The Roche Elecsys clinical diagnostic products have received FDA
approval. Prior to entering commercial distribution, all medical devices must
undergo FDA review under one of two basic review procedures depending on the
type of assay: a Section 510(k) pre-market notification (510(k)) or a pre-market
approval application (PMA). 510(k) notification is generally a relatively simple
filing submitted to demonstrate that the device in question is "substantially
equivalent" to another legally marketed device. Approval under this procedure
may be granted within 90 days if the product qualifies, but generally takes
longer, and may require clinical testing. When the product does not qualify for
approval under the 510(k) procedure, the manufacturer must file a PMA to show
that the product is safe and efficacious, based on extensive clinical testing
among several diverse testing sites and population groups, and shows acceptable
sensitivity and specificity. This procedure requires much more extensive
pre-filing testing than does the 510(k) procedure and involves a significantly
longer FDA review after the date of filing. In responding to a PMA, the FDA may
grant marketing approval, may request additional information, may set
restrictive limits on claims for use or may deny the application altogether.

After product approvals have been received, they may still be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
after the product reaches the market. The FDA may require surveillance programs
to monitor the effect of products that have been commercialized, and has the
power to prevent or limit further marketing of the products based on the results
of these post-marketing programs.

In addition to obtaining FDA approval for each product, under the PMA
guidelines, we or our licensees must seek FDA approval of the manufacturing
facilities and procedures. The FDA will also inspect clinical testing companies
on a routine basis for regulatory compliance with its GMP.

Our and our licensees' products for the physician's office market will be
affected by the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which
is intended to insure the quality and reliability of medical testing and may
have the effect of discouraging, or increasing the cost of, testing in
physicians' offices. The regulations establish requirements for laboratories in
the area of administration, participation in proficiency testing, patient test
management, quality control, personnel, quality assurance and inspection. Under
these regulations, the specific requirements that a laboratory must meet depend
upon the complexity of the tests performed by the laboratory. Laboratory tests
are categorized as either waived tests, tests of moderate complexity or tests of
high complexity. Laboratories that perform either moderate or high complexity
tests must meet standards in all areas. The major difference in requirements
between moderate and high complexity testing relates to quality control and
personnel standards. Quality control standards for moderate complexity testing
are being implemented in stages.

                                       15
<PAGE>



Personnel standards for high complexity testing are more rigorous then those for
moderate complexity testing. In general, personnel conducting high complexity
testing will need more education and experience than those doing moderate
complexity testing. Under the CLIA regulations, all laboratories performing
moderately complex or highly complex tests will be required to obtain either a
registration certificate or certificate of accreditation from the Healthcare
Financing Administration (HCFA).

Because the regulations' interpretation is uncertain, it is possible that
certain of our or our licensees' products may be categorized as tests of high
complexity, in which case penetration of the point-of-care market would be
reduced since not all laboratories would meet the standards required to conduct
such tests. We understand that laboratories, including physician office
laboratories, will be evaluating the requirements of CLIA in determining whether
to perform certain types of moderate and high complexity clinical tests.

Although we believe that we and our licensees will be able to comply with all
applicable regulations regarding the manufacture and sale of clinical testing
devices, such regulations are always subject to change and depend heavily on
administrative interpretations. Future changes in regulations or interpretations
made by the U.S. Department of Health and Human Services, FDA, HCFA or other
regulatory bodies, with possible retroactive effect, may adversely affect us and
our licensees.

In addition to the foregoing, we and our licensees are subject to numerous
federal, state and local laws and regulations relating to such matters as safe
working conditions, laboratory and manufacturing practices, environmental, fire
hazard control, and disposal of hazardous or potentially hazardous substances.
To date, compliance with these laws and regulations has not had a material
effect on our financial results, capital requirements or competitive position,
and we have no plans for material capital expenditures relating to such matters.
However, we and our licensees may be required to incur significant costs to
comply with such laws and regulations in the future, and such laws or
regulations may have a material adverse effect upon our and our licensees'
ability to do business.

Sales of our and our licensees' products outside the United States are also
subject to extensive regulatory requirements, which vary widely from country to
country. The time required to obtain such approval may be longer or shorter than
that required for FDA approval.

Government Contracts and Regulation

Our business agreements with U.S. and foreign government agencies and
departments require that we comply with numerous regulations, rules and
policies, including those governing procedures for soliciting, awarding and
funding government contracts. In addition, we are required to comply with
numerous ongoing obligations following the award of a government contract,
including those relating to record keeping, workplace compliance, third party
contracting, and disclosure of information. Failure to comply with these
requirements may lead to a denial of a contract award, a challenge to a
previously awarded contract, attempts by the U.S. government to terminate a
contract, and restrictions on a company's ability to participate in future bids
to secure government contracts.

In addition, we may be required to obtain certain security clearance
certifications and comply with security clearance standards and requirements,
including those affecting personnel and facilities. Sales of certain of our
products to international government agencies may be subject to local government
regulations and procurement policies and practices, as well as to regulations
relating to import-export control, including prior notification of, and
pre-clearance for, export of certain goods having military applications.

                                       16
<PAGE>



Environmental Regulation

Our operations are subject to stringent foreign, federal, state and local laws,
rules and regulations relating to the protection of the environment, including
those governing the use, handling and disposal of hazardous, radioactive and
infectious materials and wastes, the discharge of pollutants into the air and
water and the cleanup of contaminated sites. Some of our operations require
permits, and these permits are subject to modification, renewal and revocation
by issuing authorities. Although we believe that we have complied with these
laws and regulations in all material respects, we may be required to incur
significant costs to maintain or achieve compliance if additional or stricter
environmental and health and safety requirements are imposed in the future or in
the event of any noncompliance at our facilities.

Reimbursement

Third-party payers, such as governmental programs and private insurance plans,
can indirectly affect the pricing or the relative attractiveness of our products
by regulating the maximum amount of reimbursement they will provide for
diagnostic testing services. In recent years, healthcare costs have risen
substantially, and third-party payers have come under increasing pressure to
reduce such costs.

In this regard, the Federal government, in an effort to reduce healthcare costs,
may take actions that may involve reductions in reimbursement rates. If the
reimbursement amounts for diagnostic testing services are decreased in the
future, it may decrease the amount which physicians, clinical laboratories and
hospitals are able to charge patients for such services and consequently the
price we and our collaborators can charge for our products.

SEASONAL ASPECTS, BACKLOG AND RENEGOTIATION

There are no significant seasonal aspects to our business. Orders for our
products are generally filled on a current basis, and order backlog is not
material to our business. A material portion of our business is subject to
termination of contracts at the election of the government. In the event our
biodefense business expands, the portion of our business subject to termination
of contracts at the election of the government is likely to expand. For risks
related to our contracts with the government, see "--Risk Factors--Regulatory
and Government Contract Risks".

COMPETITION

We face competition both in the markets in which we sell our own products and in
the markets in which our licensees sell their products based on our ORIGEN
technology.

We compete in the biodefense and industrial testing markets with our own
products. We compete in these markets against a diverse group of technology
companies. While existing testing methods are relatively inexpensive, these
technologies are time consuming and produce non-specific test results that are
often unreliable. We are developing a portfolio of tests that would offer
enhanced speed, reliability and specificity in detecting pathogens and other
biological contaminants in food, water, air and other samples being tested. We
believe this will allow us to position our ORIGEN technology competitively as
the detection method of choice for the biodefense and industrial testing
markets. We do not hold a leading competitive position in the biodefense and
industrial testing markets.

We compete in the life science market with our own and our licensees' products
against a diverse group of research products companies. To be competitive in
this market, a company must be able to address the needs of pharmaceutical and
biotechnology companies, which are facing pressure to increase productivity
while decreasing drug discovery costs and shortening timelines.

                                       17
<PAGE>



These drug discovery companies favor detection systems that combine automation
and enhanced sensitivity with integrated equipment and consumables. Because our
and our licensees' ORIGEN-based systems encompass all of these elements, we
believe they offer significant advantages over competing systems. In addition,
we, unlike some of our competitors, offer our customers assay development
services, which we believe enhance the speed and robustness of their screening
operations. Neither we, nor our licensees hold a leading competitive position in
the life science market.

We compete in the clinical testing market primarily through our license
arrangement with Roche, as well as through our license arrangements with
BioMerieux and Eisai. The clinical testing market is dominated by a few large
multi-national companies, including Abbott Laboratories, Bayer and Johnson &
Johnson. Roche, our licensee, holds a leading competitive position in the
clinical testing market.

Our and our licensees' ability to compete in these markets will be determined in
part by the potential applications for which our or their products are developed
and ultimately approved by regulatory authorities. For certain of our future
products, an important factor in competition may be whether we or our
competitors are first to introduce competing products. Accordingly, the relative
speed with which we or our licensees 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 with products approved for sale will be based, among other things,
on product efficacy, safety, reliability, availability, price and patent
protection.

Many of our existing or potential competitors have substantially greater
financial, technical and human resources than we do and may be better equipped
to develop, manufacture and market products. These companies may develop and
introduce products and processes competitive with or superior to ours. See "-
Risk Factors - Risks Of Our Business - We May Not Be Able To Compete Effectively
Against More Established Companies And Institutions, Which Could Adversely
Affect Our Business."

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.

MANUFACTURING

Our current commercial manufacturing operations consist of the manufacture of
the M-SERIES family of products and related reagents, biodefense and PATHIGEN
products and cell culture research biologicals. We operate a qualified GMP and
ISO 9001 facility. We use a variety of suppliers and believe that we do not
depend on any supplier that cannot be replaced in the ordinary course of
business. Any changes in source of supply may require additional engineering or
technical development, with costs and delays that could be significant, in order
to ensure consistent and acceptable performance of the products.

We have not yet introduced  clinical  testing  products that are manufactured by
us. Initial clinical testing products, based on our ORIGEN technology, are being
manufactured  by our  licensees.  We are presently  evaluating  plans for future
manufacturing  of all of our products.  These plans may include direct and third
party manufacturing.

See "- Risk Factors - Risks Of Our Business - We Depend On A Limited Number Of
Suppliers For Materials Used In Manufacturing Our Products, And Any Interruption
In The Supply Of Those Materials Could Hamper Our Ability To Manufacture
Products And Meet Customer Orders."

                                       18
<PAGE>




SALES AND MARKETING

We market the M-SERIES systems and the ORIGEN Detection System, together with
related reagents and services, directly to the life science research market,
various government agencies for use in the biodefense market and to food and
beverage producers and contract testing laboratories for the industrial testing
market. Our sales and marketing effort includes a direct sales force in the
United States and Europe, as well as application specialists and in-house
technical service personnel. We also utilize distributors in Japan and certain
parts of Europe. The ORIGEN cell culture products are sold directly and through
distributors. Substantial sales and marketing of products based on our ORIGEN
technology is conducted by our licensees and collaborators. See "--License
Arrangements and Collaborations."

HUMAN RESOURCES

As of May 31, 2003, IGEN employed 321 individuals, of whom 243 were engaged in
research, product development, manufacturing and operations support, and 78 in
marketing, sales and applications support and general administration. Of our
employees, 49 have Ph.D. degrees. A significant number of our management and
professional employees have had prior experience with pharmaceutical,
biotechnology, diagnostic or medical products, computer software or electronics
companies. As of May 31, 2003, none of our employees is covered by a collective
bargaining agreement, and management considers relations with its employees to
be satisfactory.

Certain of our employees provide services to certain of our affiliated
companies. In addition, we satisfy a portion of our funding obligation to MSD
through in-kind contributions. For more information about these relationships,
see ITEM 13 - "Certain Relationships and Related Transactions."

The ability to maintain our competitive position will depend, in part, upon our
continued ability to attract and retain qualified scientific, technical and
managerial personnel. Competition for such personnel is intense.

OPERATING SEGMENT

The Company operates in one business segment. Information related to this
segment is incorporated herein by reference to ITEM 8-"Consolidated Financial
Statements-Notes to Consolidated Financial Statements-Note 11".

GEOGRAPHIC SEGMENTS

We do not view our business as having material risks relating to our foreign
business. We attribute royalty income to the United States because that is where
we collect payments. We attribute all other revenue to the location of the
customer from whom such revenue is derived. Information on domestic and foreign
product sales is incorporated herein by reference to ITEM 8-"Consolidated
Financial Statements-Notes to Consolidated Financial Statements-Note 11".

RISK FACTORS

Roche Litigation

WE ARE SUING THE LARGEST LICENSEE OF OUR TECHNOLOGY, AND THE OUTCOME OF THAT
LITIGATION COULD MATERIALLY ADVERSELY AFFECT OUR REVENUES AND FINANCIAL
CONDITION.

                                       19
<PAGE>


We have an ongoing lawsuit against Roche, which is the largest licensee of our
technology in terms of royalty income, accounting for 97% of our royalty income
and 63% of our total revenue in fiscal 2003. The Roche litigation was initiated
in 1997 and centers on a number of claims we asserted against Roche alleging
that they failed to comply with the terms of the Roche license agreement. Roche
filed a counterclaim against us in the lawsuit alleging, among other things,
that we breached the Roche license agreement by permitting Eisai, another of our
licensees, to market some ORIGEN-based products in Japan.

The District Court issued a final order of judgment in our case against Roche
that awarded us $105 million in compensatory damages and $400 million in
punitive damages, entitled us to terminate the Roche license agreement, directed
Roche to grant to us for use in our retained fields a license to certain
improvements developed by Roche under the Roche license agreement, including
Roche's Elecsys diagnostics product line, and barred Roche from marketing,
selling, placing or distributing outside of its licensed field any products,
including its Elecsys diagnostics product line, that are based on our ORIGEN
technology.

We have voluntarily agreed not to terminate the Roche license agreement until
the Appellate Court determines that we are entitled to do so; however, we have
already notified Roche that the Roche license agreement will terminate
immediately in the event the Appellate Court issues an opinion confirming final
order of judgment rendered by the District Court that we are entitled to
terminate the Roche license agreement.

Roche appealed certain aspects of the final order of judgment to the Appellate
Court. During the appeal process, Roche is obligated to continue to comply with
the terms of the Roche license agreement. We anticipate that the decision of the
Appellate Court will be issued in mid-2003. Our litigation related expenses
attributable to Roche were $5.4 million, $11.3 million and $13.8 million in
fiscal 2003, 2002 and 2001, respectively.

There are inherent risks in any litigation. In addition to those risks, the
Roche litigation involves additional risks including:

o        The Appellate Court may modify or overturn some or all of the final
         order of judgment including the finding that Roche materially breached
         the Roche license agreement which is the basis of our right to
         terminate the Roche license agreement, the scope and extent of the
         improvements awarded to us, the amount of compensatory and punitive
         damages.

o        The Appellate Court could overturn some or all of the final order of
         judgment and order a new trial on those issues. For example, if the
         Appellate Court orders a new trial on whether or not Roche
         miscalculated and underpaid royalties, breached its duty of good faith
         and fair dealing, or engaged in unfair competition against us, we may
         not receive any damages or, the amount of damages awarded in a new
         trial could be lower than the amount already awarded to us.

o        If the Appellate Court orders a new trial on any of the issues, we
         would be required to continue expending significant amounts of money
         and management time in pursuing our claims against Roche and we might
         not prevail on any of these issues. This time and money will then be
         unavailable for use in the development of our business.

o        In the event the Appellate Court upholds the final order of judgment
         that Roche materially breached the Roche license agreement, and the
         Roche license agreement is terminated and Roche prevented from
         continuing to market products based on our technology, virtually all of
         our royalty revenues would be eliminated.

Roche may at any time divert its attention from selling the licensed products
that generate royalties to us and focus its energies instead to find alternative
products to develop and market.



                                       20
<PAGE>


Roche may  increase  its  efforts to market and sell other Roche  products  that
compete with its  ORIGEN-based  products,  thereby lowering the royalty revenues
that we would  have  otherwise  received  if Roche  had sold  more  ORIGEN-based
products instead of its other competing products.

The risks due to our relationship with Roche are general risks of our business.
However, the possibility that our right to terminate the Roche license agreement
will be upheld by the Appellate Court makes these risks even greater while the
appeal in the Roche litigation is pending.

The outcome of the Roche litigation could materially adversely affect our
revenues and financial condition.

IF WE ARE UNABLE TO FIND A SUITABLE REPLACEMENT FOR ROCHE OR SUCCESSFULLY
INTRODUCE NEW PRODUCTS ON OUR OWN IN THE EVENT THE ROCHE LICENSE IS TERMINATED,
OUR BUSINESS WILL BE MATERIALLY ADVERSELY AFFECTED.

We may not be able to find a suitable replacement for Roche or successfully
introduce new products on our own in the event the Roche license agreement is
terminated. Without the revenues we receive from Roche or a suitable
replacement, we may lack sufficient funds to successfully maintain or further
develop our business.

Our ability to successfully commercialize new products, including products based
on the improvements that may be awarded to us in the Roche litigation, is
subject to numerous risks and uncertainties including risks relating to:

         o        the need for governmental approvals;

         o        our ability to compete effectively;

         o        our ability to effectively manufacture and market new
                  products;

         o        our need for additional financing; and

         o        the other risks applicable to our business as described
                  throughout this Form 10-K.

Risks of Our Business

FAILURE TO MEET OUR DEBT OBLIGATIONS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS AND FINANCIAL CONDITION; IN ADDITION, OUR DEBT SERVICE OBLIGATIONS
COULD IMPAIR OUR OPERATING FLEXIBILITY.

We had a total debt balance at March 31, 2003 of $49.9 million. There is a
possibility that we may be unable to generate cash or arrange financing
sufficient to pay the principal of, interest on and other amounts due in respect
of our indebtedness when due, or in the event any of our indebtedness is
accelerated.

In the event the Roche license agreement is terminated, the holders of the $18.1
million of our 8.5% senior secured notes outstanding as of March 31, 2003 will
be entitled to accelerate those obligations. Accelerated payment would result in
approximately $1.4 million of prepayment costs to be incurred. Accelerated
payment of this debt would significantly reduce our cash and cash equivalents.

                                       21
<PAGE>



The note purchase agreement for the 8.5% senior secured notes also contains
covenants that limit our ability to take specified actions, including incurring
certain types of secured debt, entering into certain merger or consolidation
transactions and amending or terminating our license agreement with Roche, which
could affect our ability to resolve issues that are being litigated in the Roche
litigation. These restrictions may limit our operating flexibility, as well as
our ability to raise additional capital.

At March 31, 2003, $35 million in aggregate principal amount of 5% subordinated
convertible debentures due 2005 was outstanding. Unless and until holders of the
debentures convert their debentures into Common Stock, we are required to make
semi-annual interest payments of $875,000 through 2005. If we are unable to meet
our obligations under the subordinated convertible debentures, the debenture
holders could require us to repay the principal amount of, and accrued interest
on, the subordinated convertible debentures, and we may not have sufficient
financial resources or be able to arrange sufficient financing to make those
payments when required. In addition, the 5% subordinated convertible debentures
due 2005 provide that, in the event our debt in an outstanding principal amount
of $2 million or greater is accelerated and not satisfied within 20 business
days, the holders of the debentures may accelerate our obligations under the
debentures and cause the debentures to be immediately due and payable. We may
not have sufficient funds to pay our debt if any of it is accelerated.

Our substantial leverage may require that we dedicate a substantial portion of
our expected cash flow from operations to service our indebtedness, which would
reduce the amount of our expected cash flow available for other purposes,
including working capital and capital expenditures. Our debt may make it
difficult to pursue our business strategy and make us more vulnerable to
economic downturns and adverse developments in our business.

WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO INCUR FUTURE LOSSES.

We have experienced significant operating losses each year since our inception,
and we expect those losses to continue. We also have an accumulated deficit. Our
losses have resulted principally from a combination of lower royalty revenue
than we believe we are entitled to under the Roche license agreement, costs
incurred in research and development, Roche litigation costs, our share in
losses in affiliate, selling costs and other general and administrative costs.
We expect to incur additional operating losses as a result of increases in
expenses for manufacturing, marketing and sales capabilities, litigation costs
and expenses, research and product development, general and administrative costs
and our share of losses in MSD.

We may not achieve profitability in the future. Our ability to become profitable
in the future will depend on, among other things, our ability to:

o        expand the commercialization of our existing products;

o        upgrade and enhance the M-SERIES family of products;

o        introduce new products into the market;

o        develop our marketing, sales and distribution capabilities
         cost-effectively; and

o        continue existing collaborations or establish successful new
         collaborations with corporate partners to develop and commercialize
         products that incorporate our technologies.

WE MAY NOT BE ABLE TO RAISE SUFFICIENT ADDITIONAL CAPITAL TO SUCCESSFULLY
DEVELOP OUR BUSINESS.

We need substantial amounts of money to fund our operations. Our access to funds
could be negatively impacted by many factors, including the results of the Roche
litigation, the volatility of the price of Common Stock, continued losses from
operations, our current level of debt and capital market conditions.

                                       22
<PAGE>


We may need to raise  substantial  amounts  of money to fund a variety of future
activities integral to the development of our business, including the following:

o        for research and development in order to successfully develop our
         technologies;

o        to obtain regulatory approval for our products;

o        to file and prosecute patent applications in order to protect our
         technology;

o        to respond to innovations that our competitors develop;

o        to continue to aggressively pursue the Roche litigation;

o        to retain qualified employees, particularly in light of competition for
         qualified scientists and engineers;

o        to make new arrangements to market our technology;

o        to continue to fund investments in MSD;

o        to manufacture products ourselves or through a third party; and

o        to market different products to different markets, either through
         building our own sales and distribution capabilities or relying on a
         third party.

We may not have access to enough funds to successfully develop our business. We
may try to raise necessary additional capital by issuing additional debt or
equity securities. Holders of debt securities would have priority over our
equity holders with respect to the proceeds from the sale of our assets in the
event of liquidation of our business, and any debt financings we obtain may
contain restrictive terms that limit our operating flexibility. If, on the other
hand, we raise additional capital by selling more common or preferred stock, the
holdings of existing stockholders would be diluted.

If we are unable to raise additional capital, we may have to scale back, or even
eliminate, some programs. Alternatively, we may have to consider pursuing
arrangements with other companies, which may not be on terms favorable to us.


A SUBSTANTIAL PORTION OF OUR REVENUES DEPENDS ON COMPANIES THAT LICENSE
TECHNOLOGY FROM US AND THESE COMPANIES CONTROL THE DEVELOPMENT AND MARKETING OF
PRODUCTS BASED ON OUR TECHNOLOGY. IF THESE COMPANIES DO NOT EFFECTIVELY DEVELOP
AND MARKET PRODUCTS BASED ON OUR TECHNOLOGY, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED.

                                       23
<PAGE>


The success of our business depends, in large part, on how effectively the
companies to which we have licensed our technology develop and market that
technology. If these companies do not effectively develop and market products
based on this technology, our revenues would decrease.

We have licensed our technology to Roche, BioMerieux and Eisai for selected
markets and uses. Our license agreements with each of these companies allow each
company to develop products using our technology and to manufacture and sell
those products in selected fields on an exclusive basis. In return for the right
to use our technology, each of these companies must pay royalties to us based on
revenues they receive from sales of products based on our technology. These
royalties were 65% of our total revenue in fiscal 2003.

We have no control over the resources that companies who license our technology
may devote to the development of products based on our technology. These
companies may decide not to develop products arising out of our agreements, may
not devote sufficient resources to the development, approval, manufacture,
marketing or sale of these products or may terminate their agreements. If any of
these events occur with respect to one of the companies who licenses our
technology, that company may not develop or market new products based on our
technology and we would not receive royalties or other payments from that
company and our revenue would be adversely affected.

We have brought the Roche litigation against Roche, a licensee which accounted
for 63% of our total revenue in fiscal 2003, in part because we believe Roche
has not properly calculated and paid royalties to us. See "--Risk Factors -
Roche Litigation" and ITEM 3 -- "Legal Proceedings" for a more detailed
description of the Roche litigation and the risks it poses to us. Business risks
faced by Roche may become risks for us, to the extent Roche's sales decline and
we have a decline in royalties on those sales. Similar or other problems may
arise with other companies to whom we license our technology.

IF WE ARE UNABLE TO IMPLEMENT OUR STRATEGY OF ENTERING INTO COLLABORATIVE
RELATIONSHIPS TO COMMERCIALIZE OUR ORIGEN TECHNOLOGY OUR ABILITY TO GROW OUR
BUSINESS WILL SUFFER.

One aspect of our strategy is to enter into collaborative relationships with
established healthcare companies to assist us in the commercialization of our
ORIGEN technology by working with us to develop, manufacture or market products
for certain markets. We may not be able to enter into collaborations on terms
that are favorable to us, if at all. If we are unable to establish new
collaborations or any collaborations we establish are not able to introduce new
products based on our ORIGEN technology, our growth may be slowed and our
business will suffer.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE
FLUCTUATIONS MAY CAUSE OUR STOCK PRICE TO FALL.

Our quarterly operating results depend upon:

o        the volume and timing of orders for M-SERIES systems or other products;

o        the timing of instrument deliveries and installations;

o        the success of M-SERIES system upgrades and enhancements;

o        the amount of revenue recognized from royalties and other contract
         revenues;

o        our mix of products sold;

o        whether our instruments are sold to or placed with customers;

                                       24
<PAGE>


o        the timing of our introduction of new products;

o        the volume and timing of product returns and warranty claims;

o        our competitors' introduction of new products;

o        the amount of expenses we incur in connection with the operation of our
         business, including costs associated with the transfer of improvements
         from Roche to us, legal fees, research and development costs, and sales
         and marketing costs, including costs for upgrading the M-SERIES system
         or other products;

o        our share of losses in MSD;

o        the timing of and results from the currently pending appeal of our
         judgment against Roche;

o        the timing of termination of the Roche license agreement, if at all;

o        whether  POL  customers'  contracts  are renewed and  whether
         Roche will  continue to service POL customers; and

o        our manufacturing capabilities.


These factors may cause our quarterly operating results to fluctuate
significantly, which in turn, may cause our stock price to fall. In addition,
because our revenues and operating results are volatile and difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.

WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST BETTER POSITIONED COMPANIES
AND INSTITUTIONS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.

Our business is subject to intensive competition from established companies and
research and academic institutions, and we expect this competition to intensify.
Many of these companies and institutions have one or more competitive advantages
over us, including:

o        more money to invest;

o        greater expertise and resources in developing, manufacturing,
         marketing and selling products;

o        a larger, more experienced workforce; and

o        more experience in obtaining regulatory approval for clinical testing
         products.

As a result, we may not be able to compete successfully against our current or
future competitors. This could have a material adverse effect on our business,
financial condition and revenues.

WE HAVE AND MAY CONTINUE TO EXPERIENCE DESIGN, DEVELOPMENT, IMPLEMENTATION AND
OTHER DIFFICULTIES THAT COULD DELAY OR PREVENT OUR INTRODUCTION OF NEW OR
ENHANCED PRODUCTS OR AFFECT THE PERFORMANCE OF EXISTING PRODUCTS WHICH COULD
ADVERSELY AFFECT OUR BUSINESS.

                                       25
<PAGE>


The development of new or enhanced products is a complex and uncertain process
requiring the accurate anticipation of technological and market trends as well
as precise technological execution. We have and may continue to experience
design, development, implementation and other difficulties that could delay or
prevent our introduction of new or enhanced products or affect the performance
of existing products, such as those which have occurred with our M-SERIES
systems. These difficulties and delays have caused, and may continue to cause,
our expenses to increase and our product sales to fluctuate. In addition, if we
experience design, development or implementation difficulties in developing
these instruments, we will sell fewer of our products and our business prospects
would be adversely affected.

The markets for our products are  expected to evolve and expand.  These  changes
would facilitate the market demand for our new or enhanced  products,  including
the need for  products  that would be  utilized in  decentralized  sites such as
clinical  testing  in  the  proximity  of  the  patient  and   field-testing  of
environmental samples in the biodefense market. If market demand does not evolve
or expand as we anticipate or we are not able to develop  products that meet the
evolving market demand, our business prospects would be adversely affected.

In addition, the markets for our products are characterized by evolving industry
standards and government regulations, the need for updated and effective
technology and new product introductions. Our future success will depend in part
upon our ability to enhance existing products and to develop and introduce new
or enhanced products. We may not be able to avoid the obsolescence of our
products due to technological change and evolving industry standards and
government regulations.

WE HAVE LIMITED MANUFACTURING AND MARKETING EXPERIENCE, WHICH PUTS US AT A
COMPETITIVE DISADVANTAGE.

We lack experience in large-scale manufacturing, which could hamper our ability
to manufacture existing products or new products that we develop. We have two
options to address this issue. First, we could expand our internal ability to
manufacture products. Second, we could contract with a third party to
manufacture products for us based on our technology.

If, however, we are unable to expand our own manufacturing capability or find a
suitable manufacturer on acceptable terms in a timely manner, we may be unable
to meet demand for existing products and could be delayed in introducing new
products to the market. Failure to meet demand for existing products or delays
in introducing new products could put us at a competitive disadvantage and could
harm our financial condition, our business and our prospects.

We will  also  need to  develop  greater  selling,  marketing  and  distribution
capabilities.  To market clinical diagnostic products directly to customers, and
not  through a  licensee,  we need to  develop a  substantial  sales  force with
technical expertise.  We also need to establish a distribution system to support
the sales  force.  Alternatively,  we could  license or  contract  with  another
company to provide sales and distribution  services for products.  We may not be
able to develop a  sufficient  sales and  distribution  force or find a suitable
company to fill that role for us.

WE HAVE LIMITED MANUFACTURING FACILITIES FOR OUR PRODUCTS AND WE MAY NOT FIND
ADDITIONAL FACILITIES SUITABLE FOR FUTURE GROWTH.

We face risks inherent in operating a single facility for the manufacture of our
products. We do not have alternative production facilities available should our
Gaithersburg, Maryland manufacturing facility cease to function. This risk
includes an unforeseen plant shutdown and if our facility were not operational
for an extended period of time, our existing business and future prospects could
be materially adversely affected.

                                       26
<PAGE>



In addition, we also may need to expand and enhance our research, development
and production facilities. We may encounter difficulties in locating suitable
additional facilities to meet our requirements. We may also be required to make
material capital expenditures at a new facility at a time when we have limited
capital resources available to us.

We may also experience difficulties or delays in integrating our operations into
new facilities. These difficulties might include delays in the availability of a
new facility or problems associated with equipment installation. In addition,
any facility that we obtain for production of clinical testing or biodefense
products will be subject, on an ongoing basis, to a variety of regulatory
requirements including quality systems regulations, international quality
standards and other regulatory standards. We may encounter difficulties
expanding our manufacturing operations in accordance with these regulations and
standards, which could result in manufacturing delays and an inability to meet
product demand and our future business prospects could be materially adversely
affected.

If we are not successful at identifying and obtaining additional facilities to
meet future growth needs, or we are unable to pay for facility enhancements and
improvements, our business would suffer.

FAILURE TO MANAGE OUR GROWTH COULD ADVERSELY AFFECT OUR BUSINESS.

We expect to continue to grow by hiring new employees in all areas of our
operations, increasing our presence in existing markets and introducing new
products we develop into new potential markets. Our growth has placed, and
continues to place, a strain on our management and our operating and financial
systems.

As we grow, our personnel, systems, manufacturing capabilities and resources,
procedures and controls may be inadequate to support future operations. In order
to accommodate the increased operations for sales and marketing, research and
development, facilities and administration, we will need to hire, train and
retain the appropriate personnel. We may also need to improve our financial and
management controls, reporting systems and operating systems. We may encounter
difficulties in developing and implementing other new systems.

We are continuing the implementation of a new enterprise resource planning
system in order to automate all of our accounting, manufacturing, sales and
purchasing. If the enterprise resource planning system fails to operate as we
expect or experiences implementation delays or interruptions, our operations, as
well as our ability to manage our growth, could be materially adversely
affected.

THE SUCCESS OF OUR BUSINESS DEPENDS ON PATENTS THAT WILL EXPIRE AND THAT MUST BE
ACTIVELY PURSUED AND PROTECTED.

Our business depends heavily on patents that will expire over time and may be
challenged or circumvented by competitors. Patents allow us to prevent others,
for a time, from using our inventions to compete against us.

Our business success or failure will depend, in part, on our ability to obtain
and maintain adequate patent protection for the ORIGEN technology. Our current
patents or future patents may not adequately protect our technology from being
used by our competitors.

Companies may challenge and invalidate patents or circumvent valid claims in
patents, all of which could make it necessary for us to defend our patents in
litigation. Litigation over patents poses the following risks to our business:

o        Litigation costs can be extremely high, which could drain our financial
         resources, and

o        Litigation over our patents could discourage other companies from
         working with us to develop and market new products based on technology
         covered by these disputed patents.

                                       27
<PAGE>


If we lose some patent protection, our competitive advantage could be eroded,
third parties may be able to use our technology without paying us and our
revenues would be adversely affected.

OUR BUSINESS WOULD BE HARMED IF WE VIOLATE THE PATENT RIGHTS OF OTHERS.

If our ORIGEN technology were to infringe others' patent rights we could be
exposed to the following risks:

o        We or our licensees could be required to alter, or abandon products or
         processes;

o        We or our licensees could be required to obtain a license from the
         patent holder;

o        We or our licensees could lose customers that are reluctant to continue
         using products;

o        We or our licensees could be forced to abandon development work with
         respect to these products; and

o        We or our licensees could be required to pay damages that could be
         substantial.

If we or our licensees infringe others' patent rights, our business could be
damaged if we were unable to make necessary alterations or obtain a necessary
license on acceptable terms, if at all.

Our business success or failure will also depend, in part, on the patent rights
of others. We license technology from other companies and academic institutions.
Because access to this technology is necessary to our business, we must be
certain that we comply with these license agreements. Our business could be
harmed if we breached any of these license agreements and lost the rights to use
this patented technology or if we were unable to renew existing licenses on
acceptable terms, if at all, or get additional licenses that we may need on
acceptable terms, if at all. In addition, we may need to litigate the scope and
validity of patents held by others and such litigation could be a substantial
cost for us.

WE RELY ON TRADE SECRETS AND OTHER INFORMATION THAT CANNOT BE PROTECTED BY
PATENTS, AND WE FACE RISKS THAT THIS INFORMATION WILL BE DISCLOSED TO OTHERS.

In addition to patents, we also rely in our business on trade secrets, know-how
and other proprietary information. If this information were disclosed to
competitors, our business would suffer. We seek to protect this information, in
part, by entering into confidentiality agreements with licensees, employees and
consultants, which prohibit these parties from disclosing our confidential
information.

These agreements may not provide adequate protection for our trade secrets,
know-how and other proprietary information or ensure that the information we
share with others during the course of our business will remain confidential. We
may not have sufficient legal remedies under the agreements or otherwise to
correct or compensate for unauthorized disclosures or sufficient resources to
seek redress. If we are not able to adequately redress the unauthorized
disclosure of our trade secrets, know-how or other proprietary information, our
competitive position may be undermined and our business may suffer.

WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR MATERIALS USED IN MANUFACTURING
OUR PRODUCTS, AND ANY INTERRUPTION IN THE SUPPLY OF THOSE MATERIALS COULD HAMPER
OUR ABILITY TO MANUFACTURE PRODUCTS AND MEET CUSTOMER ORDERS.

We depend on vendors to supply key materials that we use in our products. Some
of these materials are available only from limited sources. From time to time,
suppliers may extend lead time, limit supplies or increase prices due to
capacity constraints or other factors.

                                       28
<PAGE>


In the event of a reduction in, interruption of, or degradation in the quality
of the supply of any of our required materials, or an increase in the cost of
obtaining those materials, we would be forced to locate an alternative source of
supply. If no alternative source were available or if an alternative source were
not available on a timely basis or at a reasonable cost or otherwise on
acceptable terms, our ability to manufacture one or more of our products would
be delayed or halted. Any changes in sources of supply may require additional
engineering or technical development in order to ensure consistent and
acceptable performance of the products. If any of these events occur, product
costs may increase, we might be unable to deliver products in a timely fashion,
we could lose sales as well as customers, and our business would be
significantly harmed as a result.

WE DEPEND ON HIGHLY TRAINED AND SKILLED EMPLOYEES AND MANAGEMENT, AND WE MAY NOT
BE ABLE TO ATTRACT AND RETAIN SUFFICIENT PERSONNEL.

We need to hire additional staff and to retain existing staff, both of which are
difficult in a competitive marketplace. Because we are a technology company, we
depend heavily on scientists and engineers to develop products and to build a
successful business. Research and development efforts could suffer if we are not
able to hire and retain enough qualified scientists and engineers which would
adversely affect our business. We compete with other technology companies and
research and academic institutions for experienced scientists. Many of these
companies and institutions have greater resources than we do and thus may be in
a better position to attract desirable candidates.

In addition to scientists, we will also need to hire managers who have
regulatory, manufacturing and marketing capabilities. If we are not able to hire
managers with these skills, or develop expertise in these areas, our business
could suffer.

Regulatory and Government Contract Risks

WE MUST OBTAIN FDA APPROVAL TO MARKET OUR CLINICAL TESTING PRODUCTS, WHICH IS
OFTEN COSTLY AND TIME CONSUMING. IF WE DO NOT OBTAIN THE NECESSARY APPROVALS OUR
BUSINESS PROSPECTS WOULD SUFFER.

The FDA regulates many areas in which we conduct research and in which we
develop, produce and market products. In particular, we must obtain FDA approval
before we can market clinical testing products such as those we are currently
developing for the patient care market. The approval process is often costly and
time consuming. We may not be successful in obtaining FDA approval for any of
our clinical testing products, which would materially adversely affect our
future prospects.

In order to obtain FDA approval in the United States, we, or the companies with
whom we work, will need to either obtain pre-market application approval or
pre-market notification clearance from the FDA. In order to obtain pre-market
notification clearance, we must submit data from clinical trials demonstrating
that new clinical testing systems are substantially equivalent to diagnostic
systems that the FDA has already approved.

If an ORIGEN-based product is subject to the substantial equivalence
requirement, neither we, nor any of our licensees can sell that system for
clinical use in the United States until the FDA determines that a new
ORIGEN-based system is substantially equivalent to a previously approved system.
Typically, the initial FDA review process takes approximately 90 days, but the
FDA's review and approval could take longer. In addition, we may not be able to
demonstrate substantial equivalence for future testing systems.

If we do not successfully demonstrate substantial equivalence, or if we are
required to obtain pre-market application approval as an initial matter, we will
have to conduct extensive clinical testing of these products, which could take
years to complete.

                                       29
<PAGE>



Extensive testing could involve substantial additional costs and might delay
bringing clinical testing products to market, weakening our competitive
position. If we fail to obtain FDA approval for new products altogether, we will
be unable to market our ORIGEN-based products at all for clinical use in the
United States.

WE ARE SUBJECT TO COMPREHENSIVE GOVERNMENT REGULATION, WHICH MAY INVOLVE
SIGNIFICANT COSTS AND MAY RESTRICT OUR ABILITY TO CONDUCT BUSINESS.

We expect that we may need to spend a substantial amount of money to comply on
an ongoing basis with government regulations. Government agencies, such as the
FDA, Department of Homeland Security, Department of Commerce and the EPA,
regulate many of the products that we develop, manufacture and commercialize,
including products for clinical testing, biodefense and industrial testing.

The costs of complying with governmental regulations and any restrictions that
government agencies might impose could have a significant impact on our
business. As we increase our manufacturing and expand our product offerings,
these costs will increase.

Whether we manufacture products ourselves or contract with another company to
manufacture products based on our technology, the FDA and other government
agencies will continually review and periodically inspect the manufacturing
process. If any of these agencies were to discover a problem with our products,
the manufacturing process or the manufacturing facility, they could place
restrictions on these products and on the manufacturer.

For example, the FDA could require us to recall, or even totally withdraw, a
product from the market or close a manufacturing facility.

In addition to FDA regulations, the process of manufacturing products is subject
to a variety of environmental and safety laws and regulations, including laws
and regulations governing the use, management and disposal of hazardous,
radioactive and infectious materials and wastes, the discharge of pollutants
into the air and water, and the cleanup of contaminated sites. We could incur
substantial costs, including cleanup costs, fines and penalties, claims for
damages and loss of permits required for our operations if we fail to comply
with these laws or regulations, our business and financial condition could be
materially adversely affected.

OUR ABILITY TO OBTAIN AND RETAIN U.S. GOVERNMENT CONTRACTS IS SUBJECT TO
UNCERTAINTIES, AND OUR EXISTING GOVERNMENT CONTRACTS MAY BE TERMINATED, WHICH
COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS AND PROSPECTS.

The U.S. government contracts that we have, and our ability to secure additional
contracts, are subject to uncertainties related to the government's future
funding commitments. The future prospects for our biodefense business are also
highly sensitive to changes in national and international government policies
and funding priorities. Changes in domestic or foreign government policies or
priorities, including funding levels through agency or program budget reductions
by the U.S. Congress or executive agencies, could materially adversely affect
our ability to retain or obtain government contracts, and our business prospects
could suffer.

The U.S.  government can terminate,  suspend or modify any of its contracts with
us either for its  convenience  or if we default by failing to perform under the
terms of the applicable  contract.  A termination or suspension for  convenience
could result in our having excess capacity, inventory, personnel, unreimbursable
expenses  or charges or other  adverse  effects on our  financial  condition.  A
termination arising out of our default could expose us to claims for damages and
may have a  material  adverse  effect  on our  ability  to  compete  for  future
contracts and orders.

                                       30
<PAGE>



Our  U.S.  government  contracts  may  span one or more  years  and may  include
multiple option years. U.S.  government agencies generally have the right not to
exercise these option periods for any reason,  including lack of funding,  or if
the agency is not satisfied with our  performance  of the contract.  If the U.S.
government terminates any of our contracts our financial condition and operating
results could be materially adversely affected.

In addition to unfavorable termination provisions, certain of our U.S.
government contracts contain provisions that grant to the U.S. government a
license to use inventions made by us in the course of performing the contract,
and to authorize others to use those inventions for or on behalf of the
government.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A NEGATIVE AUDIT BY THE U.S.
GOVERNMENT.

U.S. government agencies routinely audit and investigate government contractors.
These agencies review a contractor's performance under its contracts. If an
audit results in a finding of improper activities, we may be subject to civil
and criminal penalties and administrative sanctions, including termination of
contracts, forfeiture of profits, suspension of payments, fines and suspension
or prohibition from doing business with the U.S. government. In addition, we
could suffer serious harm to our business reputation if allegations of
impropriety were made against us.

COST OVER-RUNS ON OUR CONTRACTS WITH THE U.S. GOVERNMENT COULD SUBJECT US TO
LOSSES OR ADVERSELY AFFECT OUR FUTURE BUSINESS.

Our contracts with the U.S. government have been fixed-price contracts and
therefore we receive a fixed price irrespective of the actual costs we incur.
Consequently, we are required to absorb any costs in excess of the fixed price
that may be set forth in the contract. If we are unable to control costs we
incur in performing under these contracts, our financial condition and operating
results could be materially adversely affected. Cost over-runs also may
adversely affect our ability to sustain existing programs and obtain future
contract awards.

RESTRICTIONS ON HEALTH CARE COSTS AND HEALTH CARE AND INSURANCE FINANCING
PRACTICES COULD LIMIT DEMAND FOR OUR PRODUCTS.

In the United States and elsewhere, demand for clinical testing is dependent, in
part, on consumers' ability to be reimbursed for the cost of the tests by
third-party payers, such as government agencies, health maintenance
organizations and private insurers. Medicaid and other third-party payers are
increasingly challenging the prices charged for medical services, including
clinical diagnostic tests. They are also attempting to contain costs by limiting
their coverage of, and the amount they will reimburse for, clinical tests and
other health care products.

Without adequate coverage and reimbursement, consumer demand for clinical tests
may decrease. Decreased demand would likely cause sales of our clinical
products, and sales by our licensees, to decrease since fewer tests would be
performed or prices would be lowered, or both. Reduced sales or royalty income
would hurt our business and our business prospects.

In many foreign markets, governments directly set the prices that clinical
diagnostic companies may charge for their products and services. In the United
States, a number of legislative and regulatory proposals aimed at changing the
health care system have been proposed in recent years and we expect this to
continue. Foreign and domestic legislative and regulatory initiatives that limit
health care coverage may have a materially adverse effect on our business and
our business prospects.

                                       31
<PAGE>



INDUSTRY RISKS

WE ARE EXPOSED TO PRODUCT LIABILITY RISKS THAT, IF NOT ADEQUATELY COVERED BY
INSURANCE, MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

Product liability is a major risk in marketing products for the clinical
testing, biodefense and industrial markets. We may not be able to adequately
insure against risk of product liability. We may face product liability for
claims and lawsuits brought by customers. Damages awarded in product liability
cases can be very large. While we have product liability insurance, this
coverage is limited. We may not have adequate product liability insurance to
cover us against our potential liabilities or be able to maintain current levels
of product liability insurance on acceptable terms, if at all. Claims or losses
in excess of our current or future product liability insurance coverage could
have a material adverse effect on our financial condition.

RISKS OF OUR COMMON STOCK

MEMBERS OF OUR MANAGEMENT TEAM EXERCISE SIGNIFICANT INFLUENCE OVER US AND MAY
HAVE SIGNIFICANT INFLUENCE OVER THE OUTCOME OF PROPOSED CORPORATE ACTIONS
SUPPORTED OR OPPOSED BY OTHER OF OUR STOCKHOLDERS.

Our officers and directors in the aggregate, own or have the right to purchase,
approximately 24% of the outstanding shares of our Common Stock and our Chief
Executive Officer owns approximately 19% of the outstanding shares of our Common
Stock at June 13, 2003. As a result, certain of our officers or directors may
have significant influence over the election of directors and may be able to
significantly influence the outcome of proposed corporate actions supported or
opposed by other of our stockholders. In addition, our directors could
significantly influence any vote related to transactions that may be in the best
interests of our stockholders.

PROVISIONS IN OUR CHARTER DOCUMENTS MAY DISCOURAGE POTENTIAL ACQUISITIONS OF OUR
COMPANY, EVEN THOSE WHICH THE HOLDERS OF A MAJORITY OF OUR COMMON STOCK MAY
FAVOR.

Our certificate of incorporation and bylaws contain provisions that may have the
effect of discouraging a third party from making an acquisition of us by means
of a tender offer, proxy contest or otherwise. Our certificate of incorporation
and bylaws:

o        classify the Board of Directors into three classes, with directors of
         each class serving for a staggered three-year period;

o        provide that directors may be removed only for cause and only upon the
         approval of the holders of at least a majority of the voting power of
         our shares entitled to vote generally in the election of such
         directors;

o        prohibit  stockholders  from calling special  meetings and prohibit
         action by the  stockholders by written consent;

o        require at least two-thirds of the voting power of our shares entitled
         to vote generally in the election of directors to alter, amend or
         repeal the provisions relating to the classified board, removal of
         directors and action by stockholders described above;

o        permit the Board of Directors to fill vacancies and newly created
         directorships on the Board; and

o        contain advance notice requirements for stockholder proposals.

Such provisions would make the removal of incumbent directors more difficult and
time-consuming and may have the effect of discouraging a tender offer or other
takeover attempt not previously approved by the Board of Directors.

                                       32
<PAGE>


In 1996, our Board of Directors adopted a shareholder rights plan and declared a
dividend of one preferred  share  purchase  right for each share of Common Stock
outstanding.  A right  will  also be  attached  to each  share of  Common  Stock
subsequently  issued. The rights will have certain  anti-takeover  effects.  The
rights  are  triggered  if a person or group of  persons  other  than  Samuel J.
Wohlstadter,  our Chief  Executive  Officer,  and his  affiliates or associates,
heirs,  trusts or foundations to which he has  transferred  shares of our Common
Stock  acquires  15.0% or more of our Common  Stock or  announces a tender offer
that would result in that person or group of persons  acquiring 15.0% or more of
our Common Stock on terms not approved by our Board of Directors.  If triggered,
the rights  would cause  substantial  dilution to the person or group of persons
that caused  them to be  triggered.  The rights  could  discourage  or make more
difficult a merger, tender offer or other similar transaction.

Under our certificate of incorporation, our Board of Directors also has the
authority to issue preferred stock in one or more series and to fix the powers,
preferences and rights of any such series without stockholder approval. The
Board of Directors could, therefore, issue, without stockholder approval,
preferred stock with voting and other rights that could adversely affect the
voting power of the holders of Common Stock and could make it more difficult for
a third party to gain control of us. In addition, under certain circumstances,
Section 203 of the Delaware General Corporation Law makes it more difficult for
an "interested stockholder", or generally a 15% stockholder, to effect various
business combinations with a corporation for a three-year period.

OUR STOCK PRICE IS VOLATILE AND COULD DROP PRECIPITOUSLY AND UNEXPECTEDLY.

Our Common Stock currently trades on The Nasdaq National Market. The prices of
publicly traded stock often fluctuate. The price of our stock may rise or fall
dramatically, even though our business performance has not changed. In the past,
the stock price of technology companies has been especially volatile. We expect
that this will continue to be the case. For example, from January 1, 2003 until
June 27, 2003, the closing price for a share of our Common Stock has ranged from
$30.76 to $45.02.

In addition to these fluctuations, an investment in our stock could be affected
by a wide variety of factors that relate to our business and industry, many of
which are outside of our control. For example, the price of our Common Stock
could be affected by:

o        new product introductions;

o        innovations by competitors;

o        our competitors' announcements of their financial results;

o        changes in financial estimates and recommendations by security
         analysts;

o        disputes over patents or other proprietary rights;

o        new litigation or developments in the Roche litigation;

o        publicity;

o        regulations;

o        economic, business and other market conditions; and

                                       33
<PAGE>


o        fluctuations in our performance and the performance of our licensees.

In addition, if our revenues or earnings in any period fail to meet the
investment community's expectations, there could be an immediate adverse impact
on our stock price.

WE DO NOT PLAN TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK.

We have never paid cash dividends on our Common Stock and we have no plans to
pay cash dividends in the foreseeable future.

THE VALUE OF THE COMMON STOCK MAY BE DILUTED IN THE FUTURE.

Our officers, directors, employees and consultants have options to purchase a
significant aggregate amount of our Common Stock. If they exercise their options
and purchase Common Stock, your investment in our Common Stock will be diluted.
In addition, we currently have convertible debenture holders who have the right
to convert their debentures into Common Stock. Your investment in our Common
Stock may be diluted if these convertible debenture holders decide to convert
their securities in the future. Moreover, your investment in our Common Stock
could be further diluted if we issue additional shares of Common Stock or
securities convertible into shares of Common Stock in the future, which we may
need to do to raise funds for our business. Sales of additional shares of our
Common Stock or the conversion of securities into shares of our Common Stock
could cause the market price of our Common Stock to decrease.

ITEM 2.  PROPERTIES

Our principal administrative, marketing, manufacturing and research and
development facilities consist of approximately 132,000 square feet located in
four buildings in Gaithersburg, Maryland. We have an additional 21,000 square
feet of leased research and development, sales and office facilities in McLean,
Virginia; San Diego, California; New York, New York, the District of Columbia;
and Oxfordshire, England. Our leases expire at various times from fiscal 2004
through 2010.

MSD utilizes approximately 33% of our facilities and is allocated a
corresponding portion of the expense associated with these facilities.

We believe our current  facilities should be adequate for our immediate business
requirements but believe additional  facilities may be required as we expand our
business operations.  We are continuously evaluating our facilities requirements
in light of our anticipated  growth needs. See ITEM 1 - "Business - Risk Factors
-- Risks of our Business" and ITEM 7 -  "Managment's  Discussion and Analysis of
Financial Condition and Results of Operations.

ITEM 3.  LEGAL PROCEEDINGS

ROCHE

In 1997, we filed a lawsuit against Roche in the District Court. The lawsuit
arose out of the Roche license agreement, under which we licensed to Roche
certain rights to develop and commercialize diagnostic products based on our
ORIGEN technology. In the Roche litigation, we alleged among other things that
Roche failed to perform certain material obligations under the Roche license
agreement and engaged in unfair competition against us. The jury trial was
completed in January 2002, and the jury rendered a verdict that Roche had
materially breached the license agreement, had violated its duty to us of good
faith and fair dealing, and had engaged in unfair competition against us.

                                       34
<PAGE>



In February 2002, the District Court issued a final order of judgment that
confirmed the jury's decisions to award $105 million in compensatory damages and
$400 million in punitive damages, entitled us to terminate the Roche license
agreement, and directed Roche to grant to us for use in our retained fields a
license to certain improvements. Roche was also ordered, at its sole cost and
expense, to deliver such improvements to us and to provide all other information
and materials required or necessary to enable us to commercialize these
improvements. Improvements, as defined in the final order of judgment, include
Roche's Elecsys 1010, 2010 and E170 lines of clinical diagnostic immunoassay
analyzers, the tests developed for use on those systems, and certain aspects of
Roche's nucleic acid amplification technology called PCR. The final order of
judgment also bars Roche from marketing, selling, placing or distributing
outside of its licensed field any products, including its Elecsys diagnostics
product line, that are based on our ORIGEN technology.

Roche filed counterclaims against us alleging, among other things, that we
breached the Roche license agreement by permitting Eisai, another of our
licensees, to market certain ORIGEN-based products in Japan. The final order of
judgment found in our favor and against Roche on all of Roche's counterclaims,
except for one for which we were ordered to pay $500,000.

In April 2002, the District Court affirmed a final order of judgment that
awarded us $505 million in damages, confirmed our right to terminate the Roche
license agreement, and directed Roche to grant us for use in our retained fields
a license to improvements developed or acquired by Roche in the course of the
Roche license agreement, including Roche's Elecsys and E170 diagnostics product
lines. Roche appealed certain aspects of the final order of judgment to the
Appellate Court. In connection with that appeal, Roche posted a $600 million
bond to support its financial obligations to us under the final order of
judgment. During the appeal process Roche is obligated to continue to comply
with the terms of the Roche license agreement, including its obligation to
continue to pay us royalties on Roche's sales of royalty bearing products and to
share and deliver improvements. Roche's obligations to pay the $505 million of
monetary damages awarded to us is suspended until completion of the appeal
process. On February 24, 2003, the Appellate Court heard oral arguments on the
appeal by Roche of the final order of judgment. We anticipate that the decision
of the Appellate Court will be issued in mid-2003.

We have voluntarily agreed not to terminate the Roche license agreement until
the Appellate Court determines that we are entitled to do so; however, we have
notified Roche that the Roche license agreement will terminate immediately in
the event the Appellate Court issues an opinion confirming judgment rendered by
the District Court in the Roche litigation that we are entitled to terminate the
Roche license agreement.

We have engaged in settlement discussions with Roche. We cannot assure you that
we will be able to settle the Roche litigation in a timely manner, if at all. In
addition, although we are vigorously opposing Roche's appeal, Roche may
ultimately prevail in its attempt to modify or overturn the judgment issued in
this litigation.

See "- Risk Factors - Roche Litigation".

Other Proceedings

In 2001, Brown Simpson Strategic Growth Fund L.P., Brown Simpson Strategic
Growth Fund, Ltd. and Brown Simpson Partners I (collectively Brown Simpson) and
Laurence Paskowitz initiated separate shareholder derivative lawsuits for and on
behalf our shareholders in the Circuit Court for Montgomery County, Maryland
(Circuit Court) against four of our current directors, two former directors,
three executive officers and us as a nominal defendant. The complaints alleged
breach of fiduciary duties by the named individual defendants in connection with
transactions between us and other entities in which certain directors and
officers were alleged to have an interest, including MSD.

                                       35
<PAGE>


Both lawsuits sought principally the following: that the defendants hold in
trust and be required to account for and restore to us damages that we have
allegedly sustained by reason of the allegations and relief relating to board
and management composition. The Paskowitz complaint also sought damages for a
class of our shareholders for direct claims against the individual defendants.
The complaints did not include any claims against us.

In May 2002, the Circuit Court issued an opinion and order dismissing all claims
asserted against all of the defendants in both cases. No appeal was filed by the
Brown Simpson plaintiff and the decision in that case is now final. The
Paskowitz plaintiff filed an appeal to the Court of Special Appeals in Maryland
seeking review only for one direct claim.

A final decision of the Court of Special Appeals was issued in March 2003
affirming the dismissal of the complaint by the Circuit Court. No appeal was
filed and the decisions dismissing all claims in all of these cases are now
final.

We are involved, from time to time, in various other routine legal proceedings
arising out of the normal and ordinary operation of our business which we do not
anticipate will have a material adverse impact on our business, financial
condition, results of operations or cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders during the fourth
quarter of the fiscal year covered by this report.

PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Common Stock is quoted on The Nasdaq National Market under the symbol
"IGEN". As of May 28, 2003, there were approximately 11,400 holders of record of
our Common Stock. No cash dividends have been paid on the Common Stock to date,
and we currently intend to retain any earnings for development of our business.

The following table sets forth, for periods indicated, the range of high and low
closing sales prices of the Common Stock as quoted on The Nasdaq National
Market.
<TABLE>
<CAPTION>

    FISCAL 2003                   HIGH               LOW
    -----------                 --------          --------

<S>                             <C>               <C>
    First Quarter               $ 42.20           $ 30.99
    Second Quarter              $ 34.70           $ 27.35
    Third Quarter               $ 44.42           $ 26.78
    Fourth Quarter              $ 45.02           $ 30.76

    FISCAL 2002
    -----------

    First Quarter               $ 26.00           $ 16.75
    Second Quarter              $ 32.72           $ 23.55
    Third Quarter               $ 40.52           $ 26.98
    Fourth Quarter              $ 44.23           $ 35.84

</TABLE>

                                       36
<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data set forth below with respect to the Company's
consolidated statements of operations for each of the years in the three-year
period ended March 31, 2003 and with respect to the consolidated balance sheets
at March 31, 2003 and 2002 are derived from, and are qualified by reference to,
the consolidated financial statements that have been audited by Deloitte &
Touche LLP, independent auditors, and are included elsewhere in this Form 10-K.
The statement of operations data for each of the years in the two-year period
ended March 31, 2000, and the balance sheet data at March 31, 2001, 2000 and
1999 are derived from audited financial statements not included in this Form
10-K.

The following selected financial data should be read in conjunction ITEM 1 -
Business - Risk Factors and ITEM 8 - Consolidated Financial Statements.
<TABLE>
<CAPTION>
                                                                                  Years ended March 31,
                                                          ---------------------------------------------------------------

                                                              2003         2002           2001          2000         1999
                                                          --------      -------       --------      --------      -------
                                                                        (In thousands, except per share data)
Statements of Operations Data:
Revenues:
<S>                                                       <C>           <C>           <C>           <C>           <C>
Product sales                                             $ 18,986      $ 14,583      $ 10,913      $  7,743      $  4,949
Royalty income                                              36,650        26,768        16,157        12,218         9,439
Contract fees                                                  830           696         4,292           700           510
                                                          --------      --------      --------      --------      --------
Total                                                       56,466        42,047        31,362        20,661        14,898
                                                          --------      --------      --------      --------      --------

Operating Costs and Expenses:
Product costs (1)                                            9,059         6,070         3,625         2,262         1,340
Research and development                                    23,714        27,203        28,497        18,665        14,271
Selling, general and administrative                         24,741        24,031        16,849        13,989        10,676
Litigation related costs (2)                                 5,401        11,299        13,782         6,295         2,571
                                                          --------      --------      --------      --------      --------
Total operating expenses                                    62,915        68,603        62,753        41,211        28,858
                                                          --------      --------      --------      --------      --------

Loss from operations                                        (6,449)      (26,556)      (31,391)      (20,550)      (13,960)

Other (expense) income, net                                 (3,941)       (5,023)       (4,867)      (11,855)          651
Equity in loss of affiliate (3)                            (17,598)      (10,947)            -             -             -
                                                          --------      --------      --------      --------      --------

Loss before cumulative effect of
accounting change                                          (27,988)      (42,526)      (36,258)      (32,405)      (13,309)
Cumulative effect of accounting change (4)                       -             -        (6,995)            -             -
                                                          --------      --------      --------      --------      --------

Net loss                                                   (27,988)      (42,526)      (43,253)      (32,405)      (13,309)

Preferred dividends                                           (201)       (1,402)       (2,052)       (2,137)       (1,980)
                                                          --------      --------      --------      --------      --------

Net loss attributed to common stockholders                $(28,189)     $(43,928)    $ (45,305)    $ (34,542)    $ (15,289)
                                                          ========      ========      ========      ========      ========

Basic and diluted net loss per common share               $  (1.19)     $  (2.20)     $  (2.84)     $  (2.24)     $  (1.00)
                                                          ========      ========      ========      ========      ========


Shares used in computing net loss per common share          23,590        19,947        15,929        15,415        15,318
                                                          ========      ========      ========      ========      ========
</TABLE>
<TABLE>
<CAPTION>
                                                                                     March 31,
                                                          ------------------------------------------------------
                                                              2003        2002        2001       2000       1999
                                                          --------    --------    --------    -------    -------
Balance Sheet Data:                                                          (In thousands)
<S>                                                       <C>         <C>          <C>        <C>        <C>
Cash, cash equivalents and short term
investments                                               $ 34,245    $ 74,819     $15,089    $38,486    $34,374
Working capital                                             38,955      71,371       9,096     38,537     32,327
Investment in affiliate (3)                                  9,164       6,243           -          -          -
Total assets                                                75,266     106,198      39,133     57,798     45,823
Long term obligations                                       44,436      48,192      56,821     59,605     32,704
Accumulated deficit                                       (228,011)   (200,023)   (157,497)  (114,244)   (81,839)
Stockholders' equity (deficit)                              12,741      38,519     (36,373)   (11,808)     5,590
</TABLE>

                                       37
<PAGE>



(1) During the year ended March 31, 2002,  product costs included a write-off of
$1.1 million  attributable  to costs  associated  with the  TRICORDER  detection
modules, which had previously been recorded as fixed assets.

(2) During the year ended March 31,  2002,  litigation  related  costs have been
reduced by $5.7 million due to a reimbursement  payment received from F. Hoffman
LaRoche, Ltd. (Hoffman LaRoche), the parent company of Roche, in connection with
the settlement of certain patent infringement litigation with them.

(3) Since inception of our MSD joint venture, we have utilized the equity method
to account for the investment in MSD. In conjunction with entering into the MSD
agreements and taking into account the progress made by MSD in the development
of its products, we determined that, after July 1, 2001, contributions to MSD
would be made based on the future investment benefit expected to be obtained by
us. Therefore, our share of MSD losses, since July 1, 2001, has been recorded as
Equity in Loss of Affiliate. Prior to this date, we accounted for our equity
investments in MSD as research and development funding and accordingly, recorded
all MSD investments as research and development expenses as incurred. These
research and development expenses totaled $2.4 million, $8.3 million, $4.5
million and $3.6 million for the years ended March 31, 2002, 2001, 2000 and
1999, respectively. During the years ended March 31, 2003, 2002, 2001, 2000 and
1999, operating costs allocated to MSD by us in connection with shared personnel
and facilities totaled $11.9 million, $11.4 million, $5.6 million, $3.7 million
and $3.2 million, respectively. Since July 1, 2001, these allocated operating
costs reduced certain Operating Costs and Expenses and increased Equity in Loss
of Affiliate.

(4) For a description of this accounting change, see ITEM 8 - Consolidated
Financial Statements - Notes to Consolidated Financial Statements - Note
1-Organization and Summary of Significant Accounting Policies - Cumulative
Effect of Accounting Change.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

The numbers in this Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations  may  not  tie  directly  to  the  numbers  in  our
Consolidated Financial Statements due to rounding.

OVERVIEW

We and our licensees develop, manufacture and market products based on our
ORIGEN technology. We believe that our ORIGEN technology, which permits the
detection and measurement of biological substances, offers significant
advantages over competing detection and measurement methods by providing a
unique combination of speed, sensitivity, flexibility and throughput in a single
technology platform. Our ORIGEN technology is incorporated into our and our
licensees' instrument systems and related consumable reagents, which are the
fluids used in the performance of tests, or assays, on such instrument systems.
In addition, we offer assay development and other services used to perform
analytical testing.

Our strategy for our ORIGEN technology has been and continues to be based on
entering into license arrangements and collaborations with third parties that
can assist in our commercialization efforts while at the same time directly
developing and commercializing our own products.

LICENSE   ARRANGEMENTS  AND   COLLABORATIONS.   We  have  entered  into  license
arrangements  and  collaborations  with  established  health care  companies  to
commercialize  our  ORIGEN  technology  for  clinical  testing,   which  is  the
diagnostic  testing of patient  samples to measure  the  presence of disease and
monitor medical conditions. Our licensees have developed multiple products lines
for this  market  based  on our  ORIGEN  technology,  and  have  sold or  placed
approximately 9,000 ORIGEN based systems with customers worldwide.

                                       38
<PAGE>



These sales and placements have been made  predominantly by Roche,  which has an
exclusive license for our ORIGEN technology for certain segments of the clinical
testing market and is the world's leading provider of clinical testing products.
Roche has adopted our ORIGEN technology for its Elecsys immunodiagnostic product
line. We receive royalties and contract fees from Roche and our other licensees,
which  accounted for 66% of our revenue in fiscal 2003.  For a discussion of our
relationship  with Roche and the Roche litigation,  see "--License  Arrangements
and  Collaborations--Roche",  "--Risk  Factors-Roche  Litigation"  and ITEM 3 --
"Legal Proceedings".

DIRECT COMMERCIALIZATION EFFORTS. We also directly develop and commercialize our
ORIGEN  technology.  We have  developed,  and continue to develop,  ORIGEN-based
products for the following worldwide markets. Many of our instruments and assays
have been and are being designed to serve customers across multiple markets.

o  BIODEFENSE  AND  INDUSTRIAL  TESTING  - We  are  commercializing  our  ORIGEN
   technology  for  use in the  emerging  markets for biodefense and industrial
   testing. The biodefense market includes products for the detection of
   bacteria,viruses and toxins that may pose a military or public health threat.
   Over the past year, we have worked with  numerous  departments  within the
   Department of Defense  (DOD)  and other  U.S. government agencies to develop
   ORIGEN-based products for the detection of biological agents such as anthrax,
   staphylococcus enterotoxin B and botulinum toxin, among others. We are also
   commercializing our ORIGEN technology for use in the emerging industrial
   market for the detection of foodborne and waterborne  disease causing
   pathogens.  We have begun to sell our first  products for this market,  the
   PATHIGEN  panel of tests for E. coli O157, Salmonella,  Campylobacter and
   Listeria,  which we sell  primarily as a quality control test method to food
   producers, food processors and contract laboratories for the food industry.

o  LIFE SCIENCE - We are commercializing our ORIGEN technology for use in
   drug discovery and development that is performed by pharmaceutical and
   biotechnology companies, universities and other research organizations.
   Certain of our ORIGEN-based systems are used by pharmaceutical and
   biotechnology companies in all phases of drug discovery, including:

         o        validating targets identified through genomics;

         o        screening of large numbers of compounds generated through
                  combinatorial chemistry;

         o        re-testing and optimization of lead compounds; and

         o        clinical trial testing of drug candidates.

We believe the ORIGEN-based systems used in this market provide a number of
advantages relative to other drug discovery technologies, including enhanced
sensitivity and greater ease and speed of assay formatting.

o  CLINICAL  TESTING - We are developing  our ORIGEN  technology to be used in
   certain fields in the clinical testing  market,  particularly  to perform
   tests in  decentralized  sites  outside  of  central  hospital laboratories
   and  clinical  reference  laboratories.  Our present strategy is to focus our
   product  development efforts on patient  care centers such as  physicians'
   offices,  ambulatory  clinics,  hospital  emergency rooms,  surgical and
   intensive  care units, hospital satellite laboratories and nurses' stations.
   We believe our ORIGEN  technology  permits  development of a system that can
   provide  accurate  results to a physician  rapidly, thereby  permitting  the
   physician  to make a more  timely  decision  regarding  the patient's course
   of treatment.

                                       39
<PAGE>
Results of operations in the future are likely to fluctuate  substantially  from
quarter to quarter as a result of various factors,  which include the volume and
timing  of  orders  for  M-SERIES  systems  or other  products;  the  timing  of
instrument  deliveries  and  installations;  the  success  of  M-SERIES  systems
upgrades and enhancements;  the amount of revenue  recognized from royalties and
other contract revenues;  the mix of products sold; whether instruments are sold
to or placed with customers; the timing of the introduction of new products; the
volume and timing of product  returns  and  warranty  claims;  our  competitors'
introduction of new products; the amount of expenses incurred in connection with
the operation of the business,  including costs  associated with the transfer of
improvements  from Roche to us, legal fees,  research and development  costs and
sales and marketing  costs,  including costs for upgrading the M-SERIES  system;
the timing of and results  from the  currently  pending  appeal of our  judgment
against Roche; the timing of termination of the Roche license  agreement,  if at
all;  whether POL  customers'  contracts  are  renewed  and  whether  Roche will
continue to supply service and assays to POL  customers;  our share of losses in
affiliate;  the continued  supply of the materials  that we use in our products;
our manufacturing  capabilities and the volume and timing of product returns and
warranty claims.

We have experienced  significant  operating losses each year since inception and
expect those losses to continue.  Losses have  resulted  from a  combination  of
lower royalty revenue than we believe we are entitled to under the Roche license
agreement,  costs incurred in research and development,  Roche litigation costs,
our  share  of  losses  in  affiliate,  selling  costs  and  other  general  and
administrative costs. We expect to incur additional operating losses as a result
of increases in expenses for  manufacturing,  marketing and sales  capabilities,
research and product development, general and administrative costs and equity in
loss of affiliate,  offset in part by lower Roche litigation  costs. Our ability
to become profitable in the future will be affected by, among other things, our
ability  to expand the  commercialization  of  existing  products;  upgrade  and
enhance the M-SERIES family of products; introduce new products into the market;
generate higher revenue; develop marketing,  sales and distribution capabilities
cost-effectively;  and continue existing  collaborations or establish successful
new collaborations with corporate partners to develop and commercialize products
that incorporate our technologies.

RESULTS OF OPERATIONS

YEARS ENDED MARCH 31, 2003 AND 2002.

REVENUES. Total revenues for the fiscal year ended March 31, 2003 increased by
approximately $14.5 million or 34% to $56.5 million from $42.0 million in fiscal
2002. The revenue growth for fiscal 2003 was due to increases in all revenue
categories - product sales, royalty income and contract fees.

Product  sales were $19.0  million in fiscal  2003,  an increase of 30% over the
prior year's  product sales of $14.6  million.  This growth in product sales was
from the M-SERIES  family of products  ($900,000),  and new sales of  biodefense
products  for  detection  of  biological  agents or toxins  ($3.5  million).  We
anticipate  continued  increases in biodefense  related sales as a result of our
ongoing  biodefense  initiatives.  We  have a  contract  with  the  DOD  for the
production  of tests for the  detection  of  specific  toxins  in  environmental
samples.  This  contract  provides  for  product  sales at the  election  of the
government of up to a total of $23.0 million over four years, with approximately
$7.0 million of product  sales  through June 2004.  For each contract year after
June 2004,  the DOD, at its option,  may elect to purchase  products from us but
has no obligation  to do so. Sales to POL  customers  totaling $2.5 million were
unchanged from the prior year. We began serving these POL customers in June 2000
when Roche  transferred  the  customers in order to comply with a court  ordered
preliminary  injunction.  In February  2002,  the District  Court issued a final
order of judgment against Roche,  which does not require Roche to renew existing
POL contracts,  some of which are scheduled to expire during fiscal 2004. In the
event POL  customer  contracts  are not renewed,  future POL product  sales from
these contracts would experience a decline.

Royalty income was $36.7 million in fiscal 2003, an increase of 37% over the
prior year's royalty income of $26.8 million. Royalties from Roche represent
approximately $35.5 million (97%) of the total royalty income for fiscal 2003 as
compared to approximately $25.7 million (96%) for fiscal 2002.

                                       40
<PAGE>

These increases are attributable to higher Roche sales of its Elecsys and E170
product lines, which are based on our ORIGEN technology that was licensed to
Roche under the Roche license agreement, as well as certain modifications made
by Roche to their methodology for computing and paying royalties as a result of
the Roche litigation. While we are not satisfied that Roche is properly
calculating and paying the required royalties, the recent changes in the way in
which Roche calculates and pays its royalties to us is expected to have a
continued positive impact on our royalty income in future periods. We have
voluntarily agreed not to terminate the Roche license agreement until the
Appellate Court determines that we are entitled to do so; however, we have
notified Roche that the Roche license agreement will terminate immediately in
the event the Appellate Court issues an opinion confirming judgment rendered by
the District Court in the Roche litigation that we are entitled to terminate the
Roche license agreement. In the event the Roche license agreement is terminated,
our royalty income from Roche would cease. See ITEM 3 - "Legal Proceedings".

Contract fees in the current fiscal year increased to $830,000 from $696,000
last year. These fees related primarily to work completed in conjunction with
the development of clinical assays for Roche. In the event the Roche license
agreement is terminated, revenue from these fees would cease.

OPERATING COSTS AND EXPENSES. Product costs were $9.1 million (48% of product
sales) for fiscal 2003 compared to $6.1 million (42% of product sales) for
fiscal 2002. Product costs for fiscal 2003, as a percentage of product sales,
increased due to costs incurred in connection with the recent launch of our new
M-SERIES 384 instrument for life science customers and related warranty costs
(8% of product sales in the current year), third party leasing costs incurred by
us related to instruments being used by POL customers, which were previously
paid by Roche (3% of product sales in the current year), as well as a change in
the product mix (instrumentation vs. consumable reagents) from the prior year.

Included in product costs for fiscal 2002 is a write-off of $1.1 million of
TRICORDER detection modules costs, previously recorded as fixed assets. The
TRICORDER modules are incorporated into customers' M-SERIES systems and continue
to be utilized by customers to generate ongoing reagent product sales.

Research and development expenses decreased $3.5 million (13%) in fiscal year
2003 to $23.7 million from $27.2 million in fiscal year 2002. Of the $27.2
million in fiscal 2002, $2.4 million was spent funding MSD joint venture
activities prior to the amendment and extension of the MSD joint venture
agreements in August 2001. See "--Equity in Loss of Affiliate" below for a
discussion of MSD activity in fiscal 2003 and 2002. Research and development
expenses primarily relate to ongoing development costs and product enhancements
associated with the M-SERIES family of products, development of new assays for
the life science and clinical markets, and research and development of new
systems and technologies, including hospital point-of-care products. We expect
research and development costs to increase as product development and core
research continue to expand, including costs associated with our efforts in
developing biodefense testing products.

Selling, general and administrative expenses were $24.7 million in fiscal 2003,
an increase of $700,000 (3%) over the prior year's total of $24.0 million. This
increase was primarily attributable to our hiring additional personnel and
support costs required to support the growth in sales and customers.

Costs related to the Roche litigation, which include financial and legal
advisory fees associated with settlement discussions, were $5.4 million and
$11.3 million for fiscal 2003 and 2002, respectively. The fiscal 2002 amount is
net of a $5.7 million settlement payment for a patent infringement action made
by Hoffman LaRoche to us. The decline in litigation costs in the current year
reflects the lower costs associated with moving from the trial phase to the
appellate phase of the Roche litigation.

Since  1995, we have  engaged  the law firm of Wilmer,  Cutler &  Pickering  to
provide legal services in connection with the Roche litigation and various other
matters. A partner of the law firm, Richard W. Cass, is one of our directors. In
addition,  Jennifer  M.  Drogula,  who became the  daughter-in-law  of our Chief
Executive Officer in March 2002, is a partner of the firm.

                                       41
<PAGE>

We recorded  approximately $1.8 million and $11.2 million in legal fees with the
law firm for the years ended March 31, 2003 and 2002, respectively.

We have also engaged the law firm of Hale and Dorr LLP to provide legal services
in connection with the Roche litigation and otherwise. We first engaged this law
firm in  1994.  Deborah  Wohlstadter,  the  wife of  Jacob  Wohlstadter  and the
daughter-in-law of our Chief Executive Officer since December, 2001, is a junior
partner of that law firm. We recorded  approximately $396,000 in legal fees with
that law firm for the year ended March 31, 2003.

Our  Chief  Executive  Officer,  Samuel J.  Wohlstadter,  is the  principal  and
controlling  stockholder,  a director and the Chief Executive Officer of each of
Wellstat  Biologics  Corporation  (Wellstat  Biologics),  Wellstat  Therapeutics
Corporation (Wellstat Therapeutics), Hyperion Catalysis International (Hyperion)
and  Proteinix  Corporation  (Proteinix).  Our  President  and  Chief  Operating
Officer,  Richard J. Massey,  is also a director of Hyperion and a less than 10%
stockholder  in  Proteinix.   These  companies  are  therefore   considered  our
affiliates  for  the  purpose  of  this  discussion.  We  have  shared  services
arrangements  with each of these  affiliated  companies.  These shared  services
include  accounting  and  finance,  human  resources  and  other  administrative
services, as well as facility related costs and services.  Shared services costs
allocated to these companies totaled $1.0 million and $1.3 million for the years
ended March 31, 2003 and 2002,  respectively,  which reduced  certain  Operating
Costs  and  Expenses  for the  respective  years.  Amounts  allocated  to  these
affiliated  companies  are  calculated  and billed  monthly based upon costs
incurred by the Company  and are  determined  through  allocation  methods  that
include  time spent and square  footage  utilized.  Amounts due from  affiliated
companies under the shared services arrangements were approximately $200,000 and
$100,000 at March 31, 2003 and 2002, respectively which were paid subsequent to
each  respective  year-end.  See ITEM 13 -- "Certain  Relationships  and Related
Party Transactions".

INTEREST AND OTHER EXPENSE. Interest and other expense, net of interest income,
were $3.9 million in fiscal 2003 and $5.0 million in fiscal 2002. This decrease
in net interest expense resulted from a growth in interest income in the current
year due to a higher average cash and investment balance, as well as a reduction
of interest expense on current year debt service.

EQUITY IN LOSS OF AFFILIATE. MSD is a joint venture formed by MST and us in
1995. MSD was formed for the development and commercialization of products
utilizing a propriety combination of MST's multi-array technology together with
our technology. In conjunction with entering into the MSD agreements and taking
into account the progress made by MSD in the development of its products, we
determined that future contributions to MSD would be made based on the future
investment benefit we expect to obtain. Accordingly, our contributions to MSD
since July 1, 2001 have been recorded as Investment in Affiliate and we have
recorded approximately 100% of MSD's losses since that date as Equity in Loss of
Affiliate. For the year ended March 31, 2003, our Equity in Loss of Affiliate
totaled $17.6 million compared to $10.9 million in the prior year. This increase
is due to higher losses incurred by MSD in fiscal 2003 ($4.3 million), as well
as $2.4 million of fiscal 2002 MSD costs incurred prior to July 1, 2001 that
were recorded as research and development expenses. See ITEM 1 --
"Business-License Arrangements and Collaborations - Meso Scale Diagnostics,
LLC", and ITEM 13 -- "Certain Relationships and Related Transactions".

NET LOSS. The net loss for fiscal year 2003 was $28.0 million ($1.19 per common
share, after consideration of the effect of preferred dividends) compared to a
net loss of $42.5 million ($2.20 per common share, after consideration of the
effect of preferred dividends) in fiscal year 2002. As of March 31, 2003, we had
net operating loss and general business credit tax carryforwards of
approximately $213.6 million, which expire at various times through 2023,
including $6.8 million during 2004. Our ability to utilize net operating loss
and general business credit tax carryforwards may be subject to an annual
limitation in future periods pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Code of 1986, as amended.

YEARS ENDED MARCH 31, 2002 AND 2001.

REVENUES. Total revenues for the fiscal year ended March 31, 2002 increased by
approximately $10.6 million or 34% to $42.0 million from $31.4 million in fiscal
2001. The revenue growth for fiscal 2002 was due to increases in product sales
and royalty income.
                                       42
<PAGE>


Product sales were $14.6 million in fiscal 2002, an increase of 34% over the
prior year's product sales of $10.9 million. This growth in product sales was
led by the M-SERIES family of products ($3.2 million), as well as, the revenue
generated from the sale of clinical diagnostic assays to POL customers in the
United States, which increased by $500,000. We began serving these POL customers
in June 2000 when Roche transferred the customers in order to comply with a
court ordered preliminary injunction. In February 2002, the District Court
issued a final order of judgment against Roche which does not require Roche to
renew existing POL contracts, some of which are scheduled to expire during
fiscal year 2004.

Royalty income was $26.8 million in fiscal 2002, an increase of 66% over the
prior year's royalty income of $16.2 million. Royalties from Roche represent
approximately $25.7 million (96%) of the total royalty income for fiscal 2002 as
compared to approximately $15.3 million (94%) for fiscal 2001. These increases
are attributable to higher Roche sales of its Elecsys and E170 product lines,
which are based on our ORIGEN technology that was licensed to Roche under the
Roche license agreement, as well as certain modifications made by Roche to their
methodology for computing royalties as a result of the Roche litigation.

Contract  revenue in fiscal  2002  decreased  to $696,000  from $4.3  million in
fiscal 2001.  The 2002 fees related  primarily to work  completed in conjunction
with the  development of assays for Roche.  The prior year's  contract fees were
primarily from  non-recurring  amounts  received in connection with our alliance
with Bayer Diagnostics.

OPERATING COSTS AND EXPENSES. Product costs were $6.1 million (42% of product
sales) for fiscal 2002 compared to $3.6 million (33% of product sales) for
fiscal 2001. Included in product costs for fiscal 2002 is a write-off of $1.1
million of TRICORDER detection modules costs, previously recorded as fixed
assets. The TRICORDER modules are incorporated into customers M-SERIES systems
and continue to be utilized by customers to generate ongoing reagent product
sales. The impact on prior individual annual periods was not significant.

Research and development expenses decreased $1.3 million (5%) in fiscal year
2002 to $27.2 million from $28.5 million in fiscal year 2001. Funding of the MSD
joint venture activities prior to the amendment and extension of the MSD joint
venture agreements in August 2001 was $2.4 million in 2002 and $8.3 million in
2001. See "--Equity in Loss of Affiliate" below for a discussion of MSD activity
in fiscal 2002. The 2002 increase in other research and development expense of
$4.6 million (23%) is primarily due to ongoing development costs and product
enhancements associated with the M-SERIES family of products, development of new
assays for the life sciences market and research and development of new systems
and technologies, including hospital point-of-care products.

Selling, general and administrative expenses were $24.0 million in fiscal 2002,
an increase of $7.1 million (43%) over the prior year's total of $16.9 million.
This increase was primarily attributable to additional personnel costs of $4.6
million required to support the growth in sales and customers, as well as legal
and other expenses of $1.6 million largely associated with the amendment and
extension of the MSD agreements.

Costs related to the Roche litigation were offset by a settlement payment we
received from Hoffman LaRoche related to patent litigation during fiscal 2002
regarding a claim by Hoffman LaRoche that we and one of our licensees infringed
on a patent held by Hoffman LaRoche. Under the terms of the settlement, Hoffman
LaRoche dismissed, with prejudice, all claims against us, reimbursed us for our
legal fees incurred in defending this litigation which totaled approximately
$5.7 million and granted us a fully paid-up, perpetual, worldwide, non-exclusive
license (with the right to sublicense) under the patent in suit. Absent this
settlement, costs related to our litigation increased $3.2 million (23%) to
$17.0 million in fiscal 2002 from $13.8 million in fiscal 2001. The increases
are attributable to expanded activities in several areas, including pre-trial
motions and the preparation and conduct of the trial that ran from October 2001
through January 10, 2002. The increased litigation costs also included financial
and legal advisory fees associated with settlement discussions with Roche.

                                       43
<PAGE>



Since 1995,  have engaged the law firm of Wilmer,  Cutler & Pickering to provide
legal  services  in  connection  with the Roche  litigation  and  various  other
matters. A partner of the law firm, Richard W. Cass, is one of our directors. In
addition,  Jennifer  M.  Drogula,  who became the  daughter-in-law  of our Chief
Executive  Officer  in  March  2002,  is a  partner  of the  firm.  We  recorded
approximately $11.2 million and $5.8 million in legal fees with the law firm for
the years ended March 31, 2002 and 2001, respectively.

Our  Chief  Executive  Officer,  Samuel J.  Wohlstadter,  is the  principal  and
controlling  stockholder,  a director and the Chief Executive Officer of each of
Wellstat Biologics, Wellstat Therapeutics, Hyperion and Proteinix. Our President
and Chief Operating  Officer,  Richard J. Massey, is also a director of Hyperion
and a less than 10%  stockholder  in  Proteinix.  These  companies are therefore
considered  our affiliates  for the purpose of this  discussion.  We have shared
services  arrangements  with each of these  affiliated  companies.  These shared
services   include   accounting   and  finance,   human   resources   and  other
administrative services, as well as facility related costs and services.  Shared
services  costs  allocated  to these  companies  totaled  $1.3  million and $1.4
million for the years ended March 31, 2002 and 2001, respectively, which reduced
certain Operating Costs and Expenses for the respective years. Amounts allocated
to  affiliated  companies  are  calculated  and billed  monthly based upon costs
incurred by us and are determined  through  allocation methods that include time
spent and square footage  utilized.  The amounts due from  affiliated  companies
under the shared services  arrangements was approximately  $100,000 at March 31,
2002, which was paid subsequent to year-end.  See ITEM 13 --
"Certain Relationships and Related Party Transactions".

INTEREST AND OTHER EXPENSE. Interest and other expense, net of interest income,
were $5.0 million in fiscal 2002 and $4.9 million in fiscal 2001.

EQUITY  IN  LOSS  OF  AFFILIATE.  In  conjunction  with  entering  into  the MSD
agreements  and taking into account the progress made by MSD in the  development
of its products,  we determined that future  contributions  to MSD would be made
based on the future  investment  benefit we expect to obtain.  Accordingly,  our
contributions  to MSD since July 1, 2001 have been  recorded  as  Investment  in
Affiliate  and we have  recorded  approximately  100% of MSD's losses since this
date as Equity in Loss of  Affiliate.  MSD incurred a net loss of $13.5  million
for the year ended March 31, 2002 of which $10.9  million was recorded as Equity
in Loss of  Affiliate.  In addition,  in  connection  with entering into the MSD
agreements  in August 2001,  we  transferred  certain  equipment  and  leasehold
improvements  to MSD in an amount of  $839,000,  which amount is included in the
contributions to MSD in such year. See ITEM 1-"Business-License Arrangements and
Collaborations   -  Meso  Scale   Diagnostics,   LLC",  and  ITEM  13-  "Certain
Relationships and Related Transactions".

NET LOSS. The net loss for fiscal year 2002 was $42.5 million ($2.20 per common
share, after consideration of the effect of preferred dividends) compared to a
net loss of $43.3 million ($2.84 per common share, after consideration of the
effect of preferred dividends) in fiscal year 2001. The loss in the prior year
comparable period included a one-time, non-cash charge of $7.0 million ($0.44
per share) to record the cumulative effect of an accounting change resulting
from the adoption of Emerging Issue Task Force Release No. 00-27.

LIQUIDITY AND CAPITAL RESOURCES

We have financed operations through the sale of preferred and common stock, debt
financings and the placement of convertible debentures. In addition, we have
received funds from research and licensing agreements, sales of our ORIGEN line
of products and royalties from product sales by licensees. As of March 31, 2003,
we had $34.2 million in cash, cash equivalents and short-term investments, with
working capital of $39.0 million.

Net cash used in operations was $10.0 million, $27.0 million and $27.4 million
during the years ended March 31, 2003, 2002 and 2001, respectively. The decrease
in cash used in 2003 was due primarily to a reduction in the current year's net
loss, as compared to prior years.

                                       44
<PAGE>


We used approximately $3.3 million, $5.6 million, and $4.9 million of cash for
the acquisition of equipment and leasehold improvements during the years ended
March 31, 2003, 2002 and 2001, respectively. Our investments in MSD totaled
$20.5 million, $19.6 million and $8.3 million for the years ended March 31,
2003, 2002 and 2001, respectively.

We believe material commitments for capital expenditures and additional or
expanded facilities may be required in a variety of areas, such as product
development programs. We have not, at this time, made material commitments for
any such capital expenditures or facilities and have not secured additional
sources, if necessary, to fund such commitments. If we are unable to fund such
commitments, we may have to scale back or even eliminate some programs or plans.

Net cash used for financing activities was $6.3 million during the year ended
March 31, 2003, while net cash provided by financing activities was $108.8
million and $9.0 million during the years ended March 31, 2002 and 2001,
respectively. The net use of funds in 2003 was primarily due to debt service of
$5.1 million and Series B Convertible Preferred dividend payments of $3.4
million, offset by a loan repayment of $1.6 million. The net provision of funds
in 2002 and 2001 was primarily due to cash received from the issuance of common
stock of $116.8 million and $12.9 million, respectively, offset by debt service,
Series B Convertible Preferred dividend payments and, in 2001, an increase in
restricted cash totalling $8.0 million and $3.9 million, respectively. During
fiscal 2003, all Series B Convertible Preferred shares were converted into
common stock and there are no remaining Series B shares outstanding.

As of March 31, 2003, our material future obligations were as follows:
<TABLE>
<CAPTION>


                                                                               Years Ended March 31,
                                              ------------------------------------------------------------------------
                                                                                                                     2009 and
Contractual Obligations (in thousands)         Total         2004        2005        2006        2007        2008    Thereafter
-------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>         <C>         <C>             <C>         <C>         <C>
Note payable                                  $18,065     $ 5,523     $ 6,008     $ 6,534     $     -     $     -     $     -
Subordinated convertible debentures            35,000           -      35,000           -           -           -           -
MSD funding commitment                         20,659      20,659           -           -           -           -           -
Operating and capital leases                    6,188       2,185       2,334         653         357         258         401
                                              -------     -------     -------     -------     -------     -------     -------
Total contractual obligations                 $79,912     $28,367     $43,342     $ 7,187     $   357     $   258     $   401
                                              =======     =======     =======     =======     =======     =======     =======
</TABLE>


MSD is a joint venture formed by MST and us in 1995.  Under the MSD  agreements,
our  funding  commitment  is based on an  annual  budget of MSD  approved  by an
independent  committee of our Board of Directors.  Our funding commitment may be
satisfied in part through in-kind contributions of scientific and administrative
personnel  and  shared  facilities.  An  independent  committee  of our Board of
Directors  approved  funding  for MSD for the  period  from  January  1, 2003 to
November 30, 2003 in an amount of $20.6 million, subject to a permitted variance
of fifteen percent.  As of March 31, 2003, our remaining  funding  commitment to
MSD was $17.0  million.  In addition,  prior to November 30, 2003, we would also
pay  approximately  $3.7 million to MSD related to the permitted budget variance
from prior years,  which is included in the MSD funding  commitment in the table
above.  For the  years  ended  March 31,  2003,  2002 and  2001,  we made  total
contributions  to  MSD  of  $20.5  million,  $19.6  million  and  $8.3  million,
respectively.  Operating  leases in the table above excludes amounts expected to
be allocated to MSD to meet a portion of our funding commitment.

The MSD joint  venture  agreement  will  expire on  November  30,  2003,  unless
renewed. In addition,  MST and MSD have the right to terminate the joint venture
under certain  circumstances,  including a change in control of the Company,  as
defined. Upon the expiration of the MSD joint venture as a result of non-renewal
or the  termination  by MSD and MST of the joint  venture,  MSD and MST have the
right to purchase our interest in MSD for a purchase  price equal to fair market
value (to be determined in accordance  with the  provisions  and  procedures set
forth in the MSD  agreements)  minus a discount factor varying from 7.5%, in the
case  of  non-renewal  and  certain  other  events,  to  15.0%,  in the  case of
termination because of a breach by us and certain other events.



                                       45
<PAGE>



If MSD or MST exercises this right, it will be entitled to pay us the purchase
price, plus interest, over time in installments equal to the sum of five percent
of MSD Net Sales, as determined in accordance with the MSD agreements, and
twenty percent of the net proceeds realized by MSD from the sale of debt or
equity securities in any third party financing after the date of the sale of our
interest in MSD.

MSD has an employment agreement with Jacob Wohlstadter,  its President and Chief
Executive Officer, the current term of which runs through November 30, 2004, and
provides  for a salary of $250,000 for the year ending  December  31,  2003.  In
addition, Jacob Wohlstadter is also eligible to receive, at the discretion of an
independent committee of the Company's Board of Directors,  an annual cash bonus
in an amount not to exceed  20% of his  annual  salary.  If MSD  terminates  the
employment  agreement  without  cause,  or  Jacob  Wohlstadter   terminates  the
employment  agreement for good reason  (which  includes a "change in control" of
the Company,  as defined),  Jacob Wohlstadter  shall be entitled to receive,  in
addition to salary and pro rata bonus and  adjustments  earned  through the 60th
day following the notice of  termination,  an amount equal to from 3 to 12 times
(depending on the reason for the termination) the monthly pro rata salary, bonus
and adjustments in effect at the time of the termination. We are responsible for
all amounts payable,  costs incurred and other  obligations under the employment
agreement, which generally are expected to be paid out of our funding commitment
to MSD.

For more information about the MSD agreements and our relationship with
MSD, see ITEM 13--"Certain Relationships and Related Transactions."

Roche has the right to  continue  to market  its  Elecsys  products  within  its
licensed field, however, in the event the Roche license agreement is terminated,
Roche  will no  longer  have  this  right.  We have  voluntarily  agreed  not to
terminate the Roche license  agreement until the Appellate Court determines that
we are entitled to do so; however, we have notified Roche that the Roche license
agreement will terminate  immediately in the event the Appellate Court issues an
opinion  confirming  our  right  to do  so.  Termination  of the  Roche  license
agreement would have a material adverse effect on our royalty income unless, and
until,  we enter into one or more strategic  partnerships  with other  companies
that are able to develop and  commercialize  diagnostic  instruments in a manner
that  provides  comparable  revenues to us. We cannot assure you that we will be
able to enter into one or more strategic  partnerships on favorable terms, if at
all.

We have a substantial amount of indebtedness, and there is a possibility that we
may be unable to generate cash or arrange financing sufficient to pay the
principal of, interest on and other amounts due with respect to indebtedness
when due, or in the event any of it is accelerated. In the event the Roche
license agreement is terminated, the holders of the $18.1 million of our 8.5%
senior secured notes outstanding as of March 31, 2003 would be entitled to
accelerate those obligations. If the 8.5% senior secured notes had been
accelerated at March 31, 2003, we would have incurred approximately $1.4 million
in prepayment costs. In addition, as of March 31, 2003, $35 million in aggregate
principal amount of our 5% subordinated convertible debentures due 2005 were
outstanding. Our debentures provide that, in the event debt of the Company in an
outstanding principal amount of $2 million or greater is accelerated and not
satisfied within 20 business days, the holders of the debentures may accelerate
our obligations under the debentures and cause the debentures to be immediately
due and payable. We may not have sufficient funds to pay our debt if any of it
is accelerated. In addition, our indebtedness may require that we dedicate a
substantial portion of our expected cash flow from operations to service
indebtedness, which would reduce the amount of expected cash flow available for
other purposes, including working capital and capital expenditures.

                                       46
<PAGE>



We need substantial amounts of money to fund operations. In this regard, from
time to time we have discussions with third parties, including multinational
corporations, regarding various business arrangements including distribution,
marketing, research and development, joint venture and other business
agreements, which could provide for substantial up-front fees or payments.
Further, we are considering and evaluating the advisability and feasibility of a
variety of financing alternatives, which could be completed in the near term,
including issuance of additional debt or equity securities. We cannot assure you
that we will successfully complete any of the foregoing arrangements and access
to funds could be adversely impacted by many factors, including the results of
the Roche litigation, the volatility of the price of our common stock,
continuing losses from operations, establishment of new business arrangements,
the status of new product launches, general market conditions and other factors
described under ITEM 1 "Business--Risk Factors" and elsewhere in this Form 10-K.

We  believe  that  existing  capital  resources,   together  with  revenue  from
royalties,  product sales and contract fees will be adequate to fund  operations
through the middle of calendar year 2004.  If we are unable to raise  additional
capital or in the event the Roche license  agreement is terminated,  we may have
to scale back, or even eliminate, some programs.  Alternatively, we may consider
pursuing  arrangements  with  other  companies,  such as  granting  licenses  or
entering  into  joint  ventures  or  collaborations,  on  terms  that may not be
favorable to us.

As of March 31, 2003, we had no off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

A critical accounting policy is one that is both important to the portrayal of
our financial position and results of operations and requires the application of
difficult, subjective or complex judgments by our management. As a result, they
are subject to an inherent degree of uncertainty. In applying those policies,
our management uses its judgment to determine the appropriate assumptions to be
used in the determination of certain estimates. These estimates are based on our
historical experience, terms of existing contracts, our observance of trends in
the industry, information provided by our customers, and information available
from other outside sources, as appropriate. Our significant accounting polices
include:

Revenue Recognition - We derive revenue principally from three sources: product
sales, royalty income and contract fees. Product sales revenue is generally
recognized when persuasive evidence of an arrangement exists, title and risk of
loss has been transferred, the price to the buyer is fixed and determinable, and
collectibility is reasonably assured. Rental revenue associated with instruments
that are leased is recognized ratably over the life of the lease agreements. We
also offer extended warranty arrangements to customers with the resulting
revenue recognized over the term of the contract. Royalty income is recorded
when earned based on information provided by licensees. See ITEM 8 --
Consolidated Financial Statement -- Notes to Consolidated Financial Statement --
Note 12 -- Litigation. Revenue from services performed under contracts is
recognized over the term of underlying customer contract or at the end of the
contract, when obligations have been satisfied. For services performed on a time
and material basis, revenue is recognized upon performance. Amounts received in
advance of performance under contracts or commercialization agreements are
recorded as deferred revenue until earned.

The majority of our product sales and contract fees contain standard terms and
conditions. Certain transactions may contain negotiated terms that require
contract interpretation in order to determine the appropriate amount of revenue
to be recognized. In addition, we must assess whether collectibility is
reasonably assured. While management believes its interpretations and judgments
are reasonable, different assumptions could result in changes in the timing of
revenue recognition.

                                       47
<PAGE>



Equity Accounting - We account for our ownership in the MSD joint venture on the
equity method as we have determined that we do not control MSD's operations.
Factors considered in determining our level of control include the fact that we
own less than 50% of the voting equity interest in MSD; that we do not have
exclusive authority over MSD decision making and have no ability to unilaterally
modify the joint venture agreements; and that we have the right to appoint only
one out of two seats on MSD's board of managers. A different assessment of these
factors could provide for the use of consolidation accounting rather than the
equity method, in which case a consolidation of our financial statements with
those of MSD would be appropriate. Consolidation accounting would require
certain reclassifications within our consolidated financial statements but would
not materially effect our financial position or net loss. See ITEM 8 -
Consolidated Financial Statements - Notes to Consolidated Financial Statements -
Note 6 - Meso Scale Diagnostics Joint Venture.

Available-For-Sale Securities - Our short-term investments consist of marketable
securities with original maturities of greater than three months. Due to the
fact that market or business conditions may lead us to sell a short-term
investment prior to maturity, we classify our short-term investments as
"available-for-sale". Investments in securities that are classified as
available-for-sale and have readily determinable fair values are measured at
fair market value in the balance sheets, and unrealized holding gains and losses
for these investments are reported as a separate component of stockholders'
equity until realized. All of our "available for sale" securities are included
in current assets as management considers the securities readily available to
fund current operations.

If we held investments that were classified as "held-to maturity" securities,
these would be carried at amortized cost rather than at fair market value. If we
held investments that were classified as "trading" securities, these would be
carried at fair market value, with a corresponding adjustment to earnings for
any change in fair market value.

Allowance for Doubtful Accounts - We maintain reserves on customer accounts
where estimated losses may result from the inability of our customers to make
required payments. These reserves are determined based on a number of factors,
including the current financial condition of specific customers, the age of
accounts receivable balances and historical loss rates. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, an additional allowance may be required.

Inventory - We carry our inventory at the lower of cost or market using the
first-in, first-out method. We regularly review inventory quantities on hand and
record a reserve for excess and obsolete inventory based primarily on an
estimated forecast of product demand and production requirements for the next
twelve months. Reserves are recorded for the difference between the cost and the
market value. Those reserves are based on significant estimates. Our estimates
of future product demand may prove to be inaccurate, in which case we may have
understated or overstated the provision required for excess and obsolete
inventory. In addition, our industry is characterized by technological change;
frequent new product development and product obsolescence that could result in
an increase in the amount of obsolete inventory quantities on hand. Although we
make every effort to ensure the accuracy of our forecasts of future product
demand, any significant unanticipated changes in demand or technological
developments could have a significant impact on the values of our inventory and
our reported operating results.

Value of Long-lived Assets - We have different long-lived assets recorded on our
balance sheet that include equipment and leasehold improvements, investments and
other assets. We evaluate the potential impairment of long-lived assets based
upon current estimated market values and projections of undiscounted cash flows
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be fully recoverable. While management believes that estimates
are reasonable and that no impairment of these assets exists, different
assumptions could affect these evaluations and result in impairment charges
against the carrying value of these assets.

                                       48
<PAGE>


Warranty Reserve - We warrant our products against defects in material and
workmanship for one year after sale and record estimated future warranty costs
at the time revenue is recognized. A reserve for future warranty claims is
recorded based upon management's review of historical results and expectations
of future costs. Unanticipated changes in actual warranty costs could impact our
operating results.

Capitalized Software Costs - We record software development costs in accordance
with SFAS No. 86 "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed." We apply our judgment in determining when
software being developed has reached technological feasibility, and at that
point we would capitalize software development costs. Through March 31, 2003,
software development has been substantially completed concurrently with the
establishment of technological feasibility, and accordingly, no costs have been
capitalized to date.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" (SFAS
145). SFAS 145 requires the classification of gains and losses from
extinguishments of debt as extraordinary items only if they meet certain
criteria for such classification in APB No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions". Any
gain or loss on extinguishments of debt classified as an extraordinary item in
prior periods that does not meet the criteria must be reclassified as other
income or expense. These provisions are effective for fiscal years beginning
after May 15, 2002. Additionally, SFAS 145 requires sale-leaseback accounting
for certain lease modifications that have economic effects similar to
sale-leaseback transactions. These lease provisions are effective for
transactions occurring after May 15, 2002. SFAS 145 is not expected to have a
material effect on our financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" (SFAS 146). SFAS 146 replaces Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs incurred in a Restructuring)". SFAS 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS 146 is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002. SFAS 146 is not expected to have a material effect on our financial
position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," (FIN 45). FIN 45 establishes new disclosure and
liability recognition requirements for direct and indirect debt guarantees with
specified characteristics. The initial recognition and measurement provisions of
FIN 45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The disclosure requirements in this Interpretation are
effective for financial statements of interim or annual periods ending after
December 15, 2002. We adopted FIN 45 as of March 31, 2003 and the implementation
did not have a material effect on our results of operations or financial
position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation- Transition and Disclosure- an amendment of SFAS 123" (SFAS 148).
SFAS 148 amends SFAS 123 "Accounting for Stock-Based Compensation" (SFAS 123) to
provide alternative methods of voluntarily transitioning to the fair value based
method of accounting for stock-based employee compensation. SFAS 148 also amends
the disclosure requirements of SFAS 123 to require disclosure of the method used
to account for stock-based employee compensation and the effect of the method on
reported results in both annual and interim financial statements. This
pronouncement is effective for both annual and interim periods beginning after
December 15, 2002.

                                       49
<PAGE>



We have elected to continue to follow the recognition and measurement principles
of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees," in our accounting for employee stock options. In accordance with
SFAS 148, we have adopted the annual period disclosure requirements in this Form
10-K and will adopt the disclosure provisions effective for interim periods in
our fiscal quarter ending June 30, 2003.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 provides guidance on the
consolidation of certain entities in which equity investors do not have the
characteristics of a controlling financial interest. Such entities are referred
to as variable interest entities. FIN 46 was effective immediately for variable
interest entities created or acquired after January 31, 2003 and is effective
July 1, 2003 for variable interest entities created or acquired on or before
January 31, 2003. We are in the process of evaluating the impact of adopting FIN
46. It is possible that the adoption of FIN 46 might require that our investment
in MSD and the results of MSD's operations be consolidated in our financial
statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
amendments set forth in SFAS 149 improve financial reporting by requiring that
contracts with comparable characteristics be accounted similarly. SFAS 149 is
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. We do not expect the
adoption of this pronouncement to have a material effect on our financial
position or results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Changes in interest rates do not affect interest expense incurred on our
long-term borrowings because they bear interest at a fixed rate. The principal
terms of this debt are as follows:

-        Note payable with John Hancock Life Insurance Company: $30 million
         principal ($18.1 million principal at March 31, 2003), seven year, 8.5%
         Senior Secured Notes secured by future royalty revenue from Roche,
         maturing in 2006 with quarterly principal and interest payments through
         March 2006.

-        Subordinated convertible debentures: $35 million principal, 5% interest
         maturing January 2005 with semi-annual interest payments in cash or
         equivalent value of Common Stock.

However, we run a risk that market rates will decline and that the interest rate
will exceed those based on the then-current market rate. We are currently not
using interest rate derivative instruments to manage our exposure to interest
rate changes.

Interest income earned on our investment portfolio is affected by changes in the
general level of interest rates. We have invested excess cash generally in
securities of the U.S. Treasury, money market funds, certificates of deposit and
corporate bonds.

We invest excess cash in accordance with a policy approved by our Board of
Directors. This policy is designed to provide both liquidity and safety of
principal. The policy limits investments to certain types of instruments issued
by institutions with strong investment grade credit ratings and places
restrictions on our investments by terms and concentrations by type and issuer.

Given the amount invested as of March 31, 2003, a 1% change in the LIBOR rate
would not have a material effect on our interest income.

                                       50
<PAGE>


We are exposed to changes in exchange rates where we sell direct in local
currencies, primarily in the United Kingdom and Germany. Certain other foreign
sales are denominated in U.S. dollars and have no exchange rate risk. Gains and
losses resulting from foreign currency transactions have historically not been
material.

<TABLE>
<CAPTION>



<S>  <C>
ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                PAGE

Independent Auditors' Report                                                                               52

Consolidated Statements of Operations for the Years                                                        53
  Ended March 31, 2003, 2002 and 2001

Consolidated Balance Sheets at March 31, 2003 and 2002                                                     54

Consolidated Statements of Cash Flows for the Years                                                        55
  Ended March 31, 2003, 2002 and 2001

Consolidated Statements of Stockholders' Equity (Deficit) for the Years                                    56
  Ended March 31, 2003, 2002 and 2001

Notes to Consolidated Financial Statements                                                                 57

We also incorporate herein by this reference Meso Scale Diagnostics, LLC.,
Financial Statements at December 31, 2002 and 2001, and for each of the three
years ended in the period ended December 31, 2002, and Independent Auditors'
Report filed as Exhibit 99.2 to this report.
</TABLE>


                                       51
<PAGE>












INDEPENDENT AUDITORS' REPORT

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
 OF IGEN INTERNATIONAL, INC.:


We have audited the accompanying consolidated balance sheets of IGEN
International, Inc. (the "Company") as of March 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the three years in the period ended March 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
March 31, 2003 and 2002, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2003, in conformity
with accounting principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP

McLean, Virginia
May 14, 2003



                                       52
<PAGE>



                            IGEN INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                       Years Ended March 31,
                                                           --------------------------------------------
REVENUES:                                                      2003              2002              2001
                                                           --------          --------          --------
<S>                                                        <C>               <C>               <C>
Product sales                                              $ 18,986          $ 14,583          $ 10,913
Royalty income                                               36,650            26,768            16,157
Contract fees                                                   830               696             4,292
                                                           --------          --------          --------
Total                                                        56,466            42,047            31,362
                                                           --------          --------          --------

OPERATING COSTS AND EXPENSES:
Product costs                                                 9,059             6,070             3,625
Research and development                                     23,714            27,203            28,497
Selling, general, and administrative                         24,741            24,031            16,849
Litigation related costs                                      5,401            11,299            13,782
                                                           --------          --------          --------
Total                                                        62,915            68,603            62,753
                                                           --------          --------          --------

LOSS FROM OPERATIONS                                         (6,449)          (26,556)          (31,391)
                                                           --------          --------          --------

OTHER (EXPENSE) INCOME:
Interest expense                                             (5,621)           (6,059)           (6,336)
Other income, net                                             1,680             1,036             1,469
                                                           --------          --------          --------
Total                                                        (3,941)           (5,023)           (4,867)
                                                           --------          --------          --------

EQUITY IN LOSS OF AFFILIATE                                 (17,598)          (10,947)                -
                                                           --------          --------          --------

LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE                                        (27,988)          (42,526)          (36,258)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE                            -                 -            (6,995)
                                                           --------          --------          --------
NET LOSS                                                    (27,988)          (42,526)          (43,253)

PREFERRED DIVIDENDS                                            (201)           (1,402)           (2,052)
                                                           --------          --------          --------

NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS                 $(28,189)         $(43,928)         $(45,305)
                                                           ========          ========          ========

BASIC AND DILUTED NET LOSS PER COMMON SHARE:
Loss before cumulative effect of accounting change         $  (1.19)         $  (2.20)         $  (2.40)
Cumulative effect of accounting change                            -                 -             (0.44)
                                                           --------          --------          --------
BASIC AND DILUTED NET LOSS PER COMMON SHARE                $  (1.19)         $  (2.20)         $  (2.84)
                                                           ========          ========          ========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-
BASIC AND DILUTED                                            23,590            19,947            15,929
                                                           ========          ========          ========
</TABLE>

                 See notes to consolidated financial statements.


                                       53
<PAGE>



                            IGEN INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                                                                    March 31,
                                                                                        -----------------------------

ASSETS                                                                                       2003               2002
CURRENT ASSETS:                                                                         ---------          ---------
<S>                                                                                     <C>                <C>
Cash and cash equivalents                                                               $  19,447          $  69,541
Short-term investments                                                                     14,798              5,278
Accounts receivable, net                                                                   14,536              9,865
Inventory                                                                                   5,469              4,491
Other current assets                                                                        2,794              1,683
                                                                                        ---------          ---------
Total current assets                                                                       57,044             90,858

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET                                                   6,456              6,429

OTHER NONCURRENT ASSETS:
Investment in affiliate                                                                     9,164              6,243
Restricted cash                                                                             1,721              1,721
Other                                                                                         881                947
                                                                                        ---------          ---------
TOTAL                                                                                   $  75,266          $ 106,198
                                                                                        =========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                                            7,175          $   6,182
Accrued expenses                                                                            1,714              2,246
Accrued wages and benefits                                                                  3,170              2,359
Current portion of note payable                                                             5,523              5,077
Convertible preferred stock dividend payable                                                    -              3,205
Deferred revenue                                                                              507                418
                                                                                        ---------          ---------
Total current liabilities                                                                  18,089             19,487
                                                                                        ---------          ---------

NONCURRENT LIABILITIES:
Note payable                                                                               12,542             18,064
Subordinated convertible debentures                                                        31,834             30,032
Deferred revenue                                                                               60                 96
                                                                                        ---------          ---------
Total noncurrent liabilities                                                               44,436             48,192
                                                                                        ---------          ---------

COMMITMENTS AND CONTINGENCIES                                                                   -                  -

STOCKHOLDERS' EQUITY:
Convertible preferred stock , $ 0.001 par value, 10,000,000 shares authorized,
issuable in Series: Series A, 600,000 shares designated, none issued; Series B,
25,000 shares designated, none and 8,500 shares issued and outstanding -
liquidation value of $0 and $8,500 plus accrued and unpaid dividends                            -                  1
Common stock: $0.001 par value, 50,000,000 shares authorized: 23,750,461
and 23,064,392 shares issued and outstanding                                                   24                 23
Additional paid-in capital                                                                243,046            242,228
Stock notes receivable                                                                     (2,061)            (3,710)
Accumulated other comprehensive income                                                       (257)                 -
Accumulated deficit                                                                      (228,011)          (200,023)
                                                                                        ---------          ---------
Total stockholders' equity                                                                 12,741             38,519
                                                                                        ---------          ---------
TOTAL                                                                                   $  75,266          $ 106,198
                                                                                        =========          =========
</TABLE>

                    See notes to consolidated financial statements.


                                       54
<PAGE>



                            IGEN INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                     Years Ended March 31,
                                                                                          -----------------------------------------
                                                                                               2003            2002            2001
                                                                                          ---------       ---------       ---------
OPERATING ACTIVITIES:
<S>                                                                                       <C>             <C>             <C>
Net loss                                                                                  $ (27,988)      $ (42,526)      $ (43,253)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization                                                                 4,284           5,968           3,955
Loss on disposal of equipment                                                                    90               -               -
Equity in loss of affiliate                                                                  17,598          10,947               -
Beneficial conversion feature of convertible debenture                                            -               -           6,995
Common stock issued in payment of interest                                                        -           1,757             875
Amortization of detachable warrant value                                                      1,419           1,419           1,412
Expense related to stock options                                                                386             219               -
Changes in assets and liabilities:
   Increase in accounts receivable                                                           (4,671)         (4,396)           (185)
  (Increase) decrease in inventory                                                           (1,420)          1,664          (1,932)
  (Increase) decrease in other current assets                                                (1,111)            545            (523)
   Decrease (increase) restricted cash                                                            -             399            (399)
   Increase (decrease) in accounts payable and accrued expenses                               1,327          (2,439)          6,332
   Increase (decrease) in deferred revenue                                                       53            (553)           (725)
                                                                                          ---------       ---------       ---------
Net cash used for operating activities                                                      (10,033)        (26,996)        (27,448)
                                                                                          ---------       ---------       ---------

INVESTING ACTIVITIES:
Expenditures for equipment and leasehold improvements                                        (3,331)         (5,642)         (4,925)
Investments in affiliate                                                                    (20,519)        (16,351)              -
Sales of short-term investments                                                               5,169               -          12,949
Maturities of short-term investments                                                          8,604               -           3,099
Purchases of short-term investments                                                         (23,550)         (5,278)         (1,559)
Increase in other assets                                                                       (179)            (85)              -
                                                                                          ---------       ---------       ---------
Net cash (used for) provided by investing activities                                        (33,806)        (27,356)          9,564
                                                                                          ---------       ---------       ---------

FINANCING ACTIVITIES:
Issuance of common stock, net                                                                   633         116,844          12,870
Payments on note payable and capital lease obligations                                       (5,131)         (4,722)         (2,262)
Preferred stock dividends paid                                                               (3,406)         (3,318)         (1,311)
Increase in restricted cash                                                                       -               -            (321)
Repayment of stock notes receivable                                                           1,649               -               -
                                                                                          ---------       ---------       ---------
Net cash (used for) provided by financing activities                                         (6,255)        108,804           8,976
                                                                                          ---------       ---------       ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        (50,094)         54,452          (8,908)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                 69,541          15,089          23,997
                                                                                          ---------       ---------       ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                    $  19,447       $  69,541       $  15,089
                                                                                          =========       =========       =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments of interest                                                                 $   3,594       $   2,506       $   3,599
                                                                                          =========       =========       =========

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued in exchange for notes receivable                                      $       -       $       -       $   3,710
                                                                                          =========       =========       =========
Accrued preferred dividends                                                               $     201       $   1,402       $   2,052
                                                                                          =========       =========       =========
Equipment and leasehold improvements contributed to affiliate                             $       -       $     839       $       -
                                                                                          =========       =========       =========

</TABLE>

                 See notes to consolidated financial statements.

                                       55
<PAGE>


<TABLE>
<CAPTION>



                            IGEN INTERNATIONAL, INC.
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)


                                                                                      Accumulated
                                    Convertible                  Additional   Stock      Other       Accum-
                                 Preferred Stock   Common Stock  Paid - in    Notes  Comprehensive   ulated
                                   Shares Amount  Shares  Amount  Capital  Receivable     Loss      Deficit     Total

<S>              <C> <C>               <C>  <C>   <C>      <C>   <C>           <C>       <C>      <C>         <C>
BALANCE at April 1, 2000               23   $ 1   15,578   $ 15  $ 102,420     $    -    $   -    $(114,244)  $(11,808)

Net loss                                -     -        -      -          -          -        -      (43,253)   (43,253)
Issuance of shares of common stock      -     -    1,307      2     17,453     (3,710)       -            -     13,745
Preferred stock converted              (5)    -      376      -          -          -        -            -          -
Preferred stock, dividends payable      -     -        -      -     (2,052)         -        -            -     (2,052)
Beneficial conversion feature of                                                                          -
convertible debentures                  -     -        -      -      6,995          -        -            -      6,995
----------------------------------------------------------------------------------------------------------------------

BALANCE at March 31, 2001              18     1   17,261     17    124,816     (3,710)       -     (157,497)   (36,373)
                                                                                                          -
 Net loss                               -     -        -      -          -          -        -      (42,526)   (42,526)
 Issuance of shares of common stock     -     -    5,107      5    118,596          -        -            -    118,601
 Preferred stock converted             (9)    -      696      1         (1)         -        -            -          -
 Preferred stock, dividends payable     -     -        -      -     (1,402)         -        -            -     (1,402)
 Expense related to stock options       -     -        -      -        219          -        -            -        219
 ---------------------------------------------------------------------------------------------------------------------

 BALANCE at March 31, 2002              9     1   23,064     23    242,228     (3,710)       -     (200,023)    38,519

 Comprehensive loss:
 Unrealized loss on investments         -     -        -      -          -          -     (257)           -       (257)
 Net loss                               -     -        -      -          -          -        -      (27,988)   (27,988)
                                                                                                               -------
 Comprehensive loss                     -     -        -      -          -          -        -            -    (28,245)

 Issuance of shares of common stock     -     -       77      -        633          -        -            -        633
 Preferred stock converted             (9)   (1)     609      1          -          -        -            -          -
 Preferred stock, dividends payable     -     -        -      -       (201)         -        -            -       (201)
 Expense related to stock options       -     -        -      -        386          -        -            -        386
 Repayment of stock note receivable     -     -        -      -          -      1,649        -            -      1,649
 ---------------------------------------------------------------------------------------------------------------------

 BALANCE at March 31, 2003              -   $ -   23,750   $ 24  $ 243,046   $ (2,061)   $ (257) $ (228,011)  $ 12,741
 =====================================================================================================================

</TABLE>
                See notes to consolidated financial statements.

                                       56
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Activity - IGEN International, Inc. (the Company)
develops, manufactures, and markets products that permit the detection and
measurements of biological substances utilizing its patented ORIGEN(R)
technology, which is based on electrochemiluminescence. The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, IGEN Europe, Inc. and IGEN International, K.K. All significant
inter-company transactions and balances have been eliminated.

Estimates and Reclassifications- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates. Certain amounts from the prior years
have been reclassified to conform to the current year presentation.

Cash and Cash Equivalents- Cash and cash equivalents include cash in banks,
money market funds, securities of the U.S. Treasury, and certificates of deposit
with original maturities of three months or less.

Short-Term Investments - Short-term investments consist primarily of corporate
debt-securities that are classified as "available for sale". These "available
for sale" securities, which are all due within one year, are accounted for at
their fair value and unrealized gains and losses on these securities, if any,
are included in accumulated other comprehensive loss in stockholders' equity. As
of March 31, 2003, the Company had unrealized losses on "available-for-sale"
securities of approximately $257,000. The Company uses the specific
identification method in computing realized gains and losses on the sale of
investments, which are included in results of operations as generated. Any
realized gains or losses were not material as of and for the years ended March
31, 2003, 2002 and 2001.

Concentration  of  Credit  Risk - The  Company  has  invested  its  excess  cash
generally in securities of the U.S. Treasury,  money market funds,  certificates
of  deposit  and  corporate  bonds.  The  Company  invests  its  excess  cash in
accordance  with a policy  approved by the Company's  Board of  Directors.  This
policy is designed to provide both liquidity and safety of principal. The policy
limits  investments to certain types of instruments  issued by institutions with
strong investment grade credit ratings and places  restrictions on the Company's
investment by terms and  concentrations by type and issuer.  The Company has not
experienced  any  losses  on its  investments  due to  credit  risk.  Due to the
Company's  dependence on its business  arrangements with Roche Diagnostics GmbH
(Roche),  however,  the Company has a high  concentration of exposure to Roche's
credit risks. See "-- Note 2 -- License and Research Agreements".

Restricted  Cash -The Company has a debt service reserve of  approximately  $1.7
million at March 31, 2003 and 2002 that is  restricted  in use and held in trust
as  collateral  (see Note 4). In  conjunction  with the  Roche  litigation,  the
Company  escrowed  approximately  $1.4  million  related to  Physician's  Office
Laboratory  (POL)  sales.  This  escrow  was  released  to the  Company  without
restriction upon conclusion of the Roche trial in January 2002 (see Note 12).

Allowance for Doubtful Accounts - The Company maintains reserves on customer
accounts where estimated losses may result from the inability of its customers
to make required payments. These reserves are determined based on a number of
factors, including the current financial condition of specific customers, the
age of accounts receivable balances and historical loss rates.

                                       57
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Inventory - Inventory is recorded at the lower of cost or market using the
first-in, first-out method and consists of the following:

(in thousands)                          2003                   2002
-------------------------------------------------------------------
Finished Goods                      $   2,255              $  2,070
Work in process                           869                 1,149
Raw materials                           2,345                 1,272
                                    ---------              --------
  Total                             $   5,469              $  4,491
                                    =========              ========

Equipment and Leasehold Improvements - Equipment and leasehold improvements are
carried at cost. Depreciation on equipment and furniture is computed over the
estimated useful lives of the assets, generally three to five years, using
straight-line or accelerated methods. Leasehold improvements are amortized on a
straight-line basis over the life of the lease.

Equipment and leasehold improvements consist of the following:

(in thousands)                                     2003             2002
------------------------------------------------------------------------

Lab instruments and equipment                $    6,274        $   7,761
Office furniture and equipment                    5,847            7,492
Leasehold improvements                            3,618            2,864
                                             ----------        ---------
                                                 15,739           18,117
Accumulated depreciation and amortization        (9,283)         (11,688)
                                             ----------       ----------
                                             $    6,456        $   6,429
                                             ==========        =========

Other Noncurrent Assets - Other noncurrent assets includes Deferred Debt
Issuance Costs of approximately $1.4 million which are amortized using the
effective interest method over the terms of the debt agreements. Accumulated
amortization was $1,031,000 and $806,000 at March 31, 2003 and 2002,
respectively.

Capitalized Software Costs - Software development costs incurred subsequent to
the establishment of technological feasibility are capitalized in accordance
with SFAS No. 86 "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed." Through March 31, 2003, software development has
been substantially completed concurrently with the establishment of
technological feasibility, and accordingly, no costs have been capitalized to
date.

Evaluation of Long-lived Assets - The Company evaluates the potential impairment
of long-lived assets based upon projections of undiscounted cash flows whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be fully recoverable. Management believes no impairment of these assets
exists as of March 31, 2003 and 2002.

Warranty Reserve - The Company warrants its products against defects in material
and workmanship for one year after sale and records estimated future warranty
costs at the time revenue is recognized. A reserve for future warranty claims is
recorded based upon historical results, supplemented by expectations of future
costs. The Company also offers extended warranty arrangements to customers with
related costs recorded as incurred.

                                       58
<PAGE>



Warranty reserve activity for the year ended March 31, 2003 is as follows (in
thousands):

         Balance at March 31, 2002  $      170

         Provisions recorded             1,278
         Actual costs incurred          (1,198)
                                    ----------
         Balance at March 31, 2003  $      250
                                    ==========

Fair Value of Financial Instruments - The following disclosures of estimated
fair value were determined by management using available market information and
appropriate valuation methodologies. The fair value of the Company's financial
instruments, including cash equivalents, accounts receivable, accounts payable,
accrued expenses, notes payable, and long-term debt approximate their carrying
values. Disclosure about fair values of financial instruments is based on
pertinent information available to management as of March 31, 2003. Although
management is not aware of any factors that would significantly affect the
reasonableness of the fair value amounts, current estimates of fair value may
differ significantly from the amounts presented to them.

Comprehensive Loss- Comprehensive loss is comprised of net loss and other items
of comprehensive loss. For the year ended March 31, 2003, other comprehensive
loss includes unrealized losses on "available for sale" securities that are
excluded from net loss. There were no significant elements of comprehensive loss
for the years ended March 31, 2002 and 2001.

Revenue Recognition - The Company derives revenue principally from three
sources: product sales, royalty income and contract fees. Product sales revenue
is generally recognized when persuasive evidence of an arrangement exists, title
and risk of loss has been transferred, the price to the buyer is fixed and
determinable, and collectibility is reasonably assured. Rental revenue
associated with instruments that are leased is recognized ratably over the life
of the lease agreements. The Company also offers extended warranty arrangements
to customers with the resulting revenue recognized over the term of the
contract.

Royalty income is recorded when earned, based on information provided by
licensees.

Revenue from services performed under contracts is recognized over the term of
the underlying customer contract or at the end of the contract, when obligations
have been satisfied. For services performed on a time and material basis,
revenue is recognized upon performance. Amounts received in advance of
performance under contracts or commercialization agreements are recorded as
deferred revenue until earned.

Research and Development - Research and development costs are expensed as
incurred.

Foreign Currency - Gains and losses from foreign currency transactions such as
those resulting from the settlement of foreign receivables or payables, are
included in the results of operations as incurred. These amounts were not
material during the years ended March 31, 2003, 2002 and 2001.

Deferred Income Taxes - Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. A valuation allowance is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.

Stock-based Compensation - The Company has elected to continue to follow the
recognition and measurement principals of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related Interpretations
for its stock option plans. No stock-based employee compensation cost is
reflected in net loss for the years ended March 31, 2003, 2002 and 2001, as all
options granted under those plans had an exercise price equal to the market
value of a share of the underlying Common Stock on the date of grant.

                                       59
<PAGE>


The following table illustrates the effect on net loss and net loss per share as
if the Company had applied the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation" as amended by SFAS 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure - An
Amendment of SFAS 123" to stock-based employee compensation (in thousands,
except per share amounts):
<TABLE>
<CAPTION>

                                                                                 Years Ended March 31,
                                                                            2003             2002             2001
                                                                   -----------------------------------------------
<S>                                                                  <C>              <C>               <C>
Net loss, as reported                                                $  (27,988)      $   (42,526)      $ (43,253)

Deduct: Total stock-based employee compensation expense
 determined under fair value method                                      (4,492)           (3,448)         (2,889)
                                                                     -----------      -----------       ---------

Pro-forma net loss                                                   $  (32,480)      $   (45,974)      $ (46,142)
                                                                     ==========       ===========       =========
Loss per share:

       Basic loss per common share - as reported                     $    (1.19)      $     (2.20)      $   (2.84)

       Basic loss per common share - pro-forma                       $    (1.38)      $     (2.38)      $   (3.03)
</TABLE>

The pro-forma information above may not be representative of the effects on
potential pro-forma effects on results for future years.

The fair value of options was estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>

                                         2003             2002           2001
-----------------------------------------------------------------------------
<S>                                        <C>              <C>           <C>
Expected dividend yield                    0%               0%            0%
Expected stock price volatility           68%              71%           71%
Risk-free interest rate                  3.4%             4.3%          5.5%
Expected option term (in years)            5                5             5
</TABLE>

Based on this calculation, the weighted average fair value of options granted
during the years ended March 31, 2003, 2002 and 2001 was $20.56, $15.68 and
$9.66, respectively.

Loss Per Share - The Company uses SFAS No. 128 "Earnings per Share" for the
calculation of basic and diluted earnings per share. The Company's loss has been
adjusted by dividends accumulated on the Company's Series B Convertible
Preferred Stock for all years presented. For each of the three years ended March
31, 2003, the Company incurred a net loss; therefore, net loss per common share
does not reflect the potential dilution that could occur to common shares
related to outstanding stock options, warrants, convertible preferred stock and
convertible debentures. The weighted average number of common shares outstanding
together with potentially dilutive shares was 25,530,000, 21,876,000 and
18,282,000 for the years ended March 31, 2003, 2002 and 2001, respectively.

Cumulative Effect of Accounting Change - During the year ended March 31, 2001,
the Company adopted the provisions of Emerging Issues Task Force (EITF) Release
No. 00-27, "Application of EITF Issue No. 98-5, Accounting for Convertible
Securities and Beneficial Conversion Features". This standard established new
guidelines for convertible securities with beneficial conversion features. The
EITF requires conversion options to be calculated using the effective conversion
price based on the proceeds allocated to the convertible instruments.
Previously, the Company had calculated the beneficial conversion feature of
Subordinated Convertible Debentures, issued in January 2000, using the stated
conversion price (see Note 5). The change in methods resulted in a one-time,
non-cash charge that was recorded during the year ended March 31, 2001 as a
cumulative effect of accounting change.

                                       60
<PAGE>



Prior year financial statements have not been restated to reflect the change in
accounting. The effect of the change on the Company's Consolidated Statement of
Operations for the year ended March 31, 2001 was to increase the net loss by
approximately $7 million ($0.44 per share). There was no effect on loss before
the cumulative effect of the accounting change for the year ended March 31,
2001.

New Accounting Standards -- In April 2002, the FASB issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" (SFAS 145). SFAS 145 requires the
classification of gains and losses from extinguishments of debt as extraordinary
items only if they meet certain criteria for such classification in APB No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring
Events and Transactions." Any gain or loss on extinguishments of debt classified
as an extraordinary item in prior periods that does not meet the criteria must
be reclassified as other income or expense. These provisions are effective for
fiscal years beginning after May 15, 2002. Additionally, SFAS 145 requires
sale-leaseback accounting for certain lease modifications that have economic
effects similar to sale-leaseback transactions. These lease provisions are
effective for transactions occurring after May 15, 2002. SFAS 145 is not
expected to have a material effect on the Company's financial position or
results of operations.

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities" (SFAS 146). SFAS 146 replaces Emerging Issues
Task  Force  Issue  No.  94-3,  "Liability   Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs  incurred in a  Restructuring)."SFAS  146 requires  companies to recognize
costs associated with exit or disposal  activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan.  SFAS 146 is to be
applied  prospectively to exit or disposal  activities  initiated after December
31,  2002.  The  Company  does not  expect  the  adoption  of SFAS 146 to have a
material effect on its financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness
of Others," (FIN 45). FIN 45 establishes new disclosure and liability
recognition requirements for direct and indirect guarantee with specified
characteristics. The initial recognition and measurement provisions of FIN 45
are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements in FIN 45 are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company adopted FIN 45 as of March 31, 2003 and the implementation did
not have a material effect on the Company's results of operations or financial
position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation- Transition and Disclosure- an amendment of SFAS 123" (SFAS 148).
This statement amends SFAS 123 "Accounting for Stock-Based Compensation" (SFAS
123) to provide alternative methods of voluntarily transitioning to the fair
value based method of accounting for stock-based employee compensation. SFAS 148
also amends the disclosure requirements of SFAS 123 to require disclosure of the
method used to account for stock-based employee compensation and the effect of
the method on reported results in both annual and interim financial statements.
This pronouncement is effective for both annual and interim periods beginning
after December 15, 2002. The Company has elected to continue to follow the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25, "Accounting For Stock Issued to Employees," in its accounting for
employee stock options. In accordance with SFAS 148, the Company has adopted the
annual period disclosure requirements and will adopt the disclosure provisions
effective for interim periods in its fiscal quarter ending June 30, 2003.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 provides guidance on the
consolidation of certain entities in which equity investors do not have the
characteristics of a controlling financial interest.

                                       61
<PAGE>



Such entities are referred to as variable interest entities. FIN 46 was
effective immediately for variable interest entities created or acquired after
January 31, 2003 and is effective July 1, 2003 for variable interest entities
created or acquired on or before January 31, 2003. The Company is in the process
of evaluating the impact of adopting FIN 46. It is possible that the adoption of
FIN 46 might require that the Company's investment in MSD and the results of
MSD's operations be consolidated in the Company's financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
amendments set forth in SFAS 149 improve financial reporting by requiring that
contracts with comparable characteristics be accounted similarly. SFAS 149 is
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The Company does not
expect the adoption of this pronouncement to have a material effect on its
financial position or results of operations or cash flows.

2. LICENSE AND RESEARCH AGREEMENTS

In 1992, the Company entered into a license  agreement with Roche (Roche license
agreement),  under which Roche was granted rights to  exclusively  commercialize
ORIGEN-based  clinical  immunoassay  and nucleic acid probe  systems.  Under the
terms of the agreement,  the Company has received  license fees and payments for
certain  product  development  work, as well as royalties on product sales.  The
Company  recorded  royalty and contract fee revenue from Roche of $36.2  million
(64% of total  revenue),  $26.3 million (63% of total revenue) and $15.6 million
(50% of total  revenue) for the three fiscal years ended March 31, 2002 and 2001
respectively. The Company is currently in litigation with Roche (see Note 12).

In 1993, the Company  entered into a license and stock  purchase  agreement with
BioMerieux,  Inc. (formerly Organon Teknika,  B.V.).  Under this agreement,  the
Company  sold  346,135  shares  of  Common  Stock,  granted  a  license  for the
development and worldwide-commercialization of ORIGEN - based nucleic acid probe
systems on a  co-exclusive  basis for certain  segments of the clinical  testing
market and on a  non-exlusive  basis for certain  segments  of the life  science
market. In addition, the Company and BioMerieux agreed to invest in research and
development under a joint development program. Among other things, the agreement
provides  for royalty  payments to the Company on product  sales and for product
supply  arrangements  between the parties.  The Company  recorded royalty income
from  BioMerieux  of $236,000,  $252,000 and $276,000 for the fiscal years ended
March 31, 2003, 2002, and 2001, respectively.

In 1990, the Company granted a license to Eisai Co., Ltd.,  under which Eisai is
licensed to manufacture  and market a class of ORIGEN-based  diagnostic  systems
for the clinical testing market in Japan on an exclusive  basis. The agreement
provided  for  license  fees  tied to the  achievement  of  product  development
milestones and for royalty  payments to the Company on product  sales.  In 2002,
the  Company  executed an  extension  of the  license  with  Eisai.  The Company
recorded royalty income of $871,000, $798,000, and $607,000 for the fiscal years
ended March 31, 2003, 2002 and 2001, respectively.

3. STOCKHOLDERS' EQUITY

Stock Option Plans - The Company has three stock-based plans under which
employees and non-employee directors may be granted options to purchase Common
Stock: the 1994 Stock Option Plan under which 2,500,000 shares of Common Stock
have been reserved for issuance upon exercise of options granted to employees or
consultants; the 1994 Non-Employee Directors Stock Option Plan under which
150,000 shares of Common Stock have been reserved for issuance upon exercise of
options granted to Non-Employee Directors; and the 2001 Broad Based Option Plan
under which 250,000 shares of Common Stock have been reserved for issuance under
the plan. The 1994 Stock Option Plan replaced the 1985 Stock Option Plan which
expired in February 1995 and continues to have unexercised options outstanding.

                                       62
<PAGE>


The 1985 Stock Option Plan and the 1994 Stock Option Plan provide for the grant
of both incentive stock options intended to qualify as such under Section 422 of
the Internal Revenue Code of 1986, as amended, and other stock options that do
not so qualify.

The Non-Employee Directors Stock Option Plan and the 2001 Broad Based Option
Plan only provide for the grant of options that are not intended to so qualify.

Activity related to options under the option plans for the fiscal years ended
March 31, 2003, 2002 and 2001 was (shares in thousands):
<TABLE>
<CAPTION>



                                                         2003                   2002                           2001
                                              -----------------------------------------------------------------------------
                                                               Weighted                  Weighted                  Weighted
                                                                Average                  Average                   Average
                                                               Exercise                  Exercise                  Exercise
                                                Shares          Price       Shares        Price       Shares         Price

<S>                                              <C>         <C>            <C>         <C>             <C>         <C>
Outstanding at beginning of year                 1,336       $   13.31      2,244       $    9.40       1,652       $  7.78
Granted                                            378           34.21         79           25.38         867         14.98
Exercised                                          (77)           9.29       (957)           5.27        (241)        17.06
Cancelled/forfeited                                (51)          25.00        (30)          11.64         (34)         9.32
                                                ------       ---------      ------       --------      ------       -------
Outstanding at year-end                          1,586       $   18.16       1,336       $  13.31       2,244       $  9.40
                                                ======       =========      ======       ========      ======       =======

Options exercisable at year-end                    865       $   11.97         735       $  10.30       1,414       $  6.12
Options available for future grant                 732                       1,073                        134

</TABLE>

The following table summarizes information about stock options outstanding at
March 31, 2003 (shares in thousands):
<TABLE>
<CAPTION>

                                       Options Outstanding           Options Exercisable
                              --------------------------------------------------------------

                                               Weighted
                                                Average    Weighted                 Weighted
                                              Remaining    Average                  Average
                                  Number     Contractual   Exercise     Number      Exercise
                               Outstanding   Life (Years)   Price     Exercisable    Price
                               -----------   ------------   -----     -----------    -----
Range of Exercise Prices
<C>              <C>               <C>          <C>        <C>              <C>    <C>
$  4.57    -     $  7.50           333          3.70       $  5.66          333    $ 5.66
   8.75    -       11.56           333          6.35         10.95          213      10.64
  12.75    -       18.00            42          5.82         14.74           32      14.43
  18.75    -       24.69           499          7.10         19.43          270      19.49
  26.78    -       37.91           379          9.22         34.21           17      27.63
                                 -----          ----       -------          ---    -------
$  4.57     -    $ 37.91         1,586          6.70       $ 18.16          865    $ 11.97
                                 =====          ====       =======          ===    =======
</TABLE>

In August 2000, the Company granted 75,000 non-qualified stock options in
connection with a consulting arrangement for services to be provided to the
Company. The consultant is also the sole owner of MST and is the son of the
Chief Executive Officer of the Company (see Note 6). As a result of certain
events in fiscal 2002 and pursuant to Financial Accounting Standards Board
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB Opinion No. 25" and EITF 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 began
recognizing expense on a monthly basis as the options are earned and vest, based
upon fair value calculated in accordance with the Black-Scholes option pricing
model. Changes in the fair value of the unvested options will result in changes
in future expense recognition. The options vest ratably over a five-year period
through August 2005 and the Company recorded $386,000 and $219,000 of non-cash
expense during the years ended March 31, 2003 and 2002, respectively.

                                       63
<PAGE>


Stock Notes Receivable - In connection with the exercise of stock options by
officers in July 2000, the Company granted one loan to the Company's Chief
Executive Officer and one loan to the Company's President and Chief Operating
Officer in a combined aggregate principal amount of $3.7 million, maturing in
July 2007. The loans are 6.62% simple interest (paid annually), full recourse
loans against all assets of the borrowers, collateralized by the pledge of
180,000 shares of the Company's Common Stock owned by the borrowers. In
September 2002, the loan to the Company's President and Chief Operating Officer
totaling $1.6 million was fully repaid with interest and the corresponding
collateral was released.

Convertible Preferred Stock - In 1997, the Company issued 25,000 shares of
Series B Convertible Preferred Stock (Series B) with a stated value of $1,000
per share that have converted into 1,790,830 shares of Common Stock of the
Company. Upon conversion, the Company paid dividends of $3.4 million, $3.3
million and $1.3 million during the years ended March 31, 2003, 2002 and 2001,
respectively. There are no remaining Series B shares outstanding and all Series
B dividend obligations have been satisfied. Dividends payable on the Series B
shares at March 31, 2002 have been reclassified to current liabilities in the
accompanying consolidated balance sheets.

Shareholder Rights Plan - In 1996, the Board of Directors adopted a shareholder
rights plan and declared a dividend of one preferred share purchase right
(Right) for each outstanding share of the Company's Common Stock (par value
$.001 per share). A Right has also been attached to each share of Common Stock
subsequently issued. Prior to becoming exercisable, the Rights are evidenced by
certificates representing shares of Common Stock and are transferable only in
connection with the transfer of Common Stock. Each Right, when exercisable, will
detach from the Common Stock and will entitle the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $.001 per share, at a price of $65.00 per one
one-hundredth of a Preferred Share, subject to adjustment. The Rights are
triggered if a person or group of persons other than Samuel J. Wohlstadter, the
Company's Chief Executive Officer, and his affiliates or associates, heirs,
trusts or foundations to which he has transferred shares of the Common Stock
acquires 15.0% or more of the Common Stock or announces a tender offer that
would result in that person or group of persons acquiring 15.0% or more of the
Common Stock on terms not approved by the Company's Board of Directors. If
triggered, the Rights would cause substantial dilution to the person or group of
persons that caused them to be triggered. The Rights are redeemable in whole,
but not in part, for $.01 per Right (subject to adjustment) at the option of the
Board of Directors. Until a Right is exercised, the holder of the Right has no
rights as a stockholder of the Company. The Rights will expire in 2006 unless
redeemed by the Company prior to that date.

4. NOTE PAYABLE

In March 1999, the Company entered into a debt financing under a Note Purchase
Agreement (Note) from which the Company received $30 million. The seven year,
8.5% Senior Secured Notes mature in 2006 with principal and interest
installments of $1.7 million due quarterly through March 2006. Collateral for
the debt is represented by royalty payments and rights of the Company to receive
monies due, pursuant to the Roche license agreement. Additional collateral is
represented by restricted cash (see Note 1), which had a balance of
approximately $1.7 million at March 31, 2003 and 2002. Covenants within the Note
include compliance with annual and quarterly Royalty Payment Coverage Ratios,
which are tied to royalty payments and debt service.

In the event the Roche license agreement is terminated,  the holders of our 8.5%
senior  secured  notes   outstanding  would  be  entitled  to  accelerate  those
obligations and collect a prepayment penalty.

5. SUBORDINATED CONVERTIBLE DEBENTURES

In January 2000, the Company completed a placement of $35 million principal
amount of Subordinated Convertible Debentures. The 5% debentures, if not
converted, mature January 2005 with semi-annual interest payments to be made in
cash or an equivalent value of Common Stock.

                                       64
<PAGE>



The debentures are immediately convertible into 1,129,032 shares of the
Company's Common Stock, which represents a $31 per share conversion price.

The debentures had a one-time beneficial conversion feature totaling $9.6
million measured as the difference between the conversion price of $31 per share
and the fair value of the Common Stock at the time of the issuance of the
debentures. This beneficial conversion feature was recorded as a one-time,
non-cash charge to interest expense in fiscal 2000. See Note 1, "Cumulative
Effect of Accounting Change" for a description of the effect of a change in
accounting in fiscal 2001 related to the convertible debentures.

The Company's debentures provide that, in the event debt of the Company in an
outstanding principal amount of $2 million or greater is accelerated and not
satisfied within 20 business days, the holders of the debentures may accelerate
the Company's obligations under the debentures and cause the debentures to be
immediately due and payable.

As part of this financing, the Company also issued detachable warrants to
purchase 282,258 shares of Common Stock with an exercise price of $31 per share.
Using the Black-Scholes option pricing model and the relative fair value of the
warrants and the debentures at the time of issuance, these warrants were valued
at approximately $7.0 million. The detachable warrant value has been recorded as
a reduction of the face value of the convertible debentures. Costs associated
with placing the debentures totaling approximately $1.9 million, were deferred
and have been netted against the recorded convertible debenture balance. The
convertible debenture discount consisting of the warrant value and debt issuance
costs is being amortized over the five-year life of the debentures. All warrants
remain outstanding as of March 31, 2003.

6. MESO SCALE DIAGNOSTICS JOINT VENTURE

Meso Scale  Diagnostics,  LLC.  ("MSD") is a joint venture  formed by Meso Scale
Technologies,  LLC.  ("MST")  and the  Company  in 1995.  MSD was formed for the
development   and   commercialization   of  products   utilizing  a  proprietary
combination of MST's multi-array technology together with our technology,  which
we  refer  to  as  the  Research  Program.  MST  is a  company  established  and
wholly-owned  by Jacob  Wohlstadter,  the son of the Company's  Chief  Executive
Officer.  In August 2001,  we amended our joint  venture  agreement  and certain
license and other agreements with MSD and MST in order to continue the MSD joint
venture and entered into various related agreements. The Company refers to these
amendments and agreements entered into in August 2001 as the MSD agreements.  An
independent committee of our Board of Directors,  with the advice of independent
advisors and counsel, negotiated and approved the MSD agreements.

Under the MSD agreements, the Company's funding commitment is based on an annual
budget of MSD approved by an  independent  committee of its Board of  Directors.
The  Company's  funding  commitment  may be satisfied  in part  through  in-kind
contributions of scientific and administrative  personnel and shared facilities.
An independent  committee of the Company's Board of Directors  approved  funding
for MSD for the period from January 1, 2003 to November 30, 2003 in an amount of
$20.6 million,  subject to a permitted variance of fifteen percent.  As of March
31, 2003, our remaining funding commitment to MSD was $17 million.  In addition,
prior to November  30,  2003,  the  Company  would also pay  approximately  $3.7
million to MSD related to the permitted  budget  variance from prior years.  For
the  years  ended  March  31,  2003,  2002 and  2001,  the  Company  made  total
contributions  to  MSD  of  $20.5  million,  $19.6  million  and  $8.3  million,
respectively.  During the year ended March 31,  2002,  the  Company  transferred
certain  equipment  and  leasehold  interests  to MSD in the amount of $839,000,
which amount is included in our contributions to MSD in such year.

The Company  holds a 31% voting  equity  interest in MSD.  The Company also owns
100% of the  non-voting  equity  interest  in MSD and is entitled to a preferred
return on $56.9  million of the funds  previously  invested in MSD through March
31, 2003, and on additional funds the company invests thereafter. This preferred
return  would be payable  out of a portion of both  future  profits  and certain
third-party  financings of MSD,  generally before any payments are made to other
equity holders.

                                       65
<PAGE>



Although MST owns the remaining  69% of the voting  interest in MSD, the Company
generally  has the right to  approve  significant  MSD  governance  matters.  In
exercising  this right,  a committee of our Board of Directors must consider the
interests  of  the  Company  and  our   stockholders   while  also  taking  into
consideration the interests of MSD.

Under  the  terms  of the MSD  agreements,  the  Company  has  granted  to MSD a
worldwide,  perpetual,  exclusive  license  (with  certain  exceptions)  to  its
technology for use in MSD's Research  Program,  which is more fully described in
the MSD  agreements.  If the Company ceases to be a member of the joint venture,
it will receive royalty payments from MSD on all products  developed and sold by
MSD  using  its  patents.  MST  holds  a  worldwide,  perpetual,   non-exclusive
sublicense  from MSD for certain  non-diagnostic  applications  of the Company's
technology.  The Company will receive royalty  payments from MST on any products
developed  and sold by MST using our  patents.  During the term of the MSD joint
venture, MSD is the Company's exclusive means of conducting the Research Program
and the Company is obligated to refrain from developing or  commercializing  any
products,  processes or services that are related to the Research Program in the
diagnostic  field or to MSD's  research  technologies  as  described  in the MSD
agreements,  subject to certain exceptions.  If the MSD joint venture expires or
is terminated for any reason, the Company has agreed not to use the improvements
granted to them by MSD to compete  with MSD in its field the  Company has agreed
not to directly or indirectly  develop or commercialize  products,  processes or
services  related to the Research  Program in the  diagnostic  field or to MSD's
research technologies.

The MSD joint  venture  agreement  will  expire on  November  30,  2003,  unless
renewed. In addition,  MST and MSD have the right to terminate the joint venture
under certain  circumstances,  including a change in control of the Company,  as
defined. Upon the expiration of the MSD joint venture as a result of non-renewal
or the  termination  by MSD or MST of the  joint  venture,  MSD and MST have the
right to purchase the  Company's  interest in MSD for a purchase  price equal to
fair market  value (to be  determined  in  accordance  with the  provisions  and
procedures set forth in the MSD agreements) minus a discount factor varying from
7.5%, in the case of non-renewal and certain other events, to 15.0%, in the case
of termination  because of a breach by the Company and certain other events.  If
MSD or MST  exercises  this right,  it will be  entitled to pay us the  purchase
price, plus interest, over time in installments equal to the sum of five percent
of MSD Net Sales,  as  determined  in accordance  with the MSD  agreements,  and
twenty  percent  of the net  proceeds  realized  by MSD from the sale of debt or
equity securities in any third party financing after the date of the sale of our
interest in MSD.

MSD has an employment agreement with Jacob Wohlstadter,  its President and Chief
Executive Officer, the current term of which runs through November 30, 2004, and
provides  for a salary of $250,000 for the year ending  December  31,  2003.  In
addition, Jacob Wohlstadter is also eligible to receive, at the discretion of an
independent committee of the Company's Board of Directors,  an annual cash bonus
in an amount  not to exceed  20% of his annual  salary.  During the fiscal  year
ended March 31, 2003, Jacob Wohlstadter received $250,000 from his employment at
MSD.  If MSD  terminates  the  employment  agreement  without  cause,  or  Jacob
Wohlstadter  terminates the employment agreement for good reason (which includes
a "change in control" of the Company,  as defined),  Jacob  Wohlstadter shall be
entitled  to receive,  in addition to salary and pro rata bonus and  adjustments
earned through the 60th day following the notice of termination, an amount equal
to from 3 to 12 times  (depending on the reason for the termination) the monthly
pro rata salary, bonus and adjustments in effect at the time of the termination.
The Company is  responsible  for all amounts  payable,  costs incurred and other
obligations under the employment  agreement,  which generally are expected to be
paid out of the Company's funding commitment to MSD. The Company has also agreed
to indemnify Jacob Wohlstadter against certain liabilities,  including liability
from the joint  venture.  In addition,  the Company is  obligated  under the MSD
agreements to indemnify  each board member or officer of MSD with respect to any
action  taken by such  person by reason of the fact that such person is or was a
board member or an officer of MSD.

                                       66
<PAGE>


Since inception of the joint venture, the Company has utilized the equity method
to account for the investment. In conjunction with entering into the MSD
agreements and taking into account the progress made by MSD in the development
of its products, the Company determined that future contributions to MSD would
be made based on the future investment benefit to be obtained by the Company.
Therefore, the Company's share of MSD losses since July 1, 2001, has been
recorded as Equity in Loss of Affiliate. Prior to this date, the Company
accounted for its equity investments in MSD as research and development funding
and accordingly, recorded all MSD investments as research and development
expenses as incurred. These research and development expenses totaled $2.4
million and $8.3 million for the years ended March 31, 2002 and 2001,
respectively. During the years ended March 31, 2003, 2002 and 2001, operating
costs allocated to MSD by the Company in connection with shared personnel and
facilities totaled $11.9 million, $11.4 million and $5.6 million, respectively.
Since July 1, 2001, these allocated operating costs reduced certain Operating
Costs and Expenses and increased Equity in Loss of Affiliate in the accompanying
Consolidated Statements of Operations. The Company's Investment in Affiliate
totaled $9.2 million and $6.2 million at March 31, 2003 and 2002, respectively.

Summarized financial information for MSD (unaudited) is as follows (in
thousands):
<TABLE>
<CAPTION>

                                     Years Ended March 31,
                        -----------------------------------------------
                                2003              2002             2001
                        ------------      ------------      -----------
<S>                     <C>               <C>               <C>
Revenue                 $     3,247       $          -      $         -
Operating expenses           21,537             13,560            6,185
Net loss                     18,215             13,541            6,185

                                                March 31,
                        -----------------------------------------------
                                          2003                 2002
                                 -------------        -------------
Current assets                   $      5,685         $       4,571
Total assets                           11,904                 8,305
Current liabilities                     2,226                   885
Total liabilities                       2,226                   931
Total members' equity                   9,678                 7,374
</TABLE>

7. INCOME TAXES

For the years ended March 31, 2003, 2002 and 2001, the Company recorded no
federal or state income tax expense and did not owe or pay federal or state tax,
as calculated by applying statutory rates to pretax income.

As of March 31, 2003, the Company has available for income tax reporting
purposes net operating loss and general business credit carryforwards
approximating $206.3 million and $7.3 million, respectively. Approximately $20.5
million of the net operating loss carryforward results from the exercise of
nonqualified stock options. Utilization of net operating loss carryforwards
related to stock-based compensation will result in the benefit being credited to
stockholders' equity.

The use of the Company's net operating loss carryforward may be significantly
reduced if substantial changes in stock ownership take place. The carryforwards
expire as follows (in thousands):
<TABLE>
<CAPTION>

<S> <C>                          <C>
    2004                         $      6,556
    2005                                3,029
    2006                                    -
    2007                                    -
    2008                                  142
    2009 through 2022                 196,609
                                 ------------
                  Total          $    206,336
                                 ============

</TABLE>

                                       67
<PAGE>


The approximate tax effects of temporary differences that gave rise to the
Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>


                                                               (in thousands)
                                                           2003                  2002
                                                    -----------         -------------
Deferred tax assets
<S>                                                 <C>                    <C>
    Accruals and reserves                           $       551            $       661
    Deferred revenue                                        219                    198
    Equipment and leasehold improvements                  1,304                    976
    Investment in affiliate                               1,954                  1,791
    Net operating loss and tax credit carryforwards      86,918                 77,018
    Other                                                  (294)                     6
                                                     ----------            -----------
           Total deferred tax asset                      90,652                 80,650
    Less: valuation allowance                           (90,652)               (80,650)
                                                     ----------            -----------
         Net deferred tax asset                      $       -             $         -
                                                     ==========            ===========
</TABLE>

Due to uncertainties surrounding realizability, a valuation allowance equal to
the total net deferred tax assets has been provided as of March 31, 2003 and
2002. The increase in the valuation allowance on the deferred tax asset was
$10.0 million and $24.8 million for the years ended March 31, 2003 and 2002,
respectively.

A reconciliation of the statutory federal income tax rate with the Company's
effective income tax rate is as follows:

                                   2003        2002             2001
                                  ------------------------------------
Statutory federal rate           (34.0%)      (34.0%)         (34.0%)

State income taxes,
net of valuation allowance           -            -               -
Beneficial conversion                -            -             5.5
Valuation allowance               33.7         33.7            28.4
Other                              0.3          0.3             0.1
                                 -----        -----           -----
Effective tax rates                  -%           -%              -%
                                 =====        =====           =====

8. EMPLOYEE SAVINGS PLAN

The Company has an Employee Savings Plan intended to qualify under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended, and subject
to the Employee Retirement Income Security Act of 1974, as amended. The Company
made discretionary contributions of $575,000, $486,000 and $299,000 for the
years ended March 31, 2003, 2002 and 2001, respectively.

The Company is not obligated under any postretirement benefit plan.

9. RELATED PARTIES

The Company's Chief Executive Officer,  Samuel J. Wohlstadter,  is the principal
and controlling stockholder,  a director and the Chief Executive Officer of each
of Wellstat Biologics Corporation,  Wellstat Therapeutics Corporation,  Hyperion
Catalysis  International  ("Hyperion") and Proteinix Corporation  ("Proteinix").
The Company's President and Chief Operating Officer,  Richard J. Massey, is also
a director of  Hyperion  and a less than 10%  stockholder  in  Proteinix.  These
companies are therefore  considered the Company's  affiliates for the purpose of
this discussion. The Company has shared services arrangements with each of these
affiliated  companies.  These shared  services  include  accounting and finance,
human resources and other administrative  services,  as well as facility related
costs and services.  Shared services costs allocated to these companies  totaled
$1.0 million,  $1.3 million and $1.4 million for the years ended March 31, 2003,
2002 and 2001, respectively,  which reduced certain Operating Costs and Expenses
for the respective years.

                                       68
<PAGE>



Amounts  allocated  to these  affiliated  companies  are  calculated  and billed
monthly  based upon costs  incurred by the Company  and are  determined  through
allocation methods that include time spent and square footage utilized.  Amounts
due from  affiliated  companies  under the  shared  services  arrangements  were
$228,000 and $94,000 at March 31, 2003 and 2002,  respectively,  which were paid
subsequent to each respective year end.

Since 1995,  the Company has engaged the law firm of Wilmer,  Cutler & Pickering
to provide legal  services in connection  with the Roche  litigation and various
other matters.  A partner of the law firm, Richard W. Cass, is a director of the
Company. In addition, Jennifer M. Drogula, who became the daughter-in-law of the
Company's Chief  Executive  Officer in March 2002, is a partner of the law firm.
The Company recorded  approximately $1.8 million, $11.2 million and $5.8 million
in legal fees with the law firm for the years  ended  March 31,  2003,  2002 and
2001,  respectively.  Amounts  due to the law  firm  totaled  $432,000  and $1.7
million as of March 31, 2003 and 2002, respectively.

In  addition,  the  Company  has  engaged  the law  firm of Hale and Dorr LLP to
provide legal  services in connection  with the Roche  litigation and otherwise.
The Company first engaged this law firm in 1994. Deborah  Wohlstadter,  the wife
of Jacob Wohlstadter and  daughter-in-law of our Chief Executive Officer,  since
December  2001,  is a junior  partner  in that law firm.  The  Company  recorded
approximately  $396,000  in legal fees paid to that firm  during the fiscal year
ended March 31, 2003.

The Company has licensed certain diagnostic technologies from affiliated
companies and has licensed certain pharmaceutical technologies to affiliated
companies. No royalties have ever been earned or accrued under these license
agreements.

10. COMMITMENTS

Capital Leases - The Company is obligated under capital lease agreements for
certain equipment. These agreements expire during the year ending March 31,
2004. The aggregate discounted lease payments are recorded as a liability, and
the fair market value of the related leased assets are capitalized and amortized
over the assets estimated useful lives. Total assets capitalized pursuant to
such agreements were approximately $224,000 and $350,000 at March 31, 2003 and
2002, respectively with accumulated amortization totaling approximately $220,000
and $307,000 at March 31, 2003 and 2002, respectively.

Operating Leases - The Company leased office, laboratory and manufacturing
facilities pursuant to operating leases expiring at various times from fiscal
2004 through fiscal 2010. Rent expense for facility and equipment operating
leases totaled approximately $2.9 million, $2.6 million and $2.4 million for the
years ended March 31, 2003, 2002 and 2001, respectively.

At March 31, 2003, the future minimum operating lease payments are as follows
(in thousands):

                  2004                            $  2,635
                  2005                               2,334
                  2006                                 653
                  2007                                 357
                  2008                                 258
                  2009 and thereafter                  401
                                                   -------
                  Total                            $ 6,638
                                                   =======

11. SEGMENT INFORMATION

The Company operates in one business segment. It is engaged in the development
and commercialization of ORIGEN-based products for the detection and measurement
of biological substances.

                                       69
<PAGE>

 Product sales by region are as follows (in thousands):

                                      2003             2002              2001
                              ------------     ------------      ------------

   United States              $    14,492       $    10,510      $     6,349
   United Kingdom                   1,823             1,789              612
   All other foreign                2,671             2,284            3,952
                              ------------       ----------      -----------

   Total                      $    18,986       $    14,583      $    10,913
                              ===========       ===========      ===========

Substantially all of the Company's assets are held in the United States.

Except for royalty and  contract  fee revenue from Roche,  a German  entity,  no
single customer accounted for more than 10% of total revenue.  Roche is the only
customer  with  an  account   receivable  balance  that  exceeds  10%  of  total
outstanding receivables. The amount receivable from Roche totaled 61% and 65% of
total accounts receivable at March 31, 2003 and 2002, respectively. (see Note 2)

12. LITIGATION

Roche

In 1997, the Company filed a lawsuit, which is referred to as the Roche
litigation, against Roche in the U.S. District Court for the District of
Maryland (District Court). The lawsuit arose out of the Roche license agreement,
under which the Company licensed to Roche certain rights to develop and
commercialize diagnostic products based on the Company's ORIGEN technology. In
the Roche litigation, the Company alleged, among other things, that Roche failed
to perform certain material obligations under the Roche license agreement and
engaged in unfair competition against the Company. The jury trial in this
litigation was completed in January 2002, and the jury rendered a verdict that
Roche had materially breached the license agreement, had violated its duty to
the Company of good faith and fair dealing, and had engaged in unfair
competition against the Company.

In February 2002, the District Court issued a final order of judgment that
confirmed the jury's decisions to award $105 million in compensatory damages and
$400 million in punitive damages, entitled the Company to terminate the Roche
license agreement, and directed Roche to grant to the Company for use in its
retained fields a license to certain improvements. Roche was also ordered, at
its sole cost and expense, to deliver such improvements to the Company and to
provide all other information and materials required or necessary to enable the
Company to commercialize these improvements. Improvements, as defined in the
final order of judgment, include Roche's Elecsys 1010, 2010 and E170 lines of
clinical diagnostic immunoassay analyzers, the tests developed for use on those
systems, and certain aspects of Roche's nucleic acid amplification technology
called PCR. The final order of judgment also bars Roche from marketing, selling,
placing or distributing outside of its licensed field any products, including
its Elecsys diagnostics product line, that are based on the Company's ORIGEN
technology.

Roche filed counterclaims against the Company alleging, among other things, that
the Company breached the Roche license agreement by permitting Eisai, another of
the Company's licensees, to market certain ORIGEN-based products in Japan. The
final order of judgment found in the Company's favor and against Roche on all of
Roche's counterclaims, except for one for which the Company was ordered to pay
$500,000.

In April 2002, the District Court affirmed a final order of judgment that
awarded the Company $505 million in damages, confirmed the Company's right to
terminate the Roche license agreement, and directed Roche to grant to the
Company for use in its retained fields a license to improvements developed or
acquired by Roche in the course of the Roche license agreement, including
Roche's Elecsys and E170 diagnostics product lines.

                                       70
<PAGE>



Roche appealed certain aspects of the final order of judgment to the U.S. Court
of Appeals for the Fourth Circuit (Appellate Court). In connection with that
appeal, Roche posted a $600 million bond to support its financial obligations to
the Company under the final order of judgment. During the appeal process Roche
is obligated to continue to comply with the terms of the Roche license
agreement, including its obligation to continue to pay the Company royalties on
Roche's sales of royalty bearing products and to share and deliver improvements.
Roche's obligation to pay the $505 million of monetary damages awarded to the
Company is suspended until completion of the appeal process. On February 24,
2003, the Appellate Court heard oral arguments on the appeal by Roche of the
final order of judgment.

The Company has voluntarily agreed not to terminate the Roche license agreement
until the Appellate Court determines that it is entitled to do so; however, the
Company has notified Roche that the Roche license agreement will terminate
immediately in the event the Appellate Court issues an opinion confirming the
final order of judgment rendered by the District Court that the Company is
entitled to terminate the Roche license agreement.

Other Proceedings

In 2001, Brown Simpson Strategic Growth Fund L.P., Brown Simpson Strategic
Growth Fund, Ltd. and Brown Simpson Partners I (collectively Brown Simpson) and
Laurance Paskowitz initiated separate shareholder derivative lawsuits for and on
behalf of the shareholders of the Company in the Circuit Court for Montgomery
County, Maryland (Circuit Court) against four of the Company's current
directors, two former directors, three executive officers and the Company as a
nominal defendant.

The complaints alleged breach of fiduciary duties by the named individual
defendants in connection with transactions between the Company and other
entities in which certain directors and officers are alleged to have an
interest, including MSD.

Both lawsuits sought principally the following: that the defendants hold in
trust and be required to account for and restore to the Company damages that the
Company has allegedly sustained by reason of the allegations and relief relating
to board and management composition. The Paskowitz complaint also sought damages
for a class of the Company shareholders for direct claims against the individual
defendants. The complaints did not include any claims against the Company.

In May 2002, the Circuit Court issued an opinion and order dismissing all claims
asserted against all of the defendants in both cases. No appeal was filed by the
Brown Simpson plaintiff and the decision in that case is now final. The
Paskowitz plaintiff filed an appeal to the Court of Special Appeals in Maryland
seeking review only for one direct claim. A final decision of the Court of
Special Appeals was issued in March 2003 affirming the dismissal of the
complaint by the Circuit Court. No appeal was filed and the decisions dismissing
all claims in all of these cases are now final.

The Company is involved, from time to time, in various other routine legal
proceedings arising out of the normal and ordinary operation of its business
which it does not anticipate will have a material adverse impact on its
business, financial condition, results of operations or cash flows.




                                       71
<PAGE>

13. VALUATION AND QUALIFYING ACCOUNTS

The following table sets forth activity in the Company's allowance for doubtful
accounts (in thousands):

<TABLE>
<CAPTION>
                           Balance at                                          Balance at
For the Years               Beginning            Provisions                       End of
Ended March 31,             of  Period            Recorded          Write-Offs    Period

<S>                           <C>               <C>               <C>             <C>
   2001                       $      64         $    135          $     (169)     $    30
   2002                              30               60                  (1)          89
   2003                              89              135                 (76)         148
</TABLE>

14. QUARTERLY OPERATING RESULTS (Unaudited)


For the years ended March 31,            First    Second     Third     Fourth
                                        (In thousands, except per share data)
2003
Revenue                                $ 11,999  $ 13,425   $ 16,251  $ 14,791
Income (loss) from operations            (2,176)   (2,331)        70    (2,012)
Net loss                                 (7,362)   (8,342)    (4,306)   (7,978)
Basic and diluted loss per share          (0.33)    (0.35)     (0.18)    (0.34)

2002
Revenue (1)                            $  8,258   $ 9,396   $ 10,424  $ 13,969
Loss from operations (2,3,4)            (10,619)   (7,636)    (4,184)   (4,117)
Net loss (4)                            (11,917)  (12,103)    (9,227)   (9,279)
Basic and diluted loss per share          (0.69)    (0.64)     (0.48)    (0.43)


(1)      Revenues for the first and fourth quarters includes $550,000 and $3.2
         million, respectively of Roche royalties relating to modifications made
         by Roche to their methodology for computing royalties.
(2)      Operating costs and expenses for the third quarter have been reduced by
         a reimbursement of $5.7 million resulting from the settlement of
         certain patent infringement litigation with Hoffman LaRoche.
(3)      Operating costs and expenses for the fourth quarter includes a
         write-off of $1.1 million of TRICORDER detection modules previously
         recorded as fixed assets. The impact on individual prior interim and
         annual periods was not significant.
(4)      See Note 6 of Notes to Consolidated Financial Statements for a
         description of the recording of losses under the equity method of
         accounting related to the MSD investment.

The sum of quarterly per share amounts may not be equal to per share amounts
reported for year-to date periods. This is due to changes in the number of
weighted average shares outstanding and the effects of rounding for each period.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

Not Applicable.

PART III

Certain information required by Part III is omitted from this Report in that the
Company will file a definitive proxy statement pursuant to Regulation 14A (the
"Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.

                                       72
<PAGE>


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The following table sets forth, the names and certain other information
regarding our directors and executive officers at June 30, 2003. Each officer
serves without a set term.
<TABLE>
<CAPTION>

NAME                                 AGE                     POSITION              DIRECTOR SINCE   EXPIRATION OF
                                                                                                         TERM
<S>                  <C>             <C>
Samuel J. Wohlstadter (3)            61          Chairman, Chief Executive
                                                 Officer  and Director                  1982             2005
Richard J. Massey (3)                56          President, Chief Operating
                                                 Officer and Director                   1990             2004
Richard W. Cass                      57          Director                               2000             2005
Anthony Rees (1,4)                   59          Director                               2000             2003
Robert Salsmans (1,2,4)              58          Director                               1995             2003
Joop Sistermans (1,2,4)              60          Director                               1999             2004
George V. Migausky                   48          Vice President, Chief Financial          --               --
                                                 Officer; Secretary
</TABLE>

-------------------------
1        Member of Audit Committee
2        Member of Executive Compensation Committee
3        Member of Non-Officer Stock Option Committee
4        Member of Joint Venture Operating Committee

Set forth below is certain biographical information regarding our directors and
executive officers.

Samuel J. Wohlstadter is one of our founders and has been our Chairman of the
Board and Chief Executive Officer since 1982. Mr. Wohlstadter has been a venture
capitalist for more than 25 years and has experience in founding, supporting and
managing high technology companies, including Amgen Inc., a biotechnology
company, and Applied Biosystems, Inc., a medical and biological research
products company. Mr. Wohlstadter is also Chief Executive Officer of Hyperion
Catalysis International, an advanced materials company, which he founded in
1981; of Wellstat Therapeutics Corporation (formerly Pro-Neuron, Inc.), a drug
discovery company, which he founded in 1985; of Proteinix Corporation, a
development stage company organized to conduct research in intracellular
metabolic processes, which he founded in 1988; and of Wellstat Biologics
Corporation (formerly Pro-Virus, Inc.), a drug discovery company, which
commenced operations in 1984.

Richard J. Massey, Ph.D. is one of our founders and has been President and Chief
Operating Officer since February 1992 and a director since 1990. He served as
Senior Vice President from 1985 to 1992. From 1981 until he joined us in 1983,
Dr. Massey was a faculty member in the Microbiology and Immunology Department at
Rush Medical Center in Chicago. Prior to that, he was Senior Research Scientist
at the Fredrick Cancer Center/National Cancer Institute.

Richard W. Cass has been a partner with the law firm of Wilmer, Cutler &
Pickering since 1979 and is a former member of his firm's Management Committee
and co-chairman of its Corporate Business Transactions Practice Group. He
specializes in corporate and securities law and represents companies and
entrepreneurs in acquisitions, dispositions, joint ventures and public
securities offerings. Mr. Cass received his bachelor's degree from Princeton
University and his law degree from Yale University.

                                       73
<PAGE>


Anthony Rees, D. Phil. is Director of Science at Synt:em, a private
biopharmaceutical company that is focused on the discovery and development of
novel Central Nervous System (CNS) medicines, a position he has held since
January 2000. During 1997-1999, he served as a non-executive employee of
Synt:em. Professor Rees has held faculty positions at the University of Oxford
(1980-1990) and the University of Bath (Great Britain) where, from 1990-1993, he
was Head of the Biochemistry Department and from 1993-1997 Head of the School of
Biology and Biochemistry. He is currently Professorial Research Fellow.
Professor Rees has been Executive Editor of the journal Protein Engineering
since 1997. In 1989 he co-founded Oxford Molecular PLC, a British software
company. While on sabbatical from Oxford University from 1989 to 1990, Professor
Rees was employed by us as Vice President of Research. Professor Rees received
his doctoral degree from Oxford University

Robert R. Salsmans serves as President and Chief Executive Officer of Diosynth
RTP, Inc. the U.S. subsidiary of Diosynth, a business unit that is part of the
Pharma group of Akzo Nobel N.V., a holding company with high technology
operating units in the biotechnology, medical, and pharmaceutical industries, a
position he has held since November 2001. From September 1994 to August 2001,
Mr. Salsmans was President and Chief Executive Officer of Organon Teknika B.V.
in The Netherlands. From October 1993 through August 1994, Mr. Salsmans served
as Managing Director of Organon Teknika B.V., a business unit of Akzo Nobel, and
from 1990 through September 1993, he served as Managing Director of Organon
International B.V.

Joop Sistermans serves as Chairman, Advisory Council for Science and Technology
Policy to the Dutch Government and Parliament, a position he has held since
January 1, 2003. In addition Mr. Sistermans has been Chairman Supervisory Board
of Thuiszorg Kempenstreek (Netherlands), a public organization for homecare, a
position he has held since 2000. He also serves on the Advisory Committee
Economy, Ecology and Technology for the Dutch Ministery of Economic Affairs, a
position he has held since 1999. Mr. Sistermans is a Supervisory Board member
for the University of Twente, the Netherlands, a position he has held since 1997
and of the Maastricht School of Management, the Netherlands, a position he has
held since 2001. Mr. Sistermans serves on the Boards of Directors of United
Biomedical Inc., Hauppage, NY since 1999, of the Bio Primate Research Centre,
Rijswijk, the Netherlands since 1997, of Keygene N.V. in Wageningen, the
Netherlands since 2002 and of Aglaia Biomedical N.V. since 2003. He was Vice
Chairman of the Framework Programme Expert Advisory Group of the European
Commission for Innovative Products, Processes and Organisations in Brussels,
Belgium from 1998 until 2003. From 1999 to 2000, Mr. Sistermans served as
Executive Vice President of Origin International B.V., a member company of the
Philips Electronics Group of Companies based in the Netherlands. Mr. Sistermans
was employed by Akzo Nobel from 1974 to 1999, and was a member of the Executive
Council and Executive Vice President responsible for Strategy and Technology
from 1994 until 1999. Mr. Sistermans previously served on the Board of Directors
of the Company from 1993 to 1995 while in the position of President and Chief
Executive Officer of Akzo Nobel's Organon Teknika business unit.


George V. Migausky has been our Chief Financial Officer since 1985, assuming
that position on a full-time basis in 1992. Between 1985 and 1992, in addition
to serving as our Chief Financial Officer on a part-time basis, Mr. Migausky
also served as financial advisor to several other privately held companies.
Prior to joining us in 1985, he spent nine years in financial management and
public accounting positions, most recently as a Manager with the High Technology
Group of Deloitte & Touche.

OTHER KEY MANAGEMENT

In addition to our executive officers and directors, we have the following
managers directing key functions:

        NAME                                    AGE      POSITION

Daniel Abdun-Nabi.......................        48     General Counsel
Gerald Andros............................       41     Director of Sales
David Boudreau...........................       46     Director of Operations
R. Don Elsey..............................      49     Director of Finance and
                                                       Administration

                                       74
<PAGE>


Daniel Abdun-Nabi joined us in September 1999 as General Counsel. He is
responsible for all areas of corporate law, including advising us about our
domestic and international legal matters, and he provides guidance in developing
legal and business strategies and negotiating financial transactions. From 1990
to September 1999, Mr. Abdun-Nabi was Senior Vice President - Legal Affairs &
General Counsel for North American Vaccine, Inc., where he oversaw domestic and
international legal issues for that pharmaceutical company and its operating
subsidiaries. Prior to that, Mr. Abdun-Nabi spent several years in private
practice in Washington, D.C. and served for three years as an attorney with the
Division of Corporation Finance at the Securities and Exchange Commission.

Gerald Andros has been our Director of Sales since 1994. He is responsible for
sales of ORIGEN products both in the United States and internationally. Prior to
joining us, Mr. Andros spent six years working in sales management, marketing
and sales training for Abbott Laboratories, where he focused on sales of
immunoassay, chemistry and hematology product lines.

David Boudreau joined us in August 1999 as Director of Operations. He is
responsible for manufacturing, logistics and inventory management. From 1995 to
August 1999, Mr. Boudreau served as Director of Manufacturing Operations at
i-Stat, a medical diagnostics company, where he handled operational planning and
supply chain management for the United States and Canada. Prior to that he held
the position of Manufacturing Manager at Analog Devices Inc. and worked as a
process engineer at Chevron USA.

R. Don Elsey joined us in May 2000 as Director of Finance and Administration. He
is responsible for the accounting, treasury, risk management, and human
resources functions for us. From April 1998 to February 2000, Mr. Elsey served
as Director of Finance at PE Biosystems. From 1980 to April 1998, Mr. Elsey held
a variety of financial management positions with International Business
Machines, Inc.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires our
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered  class of our  equity  securities,  to file with the  Securities  and
Exchange  Commission  initial  reports of  ownership  and  reports of changes in
ownership  of  Common  Stock  and  other  of our  equity  securities.  Officers,
directors  and greater  than 10%  stockholders  are required by  Securities  and
Exchange  Commission  regulation  to furnish us with copies of all Section 16(a)
forms they file. Based on our records and other information, we believe that all
of our current  directors and executive  officers,  reported all transactions in
our Common  Stock and  options on a timely  basis  during the fiscal  year ended
March 31,  2003,  except for one Form 5 prepared by the Company 27 days late and
immediately filed by Samuel J. Wohlstadter reporting the June 2002 grant of a
stock option.

ITEM 11.          EXECUTIVE COMPENSATION.

The information required under this item is incorporated herein by reference to
the sections entitled "Election of Directors -- Compensation for Directors", and
-- Compensation Committee Interlocks and Insider Participation", and "Executive
Compensation", in the Company's Proxy Statement with respect to the Annual
Meeting of Shareholders to be held on September 10, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of March 31, 2003 certain information with
respect to compensation plans under which the Company's common stock is
authorized for issuance.

                                       75
<PAGE>


<TABLE>
<CAPTION>


                      EQUITY COMPENSATION PLAN INFORMATION

         PLAN CATEGORY           NUMBER OF SECURITIES TO    WEIGHTED AVERAGE        NUMBER OF SECURITIES
                                 BE ISSUED UPON EXERCISE    EXERCISE PRICE OF     REMAINING AVAILABLE FOR
                                 OF OUTSTANDING OPTIONS,       OUTSTANDING         FUTURE ISSUANCE UNDER
                                   WARRANTS AND RIGHTS      OPTIONS, WARRANTS    EQUITY COMPENSATION PLANS
                                                               AND RIGHTS          (EXCLUDING SECURITIES
                                                                                  REFLECTED IN COLUMN (A))
----------------------------------------------------------------------------------------------------------
                                           (A) (B) (C)

<S>                                     <C>                      <C>                      <C>
EQUITY COMPENSATION PLANS               1,585,821                $18.16                   481,841
APPROVED BY SECURITY HOLDERS

EQUITY COMPENSATION PLANS NOT
APPROVED BY SECURITY HOLDERS                _                      N/A                    250,000

TOTAL                                   1,585,821                $18.16                   731,841
</TABLE>

DESCRIPTION OF 2001 BROAD BASED OPTION PLAN

Our 2001 Broad Based Option Plan provides for the grant of options to acquire up
to 250,000 shares of Common Stock. As of March 31, 2003, no options have been
granted under this plan. The purpose of the plan is to attract and retain the
services of selected employees. The plan is administered by a committee of our
Board of Directors, which has the authority to interpret, and grant options
under, the plan. Options may only be granted to employees who are not our
officers or directors. The exercise price for options granted under the plan may
not be less than fair market value of a share of Common Stock on the date of
grant. Options will vest in accordance with a schedule determined by the
Committee and may have a term of up to ten years. The plan will terminate on
July 24, 2010, although the Board may suspend or terminate the plan at any time.
The number of shares related to outstanding options, the exercise price per
share of Common Stock subject to such outstanding options and the number of
shares of Common Stock pursuant to the plan will be appropriately adjusted in
the event of a stock dividend, stock split or other similar event. If any
outstanding option expires, or is terminated or canceled without being
exercised, then the shares underlying the option will again be available for
grant under the plan. In the event of dissolution, liquidation, merger or other
corporate reorganization, any surviving corporation will be required to assume
the outstanding options, substitute similar options, or allow the outstanding
options to continue. If the surviving corporation in such a transaction fails to
do so, then the outstanding options will become immediately exercisable and will
expire if not exercised before the stated event.

Other information  required under this item is incorporated  herein by reference
to the section entitled  "Security  Ownership of Certain  Beneficial  Owners and
Management" in the Company's  Proxy Statement with respect to the Annual Meeting
of Shareholders to be held on September 10, 2003.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

MSD is a joint  venture  formed by MST and us in 1995.  MSD was  formed  for the
development   and   commercialization   of  products   utilizing  a  proprietary
combination of MST's multi-array technology together with our technology,  which
we  refer  to  as  the  Research  Program.  MST  is a  company  established  and
wholly-owned by Jacob Wohlstadter,  the son of our Chief Executive  Officer.  In
August 2001,  we amended our joint  venture  agreement  and certain  license and
other agreements with MSD and MST in order to continue the MSD joint venture and
entered  into  various  related  agreements.  We refer to these  amendments  and
agreements  entered into in August 2001 as the MSD  agreements.  An  independent
committee of our Board of Directors, with the advice of independent advisors and
counsel, negotiated and approved the MSD agreements.

MSD  manufactures  and markets two  instrument  systems,  the Sector HTS and the
Sector PR, both of which  combine our ORIGEN  technology  and MST's  multi-array
technology.  The Sector HTS is an ultra high  throughput  drug discovery  system
engineered for  applications  such as high throughput  screening and large scale
proteomics. The Sector PR is a smaller system designed for benchtop applications
such as assay development,  research in therapeutic areas,  cellular biology and
medium throughput screening.


                                       76
<PAGE>



MSD also manufactures and markets a line of proprietary reagents, assays and
plates that are used on these systems. Product sales commenced in October 2002,
and during the year ended March 31, 2003, MSD had product sales of $3.2 million
and a net loss of $18.2 million.

Under the MSD agreements, our funding commitment is based on an annual budget of
MSD approved by an independent committee of our Board of Directors. Our funding
commitment may be satisfied in part through in-kind contributions of scientific
and administrative personnel and shared facilities. An independent committee of
our Board of Directors approved funding for MSD for the period from January 1,
2003 to November 30, 2003 in an amount of $20.6 million, subject to a permitted
variance of fifteen percent. As of March 31, 2003, our remaining funding
commitment to MSD was $17.0 million. In addition, prior to November 30, 2003,
the Company would also pay approximately $3.7 million to MSD related to the
permitted budget variance from prior years. For the years ended March 31, 2003,
2002 and 2001, we made total contributions to MSD of $20.5 million, $19.6
million and $8.3 million, respectively. During the year ended March 31, 2002,
the Company transferred certain equipment and leasehold interests to MSD in the
amount of $839,000, which amount is included in the in-kind contributions to MSD
in such year.

We hold a 31% voting  equity  interest in MSD,  and are  entitled to a preferred
return on $56.9  million of the funds  previously  invested in MSD through March
31, 2003, and on additional  funds we invest  thereafter.  This preferred return
would be payable out of a portion of both future profits and certain third-party
financings  of MSD,  generally  before  any  payments  are made to other  equity
holders.  Although MST owns the remaining 69% of the voting interest in MSD, the
Company generally has the right to approve  significant MSD governance  matters.
In exercising  this right,  a committee of our Board of Directors  must consider
the  interests  of the  Company  and our  stockholders  while also  taking  into
consideration the interests of MSD.

The Company and MST are the sole members of MSD and each holds one seat on MSD's
two-member board of managers. Our representative on the MSD Board of Managers is
Richard J. Massey, the Company's President and Chief Operating Officer, who also
serves as the Treasurer and Secretary for MSD. Dr. Massey receives no
compensation from MSD or the Company for serving as the Treasurer and Secretary
of MSD. The other member of the MSD Board of Managers is Jacob Wohlstadter, who
is the sole owner of MST and serves as President and Chief Executive Officer of
MSD. Neither Dr. Massey nor any other executive officer or director of the
Company has any ownership interest in MST or MSD, other than through ownership
of interests in the Company. Samuel J. Wohlstadter disclaims any ownership
interest in MST or MSD as a result of Jacob Wohlstadter's ownership interest in
those entities.

Under the terms of the MSD agreements, we have granted to MSD a worldwide,
perpetual, exclusive license (with certain exceptions) to our technology, for
use in MSD's Research Program, which is more fully described in the MSD
agreements. If we cease to be a member of the joint venture, we will receive
royalty payments from MSD on all products developed and sold by MSD using our
patents. MST holds a worldwide, perpetual, non-exclusive sublicense from MSD for
certain non-diagnostic applications of the Company's technology. The Company
will receive royalty payments from MST on any products developed and sold by MST
using our patents. During the term of the MSD joint venture, MSD is our
exclusive means of conducting the Research Program and we are obligated to
refrain from developing or commercializing any products, processes or services
that are related to the Research Program in the diagnostic field or to MSD's
research technologies as described in the MSD agreements, subject to certain
exceptions. If the MSD joint venture expires or is terminated for any reason, we
have agreed not to use the improvements granted to us by MSD to compete with MSD
in its field and we have agreed not to directly or indirectly develop or
commercialize products, processes or services related to the Research Program in
the diagnostic field or to MSD's research technologies.

The MSD joint venture agreement will expire on November 30, 2003, unless
renewed. In addition, MST and MSD have the right to terminate the joint venture
under certain circumstances, including (1) breach of our obligations, including
our funding obligations to MSD, (2) MSD's termination of Jacob Wohlstadter's
employment (other than for cause or disability),

                                       77
<PAGE>



(3) if Jacob Wohlstadter is entitled to terminate his employment agreement for
good reason (as defined in his employment agreement) or (4) upon a change in
control of the Company, as defined. For purposes of the MSD agreements, a change
in control includes, among other things, the acquisition by any person or group
(other than Samuel Wohlstadter and his affiliates) of 30% or more of the
beneficial ownership of any class of voting securities of the Company.

Upon the  expiration of the MSD joint venture as a result of  non-renewal or the
termination  by MSD or MST of the joint  venture,  MSD and MST have the right to
purchase the Company's interest in MSD for a purchase price equal to fair market
value (to be determined in accordance  with the  provisions  and  procedures set
forth in the MSD agreements,  which shall include a determination  by appraisers
if the parties are unable to agree on fair market value) minus a discount factor
varying from 7.5%,  in the case of  non-renewal  and certain  other  events,  to
15.0%,  in the case of  termination  because of a breach by us and certain other
events.  If MSD or MST exercises  this right,  it will be entitled to pay us the
purchase price,  plus interest,  over time in  installments  equal to the sum of
five  percent  of MSD Net  Sales,  as  determined  in  accordance  with  the MSD
agreements, and twenty percent of the net proceeds realized by MSD from the sale
of debt or equity  securities in any third party financing after the date of the
sale of our interest in MSD.

Following the termination or non-renewal of the joint venture agreement, many of
our licenses and other arrangements with MSD and MST will continue indefinitely.

MSD has an employment agreement with Jacob Wohlstadter,  its President and Chief
Executive Officer, the current term of which runs through November 30, 2004, and
provides  for a salary of $250,000 for the year ending  December  31,  2003.  In
addition, Jacob Wohlstadter is also eligible to receive, at the discretion of an
independent committee of the Company's Board of Directors,  an annual cash bonus
in an amount  not to exceed  20% of his annual  salary.  During the fiscal  year
ended March 31, 2003, Jacob Wohlstadter received $250,000 from his employment at
MSD.  If MSD  terminates  the  employment  agreement  without  cause,  or  Jacob
Wohlstadter  terminates the employment agreement for good reason (which includes
a "change in control" of the Company,  as described  above),  Jacob  Wohlstadter
shall be  entitled  to  receive,  in  addition  to salary and pro rata bonus and
adjustments earned through the 60th day following the notice of termination,  an
amount equal to from 3 to 12 times (depending on the reason for the termination)
the monthly pro rata salary,  bonus and adjustments in effect at the time of the
termination.  In  addition,  upon such a  termination,  MSD and MST shall have a
joint right to purchase our  interest in MSD on terms  described  above.  We are
responsible for all amounts payable,  costs incurred and other obligations under
the  employment  agreement,  which  generally are expected to be paid out of the
Company's  funding  commitment  to  MSD.  We  have  agreed  to  indemnify  Jacob
Wohlstadter  against  certain  liabilities,  including  liability from the joint
venture.  In addition,  we are obligated  under the MSD  agreements to indemnify
each board  member or officer  of MSD with  respect to any action  taken by such
person by reason  of the fact  that such  person is or was a board  member or an
officer of MSD.

Since inception of the joint venture, the Company has utilized the equity method
to account for the investment. In conjunction with entering into the MSD
agreements and taking into account the progress made by MSD in the development
of its products, the Company determined that future contributions to MSD would
be made based on the future investment benefit to be obtained by the Company.
Therefore, the Company's share of MSD losses since July 1, 2001, has been
recorded as Equity in Loss of Affiliate. Prior to this date, the Company
accounted for its equity investments in MSD as research and development funding
and accordingly, recorded all MSD investments as research and development
expenses as incurred. These research and development expenses totaled $2.4
million and $8.3 million for the years ended March 31, 2002 and 2001,
respectively. During the years ended March 31, 2003, 2002 and 2001, operating
costs allocated to MSD by the Company in connection with shared personnel and
facilities totaled $11.9 million, $11.4 million and $5.6 million, respectively.

                                       78
<PAGE>


Since July 1, 2001, these allocated operating costs reduced certain Operating
Costs and Expenses and increased Equity in Loss of Affiliate in the accompanying
Consolidated Statements of Operations. The Company's Investment in Affiliate
totaled $9.2 million and $6.2 million at March 31, 2003 and 2002, respectively.

Jacob Wohlstadter has a consulting agreement with us that terminates on August
15, 2004. Pursuant to the consulting agreement, Jacob Wohlstadter will be
entitled to receive such fees as the Company and Jacob Wohlstadter agree to when
particular services are requested by the Company.  During fiscal 2002, Jacob
Wohlstadter received $275,000 for consulting services performed for the Company
for the period 1995 through 2001. In his role as a consultant, Jacob Wohlstadter
has received stock option grants. In May 1997, he was granted options to
purchase 180,000 shares of Common Stock, with an exercise price of $6.00 per
share, which was the fair market value on the date of grant. The options will
expire on May 8, 2007, and are fully vested. In August 2000, Jacob Wohlstadter
was granted options to purchase 75,000 shares of Common Stock, with an exercise
price of $18.75 per share, which was the fair market value on the date of grant.
These options will expire on August 1, 2010, and 45,000 shares are exercisable
within 60 days of June 15, 2003.

Our Bylaws provide that we will indemnify our directors and its officers to the
fullest extent permitted by Delaware law. We are also empowered under our Bylaws
to enter into indemnification contracts with its directors and officers and to
purchase insurance on behalf of any person whom it is required or permitted to
indemnify. Pursuant to these provisions, we have entered into indemnity
agreements with each of our directors and executive officers and certain of our
key employees. We have also obtained director and officer liability insurance
for claims up to $30 million.

In addition,  our Certificate of Incorporation provides that our directors shall
not be liable for monetary  damages for breach of the directors'  fiduciary duty
of care as a director, except liability for

  o       any breach of the director's duty of loyalty to the Company or its
          stockholders,

  o       acts or omissions not in good faith or which involve intentional
          misconduct or a knowing violation of law,

  o       under Section 174 of the Delaware General Corporation Law or

  o       any transaction from which a director derived an improper personal
          benefit.


If the Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware law.

During  fiscal  year 1995 the Company  entered  into  agreements  to develop and
commercialize  biomedical  products  utilizing  advanced  materials and a supply
agreement  with  Hyperion.  Messrs.  Massey and  Wohlstadter  are  directors  of
Hyperion.  In  addition,  Mr.  Wohlstadter  is  the  principal  and  controlling
stockholder of Hyperion,  beneficially  owning more than 50% of the  outstanding
common stock of Hyperion. Mr. Wohlstadter is also the Chief Executive Officer of
Hyperion.  During the fiscal year ended March 31, 2003,  the Company did not pay
to, or receive from,  Hyperion any amounts under these agreements.  In addition,
Hyperion  has a service  arrangement  with the  Company  under which the Company
provides  certain  administrative  and other  services at cost to Hyperion.  The
total amount  billed by and paid to the Company under this  arrangement  for the
year-ended  March 31, 2003 was $338,000.  Mr.  Wohlstadter  is the principal and
controlling stockholder,  a director and the Chief Executive Officer of Wellstat
Biologics,  Wellstat  Therapeutics and Proteinix.  Dr. Massey is a less than 10%
stockholder in Proteinix.

                                       79
<PAGE>


In 1993, the Company licensed certain diagnostic  technologies from, and certain
pharmaceutical   technologies  to,  Proteinix  and  Wellstat  Therapeutics.   No
royalties  have ever been  earned or accrued  under these  agreements.  Wellstat
Biologics,   Proteinix  and  Wellstat  Therapeutics  each  has  had  a  services
arrangement  with the Company  since 1994,  1992 and 1986,  respectively,  under
which the Company provides certain services.  These services include  accounting
and finance,  human  resources  and other  administrative  services,  as well as
facility  related  costs and  services.  For the year ended March 31, 2003,  the
total amounts billed to, and paid by, Wellstat Biologics,  Wellstat Therapeutics
and  Proteinix,  under this  arrangement  were $313,000,  $352,000,  and $6,000,
repectively.

In connection with the exercise of employee stock options in July 2000, Samuel
J. Wohlstadter, our Chief Executive Officer, received a loan from us. The loan
is a 6.62% simple interest only, full recourse loan against all assets of Mr.
Wohlstadter in the principal amount of $2,060,500 maturing in July 2007.
Interest charged to and paid by Mr. Wohlstadter under this loan arrangement
during fiscal 2003 was $136,405. The loan is collateralized by the pledge of
100,000 shares of Common Stock.

In connection with the exercise of an employee stock option in July 2000,
Richard Massey, President and Chief Operating Officer, received a loan from the
Company. The loan is a 6.62% simple interest only, full recourse loan against
all assets of Dr. Massey in the principal amount of $1,649,000, maturing in July
2007. Interest charged to and paid by Dr. Massey under this loan arrangement
during fiscal 2003 was $109,164. The loan was collateralized by the pledge of
80,000 shares of Common Stock owned by Dr. Massey. This loan has been repaid in
full and the pledged collateral has been released.

Since 1995 the Company has retained  Wilmer  Cutler & Pickering to perform legal
services in connection  with the Roche  litigation  and other  matters.  Richard
Cass,  one of our  directors,  is a partner of the law firm of Wilmer,  Cutler &
Pickering and is a member of that firm's Management Committee and co-chairman of
its Corporate Practices Group. In addition,  Jennifer M. Drogula, who became the
daughter-in-law  of our Chief  Executive  Officer in March 2002, is a partner of
the firm since January 1, 2001. We recorded  approximately  $2.1 million,  $11.2
million  and $5.8  million in legal  fees with the law firm for the years  ended
March 31, 2003, 2002 and 2001, respectively. Amounts due to the law firm totaled
$432,000 and $1.7 million as of March 31, 2003 and 2002, respectively.

In  addition,  we  engaged  the law firm of Hale and Dorr LLP to  provide  legal
services in connection  with the Roche  litigation  and  otherwise.  The Company
first  engaged  this law firm in 1994.  Deborah  Wohlstadter,  the wife of Jacob
Wohlstadter and  daughter-in-law  of our Chief Executive Officer since December,
2001, is a junior partner in that law firm. We recorded  approximately  $396,000
in legal fees paid to that firm during the fiscal year ended March 31, 2003.

In 2001, Brown Simpson and Laurance Paskowitz initiated separate shareholder
derivative lawsuits for and on behalf of the shareholders of the Company in the
Circuit Court against four of the Company's current directors, two former
directors, three executive officers and the Company as a nominal defendant.

The complaints alleged breach of fiduciary duties by the named individual
defendants in connection with transactions between the Company and other
entities in which certain directors and officers are alleged to have an
interest, including MSD.

Both lawsuits sought principally the following: that the defendants hold in
trust and be required to account for and restore to the Company damages that the
Company has allegedly sustained by reason of the allegations and relief relating
to board and management composition. The Paskowitz complaint also sought damages
for a class of the Company shareholders for direct claims against the individual
defendants. The complaints did not include any claims against the Company.

In May 2002, the Circuit Court issued an opinion and order dismissing all claims
asserted against all of the defendants in both cases.

                                       80
<PAGE>


No appeal was filed by the Brown Simpson plaintiff and the decision in that case
is now final. The Paskowitz plaintiff filed an appeal to the Court of Special
Appeals in Maryland seeking review only for one direct claim. A final decision
of the Court of Special Appeals was issued in March 2003 affirming the dismissal
of the complaint by the Circuit Court. No appeal was filed and the decisions
dismissing all claims in all of these cases are now final.

ITEM 14. CONTROLS AND PROCEDURES

Our management, including our Chairman of the Board and Chief Executive Officer
(our principal executive officer) and our Chief Financial Officer (our principal
financial officer), evaluated within 90 days prior to the filling of this Form
10-K the effectiveness of the design and operation of our disclosure controls
and other procedures that are designed to ensure that information required to be
disclosure by us un the reports that we file or submit under the Securities and
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.

As a result of this evaluation, these executive officers have concluded that, as
of such date, the design and operation of our disclosure controls and procedures
were effective. There have been no significant changes in our internal controls,
subsequent to the date of our Chairman of the Board and Chief Executive Officer
and our Chief Financial Officer completed their evaluation.

It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required under this item is incorporated herein by reference to
the section entitled "Principal Accountant Fees and Services" in the Company's
Proxy Statement with respect to the Annual Meeting of Shareholders to be held on
September 10, 2003.

PART IV

ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

      (a) Documents filed as a part of this report.

                  (1) Index to Financial Statements.

The financial statements listed in the Index to Financial Statements are filed
as part of this Annual Report on Form 10-K. See ITEM 8 - Consolidated Financial
Statements and Supplementary Data.

                  (2) Index to Financial Statement Schedules.

All financial statement schedules are omitted because they are not applicable,
or not required, or because the required information is included in the
financial statements or notes thereto.

                  (3) Index to Exhibits.

The Exhibits filed as part of this Form 10-K are listed on and incorporated by
reference to the Exhibit Index immediately following the Certifications to this
Form 10-K.

                                       81
<PAGE>



                  (b) Reports on Form 8-K:
                      The Company did not furnish any reports on Form 8-K
                      during the quarter ended March 31, 2003.

                  (c) Exhibits. The Exhibits filed as part of this Form
                      10-K are listed on and incorporated by reference to
                      the Exhibit Index immediately following the Certifications
                      to this Form 10-K.

                  (d) Financial Statement Schedules. All financial
                      Statement schedules are omitted because they are not
                      applicable, or not required, or because the required
                      information is included in the financial statements
                      or notes thereto.




                                       82
<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                 IGEN International, Inc.

June 30, 2003                    By: /s/ Samuel J. Wohlstadter
                                     -------------------------
                                     Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>


Signature                                            Title                                       Date

<S>                                                                                                 <C> <C>
/s/ Samuel J. Wohlstadter                      Chief Executive Officer                         June 30, 2003
-------------------------
Samuel J. Wohlstadter                          (Principal Executive Officer); Director

/s/ George V. Migausky                         Vice President                                  June 30, 2003
----------------------
George V. Migausky                             and Chief Financial Officer
                                               (Principal Financial and Accounting
                                               Officer)

/s/ Richard J. Massey                          President, Chief Operating Officer;             June 30, 2003
---------------------
Richard J. Massey                              Director

/s/ Richard Cass                               Director                                        June 30, 2003
----------------
Richard Cass

/s/ Anthony Rees                               Director                                        June 30, 2003
----------------
Anthony Rees

/s/ Robert Salsmans                            Director                                        June 27, 2003
-------------------
Robert Salsmans

/s/ Joop Sistermans                            Director                                        June 30, 2003
-------------------
Joop Sistermans
</TABLE>




                                       83
<PAGE>

                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

 CERTIFICATION

I, Samuel J. Wohlstadter, certify that:

1. I have reviewed this annual report on Form 10-K of IGEN International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  June 30, 2003

/s/Sameul J. Wohlstadter
------------------------
Samuel J. Wohlstadter
Chairman of the Board and Chief Executive Officer



                                       84
<PAGE>




                            IGEN INTERNATIONAL, INC.
                           CERTIFICATIONS PURSUANT TO
                                 SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, George V. Migausky, certify that:

1. I have reviewed this annual report on Form 10-K of IGEN International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions  about the  effectiveness  of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  June 30, 2003

/s/George V. Miagusky
---------------------
George V. Migausky
Vice President and Chief Financial Officer





                                       85
<PAGE>



                                INDEX TO EXHIBITS
EXHIBIT
                         NUMBER DESCRIPTION OF DOCUMENT

3.1 (3)           Certificate of Incorporation, as filed with the Secretary of
                  State of the State of  Delaware on August 30, 1996.
3.2 (3)           Certificate of Designation of Series A Junior Participating
                  Preferred Stock, as filed with the Secretary of State of the
                  State of Delaware on November 18, 1996.
3.3 (7)           Certificate of Designation of Series B Convertible Preferred
                  Stock, as filed with the Secretary of State of the State of
                  Delaware on December 18, 1997.
3.4 (10)          Bylaws, as currently in effect.
4.1 (6)           Form of Right Certificate.
4.2 (6)           Rights  Agreement,  dated  November 6, 1996,  between the
                  Company and The First National Bank of Boston.
4.3 (8)           Note Purchase Agreement between the Company and the purchasers
                  named therein dated as of March 22, 1999, including the form
                  of 8.5% Senior Secured Notes due 2006.
4.4 (9)           Securities  Purchase  Agreement, dated as of January 11, 2000,
                  among  Company and the Purchasers  listed  on  Schedule  I
                  thereto,  including  the  form  of 5%  Subordinated
                  Convertible Debentures and the form of Common Stock Purchase
                  Warrant.
10.1 (2*)         Agreement between the Company and Eisai Co., Ltd. dated
                  May 25, 1990.
10.2 (1)          Supplemental Agreement between Eisai Co., Ltd. and the
                  Company.
10.3 (20)         Extension Agreement between the Company and Eisai Co. Ltd.,
                  dated July 11, 2002.
10.4 (2*)         License and Technology Development Agreement between the
                  Company and Boehringer Mannheim GmbH dated September 23, 1992.
10.5 (2*)         License and Technology Development Agreement between the
                  Company and Organon Teknika B.V. dated May 19, 1993.
10.6 (2*)         Term Sheet for  Consolidation  of Research  Projects  between
                  the Company and Proteinix Corporation dated December 14, 1993.
10.7 (2*)         Term Sheet for consolidation of Cancer Research Projects
                  between the Company and Pro-Neuron, Inc.dated
                  December 14,1993.
10.8 (2)          Form of Indemnity Agreement entered into between the Company
                  and its directors and officers. Filed herewith.
10.9 (2+)         1985 Stock Option Plan, as amended, and related Form of
                  Incentive Stock Option Grant and Form of Nonqualified Stock
                  Option Grant.
10.10 (4+)        1994 Stock Option Plan.
10.11 (4)         Lease Agreement between the Company and W-M 16020 Limited
                  Partnership dated October 5, 1994.
10.12 (5*)        Joint Venture Agreement, dated as of November 30, 1995,
                  between Meso Scale Diagnostics, LLC. ("MSD"), Meso Scale
                  Technologies, LLC. ("MST") and the Company.
10.13 (5)         Limited Liability Company Agreement, dated as of
                  November 30, 1995, between MSD, MST and the Company.
10.14 (5*)        IGEN/MSD License Agreement, dated as of November 30, 1995,
                  between MSD and the Company.


<PAGE>


                          INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER                              DESCRIPTION OF DOCUMENT


10.15 (5+)        Indemnification Agreement, dated as of November 30, 1995,
                  between the Company and Jacob Wohlstadter.
10.16 (13*)       Amendment No.1 to Joint Venture Agreement between Meso Scale
                  Diagnostics, LLC., Meso Scale Technologies, LLC., and IGEN
                  International, Inc. dated August 15, 2001.
10.17 (13)        First Amendment of Limited Liability Company Agreement of
                  Meso Scale Diagnostics, LLC. dated August 15, 2001 between
                  IGEN International, Inc. and Meso Scale Technologies, LLC.
10.18 (13*)       Amendment No.1 to IGEN/MSD License Agreement dated August 15,
                  2001 between Meso Scale Diagnostics, LLC. and IGEN
                  International, Inc.
10.19 (13)        MSD/MST Sublicense Agreement dated November 30, 1995 between
                  Meso Scale Diagnostics, LLC. and Meso Scale Technologies, LLC.
10.20 (13*)       Amendment No. 1 to MSD/MST Sublicense Agreement dated
                  August 15, 2001 between Meso Scale Technologies, LLC. and
                  IGEN International, Inc.
10.21 (13+)       Consulting Agreement between IGEN International, Inc. and
                  Jacob N. Wohlstadter effective as of  November 30, 1996.
10.22 (13+)       Indemnification Agreement between IGEN International, Inc.,
                  Jacob N. Wohlstadter and JW Consulting Services, LLC. dated
                  as of November 30, 1996.
10.23 (13+*)      Employment Agreement between Meso Scale Diagnostics, LLC.,
                  IGEN International, Inc.,Meso Scale Technologies, LLC. and
                  Jacob N. Wohlstadter dated August 15, 2001.
10.24 (16+)       Indemnification Agreement between IGEN International, Inc.
                  and Jacob N. Wohlstadter dated October 26, 2001.
10.25 (11+)       Amended and Restated Promissory Note effective as of
                  July 22, 2000 between Samuel J. Wohlstadter and the Company.
10.26 (11+)       Stock Pledge Agreement effective as of July 22, 2000 between
                  Samuel J. Wohlstadter and the Company.
10.27 (15+)       IGEN International, Inc. 2001 Broad Based Stock Option Plan.
10.28 (14)        Common Stock Purchase Agreement between IGEN International,
                  Inc. and Acqua Wellington Private Placement Fund, Ltd. dated
                  December 7, 2001.
10.29 (14)        Common Stock Purchase Agreement between IGEN International,
                  Inc. and Acqua Wellington Opportunity I Limited dated
                  December 7, 2001.
10.30 (14)        Registration Rights Agreement between IGEN International, Inc.
                  and Acqua Wellington Private Placement Fund, Ltd. dated
                  December 7, 2001.
10.31 (14)        Registration Rights Agreement between IGEN International, Inc.
                  and Acqua Wellington Opportunity I Limited dated
                  December 7, 2001.
10.32 (19)        Common Stock Purchase Agreement between IGEN International,
                  Inc. and Brown Simpson Partners I, Ltd. dated
                  December 26, 2001.
10.33 (19)        Registration Rights Agreement between IGEN International, Inc.
                  and Brown Simpson Partners I, Ltd. dated December 26, 2001.
10.34 (18)        Common Stock Purchase Agreement between IGEN International,
                  Inc. and Acqua Wellington Private Placement Fund, Ltd. dated
                  March 8, 2002.
10.35 (18)        Common Stock Purchase Agreement between IGEN International,
                  Inc. and Acqua Wellington Opportunity I Limited dated
                  March 8, 2002.
10.36 (18)        Registration Rights Agreement between IGEN International Inc.
                  and Acqua WellingtonPrivate Placement Fund, Ltd. dated
                  March 8, 2002.


<PAGE>


                                      INDEX TO EXHIBITS (CONTINUED)
EXHIBIT
NUMBER            DESCRIPTION OF DOCUMENT

10.37 (18)        Registration  Rights  Agreement  between IGEN  International,
                  Inc. and Acqua Wellington Opportunity I Limited dated
                  March 8, 2002.
10.38 (12+)       1994 Non-Employee Directors' Stock Option Plan, as amended.
10.39 (16+)       Termination Protection Program.
10.40             Letter Agreement between the Company and Meso Scale
                  Diagnostics, LLC dated March 12, 2003. Filed herewith.
10.41             Registration Rights Agreement between the Company and Citadel
                  Equity Fund Ltd. dated March 26, 2002.Filed herewith.
10.42             Collateral Account and Security Agreement between the Company
                  and Bankers Trust Company dated as of March 22, 1999.
                  Filed herewith
21.1              List of subsidiaries of the Company. Filed herewith.
23.1              Consent of Deloitte & Touche LLP.  Filed herewith.
23.2              Consent of Deloitte & Touche LLP. Filed herewith.
99.1 (17)         Final Order of Judgment issued in IGEN International, Inc. v.
                  Roche Diagnostics GmbH dated February 15, 2002.
99.2              Meso Scale Diagnostics LLC., Financial  Statements at December
                  31, 2002 and 2001, and for the Three Years  Ended December 31,
                  2002, 2001 and 2000, and  Independent Auditors' Report.
                  Filed herewith
99.3              Certification of Chief Executive Officer pursuant to 18 U.S.C.
                  section 1350, as adopted pursuant to section 906 of the
                  Sarbanes-Oxley act of 2002. Filed herewith.
99.4              Certification of Chief Financial Officer pursuant to 18 U.S.C.
                  section 1350, as adopted pursuant to section 906 of the
                  Sarbanes-Oxley act of 2002.Filed herewith.

         +        Denotes management contract or compensatory plan or
                  arrangement.
         *        Denotes confidential treatment applied.
(1)               Previously filed as an exhibit to the Company's Form 10-Q for
                  the quarter ended September 30, 1997 filed
                  November 14, 1997.
(2)               Previously filed as an exhibit to the Registration Statement
                  on Form S-1, as amended (Registration No. 33-72992).
(3)               Previously  filed as an exhibit to the Company's  Form 10-Q
                  for the quarter ended December 31, 1996 filed
                  February 14, 1997.
(4)               Previously filed as an exhibit to the Company's Annual Report
                  on Form 10-K for the fiscal year ended March 31, 1995 filed
                  May 22, 1995.
(5)               Previously  filed as an exhibit to the Company's  Form 10-Q
                  for the quarter ended  December 31, 1995 filed
                  February 14, 1996.
(6)               Previously filed as an exhibit to the Company's Form 8-A filed
                  December 10, 1996.
(7)               Previously filed as an exhibit to the Company's Registration
                  Statement on Form S-3 (Registration No. 333-45355) filed
                  January 30, 1998.
(8)               Previously  filed as an exhibit to the Company's  Form 10-K
                  for the fiscal year ended March 31, 1999 filed
                  June 29, 1999.
(9)               Previously filed as an exhibit to the Company's Form 8-K filed
                  January 12, 2000.
(10)              Previously filed as an exhibit to the Company's Form 10-Q for
                  the quarter ended September 30, 2000 filed November 14, 2000.
(11)              Previously filed as an exhibit to the Company's Form 10-K for
                  the fiscal year ended March 31, 2001 filed June 29, 2001.
(12)              Previously filed as an exhibit to the Company's Form 10-Q
                  for the quarter ended June 30, 2001 filed  August 9, 2001.
(13)              Previously filed as an exhibit to the Company's Amendment to
                  Form 8-K filed  September 5, 2001.
(14)              Previously filed as an exhibit to the Company's Form 8-K  on
                  December 19, 2001.
(15)              Previously filed as an exhibit to the Company's Registration
                  Statement on Form S-8 (Registration No.333-76624).
(16)              Previously filed as an exhibit to the Company's Form 10-Q
                  for the quarter ended December 31, 2001 filed
                  February 13, 2001.
(17)              Previously filed as an exhibit to the Company's Form 8-K
                  filed February 20, 2002.
(18)              Previously filed as an exhibit to the Company's Form 8-K filed
                  March 15, 2002.
(19)              Previously filed as an exhibit to the Company's Registration
                  Statement on Form S-3 (Registration No.333-76760).
                  Filed January 29, 2002.
(20)              Previously filed as an exhibit to the Company's Form 10-Q for
                  the quarter ended June 30, 2002 filed August 14, 2002.