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

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FORM 10-Q

|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|For the Quarterly Period Ended March 31, 2003
|or                                           
|o                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to           

Commission file number 0-27628

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SUPERGEN, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction
of incorporation or organization)                  |  | 91-1841574(IRS Employer
Identification Number)
|--------------------------------------------------------------------------------------- |  | ----------------------------------------------
|4140 Dublin Blvd, Suite 200, Dublin, California(Address of principal executive offices) |  | 94568(Zip Code)                               

(925) 560 - 0100(Registrant's telephone number, including area code)

Not applicable(Former name, former address and former fiscal year, if changed since last report)

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

Indicate
by checkmark whether Registrant is an accelerated filer (as defined in Rule 12B-2 of the
Act). Yes ý No o

The
number of shares of the registrant's Common Stock, $.001 par value, outstanding as of May 13, 2003 was 32,793,765.

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TABLE OF CONTENTS

|                                                                      |  |                                                                                              |                                                                                                           |    | Page No.
|--------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | -- | --------
|PART I                                                                |  | FINANCIAL INFORMATIONItem 1Financial Statements (Unaudited)                                 |                                                                                                           |   
|                                                                      |  |                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                          |    | 3       
|                                                                      |  |                                                                                              | Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2003 and 2002 |    | 4       
|                                                                      |  |                                                                                              | Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2003 and 2002 |    | 5       
|                                                                      |  |                                                                                              | Notes to Condensed Consolidated Financial Statements                                                      |    | 6       
|                                                                      |  | Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                           | 12
|                                                                      |  | Item 3Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                           | 36
|                                                                      |  | Item 4Disclosure Controls and Procedures                                                    |                                                                                                           | 36
|PART II                                                               |  | OTHER INFORMATION                                                                            |                                                                                                           |   
|                                                                      |  | Item 1Legal Proceedings                                                                     |                                                                                                           | 37
|                                                                      |  | Item 2Changes in Securities                                                                 |                                                                                                           | 37
|                                                                      |  | Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                           | 37
|SIGNATURES                                                            |  | 38                                                                                          
|CERTIFICATIONS UNDER SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 |  | 39                                                                                          

2

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SUPERGEN, INC.    CONDENSED CONSOLIDATED BALANCE SHEETS    (in thousands, except share and per share amounts)

|                                           |                                                                                                                                                                             | March 31,
2003                             |        | December 31,
2002 |       
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | ------
|
|ASSETS                                     |                                                                                                                                                                            
|Current assets:                            |                                                                                                                                                                             |                                            |        |                   |       
|                                           | Cash and cash equivalents                                                                                                                                                   |                                            | $      | 22,088            |       
|                                           | Marketable securities                                                                                                                                                       |                                            |        | 9,608             |       
|                                           | Accounts receivable, net                                                                                                                                                    |                                            |        | 1,730             |       
|                                           | Due from related parties                                                                                                                                                    |                                            |        | 443               |       
|                                           | Inventories                                                                                                                                                                 |                                            |        | 2,494             |       
|                                           | Prepaid financing costs                                                                                                                                                     |                                            |        | 2,546             |       
|                                           | Prepaid expenses and other current assets                                                                                                                                   |                                            |        | 2,666             |       
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total current assets                       |        |                   | 41,575
|Marketable securitiesnon-current          |                                                                                                                                                                             |                                            | 2,061  |                   |       
|Investment in stock of related parties     |                                                                                                                                                                             |                                            | 853    |                   |       
|Due from related parties                   |                                                                                                                                                                             |                                            |       |                   |       
|Property, plant and equipment, net         |                                                                                                                                                                             |                                            | 5,227  |                   |       
|Developed technology at cost, net          |                                                                                                                                                                             |                                            | 710    |                   |       
|Goodwill, net                              |                                                                                                                                                                             |                                            | 731    |                   |       
|Other intangibles, net                     |                                                                                                                                                                             |                                            | 229    |                   |       
|Restricted cash and investments            |                                                                                                                                                                             |                                            | 12,597 |                   |       
|Other assets                               |                                                                                                                                                                             |                                            | 30     |                   |       
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total assets                               |        | $                 | 64,013
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                            
|Current liabilities:                       |                                                                                                                                                                             |                                            |        |                   |       
|                                           | Accounts payable and accrued liabilities                                                                                                                                    |                                            | $      | 4,246             |       
|                                           | Convertible debt, current portion, net                                                                                                                                      |                                            |        | 6,871             |       
|                                           | Derivative liability                                                                                                                                                        |                                            |        | 2,504             |       
|                                           | Payable to AVI BioPharma, Inc                                                                                                                                               |                                            |        | 528               |       
|                                           | Deferred revenue                                                                                                                                                            |                                            |        | 167               |       
|                                           | Accrued payroll and employee benefits                                                                                                                                       |                                            |        | 2,422             |       
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total current liabilities                  |        |                   | 16,738
|Deferred rent                              |                                                                                                                                                                             |                                            | 666    |                   |       
|Convertible debt, non-current portion, net |                                                                                                                                                                             |                                            | 7,733  |                   |       
|Deferred revenuenon-current               |                                                                                                                                                                             |                                            | 1,500  |                   |       
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total liabilities                          |        |                   | 26,637
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|Commitments and contingencies              |                                                                                                                                                                             |                                            |        |                   |       
|Stockholders' equity:                      |                                                                                                                                                                             |                                            |        |                   |       
|                                           | Preferred stock, $.001 par value; 2,000,000 shares authorized; none outstanding                                                                                             |                                            |        |                  |       
|                                           | Common stock, $.001 par value; 150,000,000 shares authorized; 32,793,765 and 32,892,674 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |                                            |        | 33                |       
|                                           | Additional paid in capital                                                                                                                                                  |                                            |        | 287,203           |       
|                                           | Deferred compensation                                                                                                                                                       |                                            |        |                  |       
|                                           | Accumulated other comprehensive loss                                                                                                                                        |                                            |        | (4,996            | )     
|                                           | Accumulated deficit                                                                                                                                                         |                                            |        | (244,864          | )     
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total stockholders' equity                 |        |                   | 37,376
|                                           |                                                                                                                                                                             |                                            |        |                   |       
|                                           |                                                                                                                                                                             | Total liabilities and stockholders' equity |        | $                 | 64,013
|                                           |                                                                                                                                                                             |                                            |        |                   |       

See accompanying notes to condensed consolidated financial statements

3

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SUPERGEN, INC.    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    (in thousands, except per share amounts)    (unaudited)

|                                                                                 |                                      | Three months ended
March 31, |        
|-------------------------------------------------------------------------------- | ------------------------------------ | ---------------------------- | -------
|
|Revenues:                                                                        |                                      |                              |        
|                                                                                 | Net sales revenue                    |                              | $      
|                                                                                 | Other revenue                        |                              |        
|                                                                                 |                                      |                              |        
|                                                                                 |                                      | Total revenue                |        
|Operating expenses:                                                              |                                      |                              |        
|                                                                                 | Cost of sales                        |                              |        
|                                                                                 | Research and development             |                              |        
|                                                                                 | Selling, general, and administrative |                              |        
|                                                                                 |                                      |                              |        
|                                                                                 |                                      | Total operating expenses     |        
|Loss from operations                                                             |                                      |                              | (11,226
|Interest income                                                                  |                                      |                              | 129    
|Interest expense                                                                 |                                      |                              | (186   
|Non-cash amortization of deemed discount on convertible debt                     |                                      |                              | (216   
|Change in valuation of derivative                                                |                                      |                              | (167   
|                                                                                 |                                      |                              |        
|Net loss                                                                         |                                      | $                            | (11,666
|                                                                                 |                                      |                              |        
|Basic and diluted net loss per share                                             |                                      | $                            | (0.35  
|                                                                                 |                                      |                              |        
|Weighted average shares used in basic and diluted net loss per share calculation |                                      |                              | 32,875 
|                                                                                 |                                      |                              |        

See
accompanying notes to condensed consolidated financial statements

4

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SUPERGEN, INC.    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS    (in thousands)    (unaudited)

|                                                           |                                                                             | Three months ended
March 31,                                                       |                                       
|---------------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | --------------------------------------
|
|Operating activities:                                      |                                                                             |                                                                                    |                                       
|                                                           | Net loss                                                                    |                                                                                    | $                                     
|                                                           | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                    |                                       
|                                                           |                                                                             | Depreciation                                                                       |                                       
|                                                           |                                                                             | Amortization of intangible assets                                                  |                                       
|                                                           |                                                                             | Amortization of deferred compensation                                              |                                       
|                                                           |                                                                             | Amortization of deferred revenue                                                   |                                       
|                                                           |                                                                             | Amortization of deemed discount on convertible debt                                |                                       
|                                                           |                                                                             | Change in valuation of derivative                                                  |                                       
|                                                           |                                                                             | Expense related to stock options and warrants granted to non-employees             |                                       
|                                                           |                                                                             | Non-cash charge related to research or license agreements                          |                                       
|                                                           |                                                                             | Cash option paid in modification of distribution agreement                         |                                       
|                                                           |                                                                             | Changes in operating assets and liabilities:                                       |                                       
|                                                           |                                                                             |                                                                                    | Accounts receivable                   
|                                                           |                                                                             |                                                                                    | Inventories                           
|                                                           |                                                                             |                                                                                    | Prepaid expenses and other assets     
|                                                           |                                                                             |                                                                                    | Prepaid financing costs               
|                                                           |                                                                             |                                                                                    | Due from related parties              
|                                                           |                                                                             |                                                                                    | Other receivables                     
|                                                           |                                                                             |                                                                                    | Restricted cash                       
|                                                           |                                                                             |                                                                                    | Accounts payable and other liabilities
|                                                           |                                                                             |                                                                                    |                                       
|Net cash used in operating activities                      |                                                                             |                                                                                    | (9,274                                
|                                                           |                                                                             |                                                                                    |                                       
|Investing activities:                                      |                                                                             |                                                                                    |                                       
|                                                           | Purchases of marketable securities                                          |                                                                                    |                                       
|                                                           | Sales or maturities of marketable securities                                |                                                                                    |                                       
|                                                           | Purchases of property and equipment                                         |                                                                                    |                                       
|                                                           |                                                                             |                                                                                    |                                       
|Net cash provided by investing activities                  |                                                                             |                                                                                    | 2,346                                 
|                                                           |                                                                             |                                                                                    |                                       
|Financing activities:                                      |                                                                             |                                                                                    |                                       
|                                                           | Issuance of common stock, net of issuance costs                             |                                                                                    |                                       
|                                                           | Issuance of convertible debt                                                |                                                                                    |                                       
|                                                           | Repurchases of common stock                                                 |                                                                                    |                                       
|                                                           |                                                                             |                                                                                    |                                       
|Net cash provided by (used in) financing activities        |                                                                             |                                                                                    | 20,775                                
|                                                           |                                                                             |                                                                                    |                                       
|Net increase (decrease) in cash and cash equivalents       |                                                                             |                                                                                    | 13,847                                
|Cash and cash equivalents at beginning of period           |                                                                             |                                                                                    | 8,241                                 
|                                                           |                                                                             |                                                                                    |                                       
|Cash and cash equivalents at end of period                 |                                                                             | $                                                                                  | 22,088                                
|                                                           |                                                                             |                                                                                    |                                       
|Supplemental Disclosures of Non-cash financing activities: |                                                                             |                                                                                    |                                       
|                                                           |                                                                             | Valuation of warrant issued to placement agent in connection with convertible debt |                                       
|                                                           |                                                                             | Beneficial conversion and deemed discount in connection with convertible debt      |                                       

See
accompanying notes to condensed consolidated financial statements

5

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SUPERGEN, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        MARCH 31, 2003        (Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying condensed unaudited consolidated financial statements of SuperGen, Inc. ("we," "SuperGen" or "the Company") have been prepared in
accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month period ended
March 31, 2003 are not necessarily indicative of results that may be expected for the year ended December 31, 2003.

The
balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.

For
further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended
December 31, 2002.

NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

Cash and cash equivalents include bank demand deposits, certificates of deposit, investments in debt securities with maturities of three months or less when
purchased, and an interest in money market funds which invest primarily in U.S. government obligations and commercial paper. These instruments are highly liquid and are subject to insignificant risk.

Investments
in marketable securities consist of equity securities and corporate or government debt securities that have a readily ascertainable market value and are readily marketable.
We report these investments at fair value. We designate all marketable securities as available-for-sale, with unrealized gains and losses included as a component of equity.

The
following is a summary of available-for-sale securities as of March 31, 2003 (in thousands):

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair ValueU.S. corporate debt securities

$
12,578

$
66

$
(1
)
$
12,643U.S. government debt securities


3,007


5





3,012Marketable equity securities


14,678





(5,066
)

9,612Total

$
30,263

$
71

$
(5,067
)
$
25,267


6

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The
available-for-sale securities are classified on the balance sheet as of March 31, 2003 as follows (in thousands):

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair ValueAmounts included in cash and cash equivalents

$
4,338

$


$
(1
)
$
4,337Marketable securities, current


9,561


47





9,608Investment in stock of related parties


267





(94
)

173Amounts included in restricted cash and investments


14,027





(4,939
)

9,088Marketable securities, non-current


2,070


24


(33
)

2,061Total

$
30,263

$
71

$
(5,067
)
$
25,267


Available-for-sale
securities by contractual maturity, are shown below (in thousands):

Estimated Fair ValueMarch 31,
2003

December 31,
2002Debt securities:Due in one year or less

$
13,946

$
17,611Due after one year through three years


1,709


1,70615,655


19,317Marketable equity securities


9,612


13,815Total

$
25,267

$
33,132


NOTE 3. INVENTORIES

Inventories consist of the following (in thousands):

March 31,
2003

December 31,
2002Raw material

$
126

$
126Work in process


2,039


1,196Finished goods


329


844$
2,494

$
2,166


NOTE 4. STOCK-BASED COMPENSATION

We account for stock issued to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25") and comply with the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based

7

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Compensation"
("SFAS 123") and Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure" ("SFAS 148").
Under APB 25, compensation expense of fixed stock options is based on the difference, if any, on the date of the grant between the fair value of the stock and the exercise price of the option. We
account for stock issued to non-employees in accordance with the provisions of SFAS 123 and EITF No. 96-18,"Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

Under
the intrinsic value method, when the exercise price of our employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is
recognized. The following table illustrates the pro forma effect on net loss and loss per share for the three month periods ended March 31, 2003 and 2002 had we applied the fair value method to
account for stock-based awards to employees (in thousands, except per share amounts):

Three months ended March 31,2003

2002Net loss, as reported

$
(11,666
)
$
(12,081
)Add: Stock-based employee compensation expense included in the determination of net loss, as reported


7


19Deduct: Stock-based employee compensation expense that would have been included in the determination of net loss if the fair value method had been applied to all awards


(779
)

(912
)Pro forma net loss

$
(12,438
)
$
(12,974
)Basic and diluted net loss per common share:As reported

$
(0.35
)
$
(0.37
)Pro forma

$
(0.38
)
$
(0.40
)


NOTE 5. STOCKHOLDERS' EQUITY

Stock Repurchase Plan

In September 2000, the SuperGen Board of Directors authorized a stock repurchase plan to acquire, in the open market, an aggregate of up to one million
shares of our common stock, at prices not to exceed $22.00 per share or $20,000,000 in total. In March 2001 and September 2002, the Board authorized increases in the number of shares to
be acquired under the repurchase plan, but maintained the $20,000,000 repurchase total.

During
the three months ended March 31, 2003, we repurchased 187,600 shares of our common stock at a cost, net of commissions, of $527,000. Since inception of the stock repurchase
plan, we have repurchased 3,221,000 shares of our common stock at a cost, net of commissions, of $19,214,000. All shares repurchased have been retired.

8

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NOTE 6. CONVERTIBLE DEBT FINANCING

On February 26, 2003 we entered into a Securities Purchase Agreement for the private placement of Senior Exchangeable Convertible Notes ("Notes") in the
principal amount of $21.25 million and related warrants, and a Registration Rights Agreement.

The
Notes accrue interest at a rate of 4% per year. The principal amount of the Notes are repayable in four equal quarterly installments beginning nine months after the closing of the
transactions. The Notes are, at the option of the investors, in whole or in part, (a) convertible into shares of our common stock at a fixed conversion price of $4.25 per share, and
(b) exchangeable for up to 2,634,211 shares of common stock of AVI BioPharma, Inc. that we currently own (the "AVI Shares") at a fixed exchange price of $5.00 per share. The fair value
of the AVI Shares of $9,088,000 is included in the March 31, 2003 balance sheet under Restricted cash and investments. We may pay interest due under the Notes in shares of our common stock at a
price tied to the then market price, and subject to certain conditions, we may also elect to pay principal due under the Notes in shares of our common stock and AVI Shares at prices tied to the then
market price of our common stock and AVI common stock, respectively. Subject to certain conditions, at any time after the first anniversary of the effectiveness of the registration statement covering
the resale of our shares of common stock, all of the outstanding Notes will be redeemable by us for a cash redemption price at 120% of par plus accrued and unpaid interest. Upon a Change of Control
(as defined under the Notes), the holders will have certain redemption rights, and we may also redeem the Notes, in each case subject to certain conditions and provided that, in the event of our
redemption, we will issue to the holders of the Notes certain warrants exercisable for the securities of the acquiring entity and the AVI Shares. Our exchange obligations under the Notes are secured
by a pledge of the AVI Shares.

In
connection with the issuance of the Notes, we issued warrants to the note holders for the purchase of an aggregate of 1,997,500 shares of SuperGen common stock. These warrants will be
exercisable for a term of five years at an exercise price of $5.00 per share. We valued these warrants using the Black-Scholes method with the following assumptions: a risk-free interest
rate of 4%, volatility of 0.85, and a dividend yield of 0%. This resulted in an assigned value of $4,614,000. The proceeds from the Notes of $21,250,000 were allocated between the convertible
instrument and the warrants on a relative fair value basis, which resulted in a fair value of $3,825,000 assigned to the warrants as a deemed discount on the convertible debt. In connection with the
issuance of the Notes and warrants, we also recorded $700,000 related to the beneficial conversion feature on the Notes, because the effective conversion price of the convertible debt was less than
the fair value of the common stock on the date of issuance. The total amount of the deemed discount on the Notes as a result of the warrant
issuance and the beneficial conversion feature amounted to $4,525,000. The beneficial conversion feature and warrant value is amortized over 21 months, the term of the Notes. At
March 31, 2003, the unamortized balance of the deemed discount on the convertible debt is $4,310,000.

In
connection with the consummation of this transaction, we paid legal fees of approximately $370,000. In addition, as compensation to the placement agent, we paid the placement agent
$1,477,500 in cash and issued a four-year warrant to an affiliate of the placement agent for the purchase of 363,125 shares of our common stock at an exercise price of $4.00 per share. The
warrants issued to the placement agent were assigned a value of $813,400, using the Black-Scholes method with the following assumptions: a risk-free interest rate of 4%; volatility of
0.85; and a dividend yield of 0%. The total of

9

---

the
legal fees, placement agent cash fee, and placement agent warrant valuation was $2,661,000, which we have classified as prepaid financing costs. This amount is being amortized over
21 months, the term of the Notes, to interest expense. At March 31, 2003, the unamortized balance is $2,546,000.

In
accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments," ("SFAS 133") we are required to separate and account for,
as an embedded derivative, the option feature that allows holders of the Notes to receive a portion of the principal and interest in the AVI Shares at $5.00 per share. As an embedded derivative
instrument, the exchangeable feature must be measured at fair value and reflected as a liability. Changes in the fair value of the derivative are recognized in earnings. We determined the fair value
of the exchange feature with respect to the AVI Shares to be $2,337,000 at February 26, 2003, which was calculated as an American style written put option on 2,634,211 AVI shares, with a strike
of $5.00, expiring on the related principal and interest payment dates through August 2004. This amount was allocated from the proceeds of the Notes to the derivative liability at
February 26, 2003. The high valuation of the exchange feature reflects more the extraordinary volatility associated with AVI stock over the past year than the closing price of the AVI shares.
At March 31, 2003, the fair value of the derivative had increased to $2,504,000, and is recorded as a current liability on the balance sheet. The change in the derivative valuation of $167,000
has been recorded in the statement of operations. The convertible feature on our own SuperGen shares associated with the Notes do not qualify as embedded derivatives under SFAS 133. We continue
to hold all of the exchangeable AVI shares available for exchange and continue to reflect changes in those share values in accumulated other comprehensive gain or loss. The exchangeable feature was
embedded in the Notes to increase the appeal of our private placement to institutional investors and to reduce the related interest payments.

NOTE 7. COMPREHENSIVE LOSS

For the three months ended March 31, 2003 and 2002, total comprehensive losses amounted to $15,866,000 and $20,170,000, respectively. Comprehensive losses
consisted primarily of the net losses and changes in unrealized gains or losses on investments. Changes in unrealized gains or losses on
investments were $4,200,000 and $8,090,000 for the three month periods ended March 31, 2003 and 2002, respectively.

NOTE 8. BASIC NET LOSS PER SHARE

Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during the quarter.

As
we have reported operating losses each period since our inception, the effect of assuming the exercise of options and warrants would be anti-dilutive and, therefore, basic
and diluted net loss per share are the same.

NOTE 9. DEFERRED REVENUE

In March 2003, we entered into an agreement with Abbott Laboratories that allows us to terminate the Nipent Distribution agreement, entered into in
December 1999, for a stated fee that

10

---

decreases
over time to $1.5 million at March 2005. As part of the agreement we paid Abbott $500,000 for the right to terminate the Nipent Distribution agreement at our option. The
$500,000 has been recorded as a reduction of the deferred revenue we initially received from Abbott for the distribution rights, and we have stopped amortizing the remaining deferred revenue, which
was $1,667,000 at March 31, 2003, to account for the termination fee we may pay to Abbott.

NOTE 10. LEGAL PROCEEDINGS

On April 14, 2003, John R. Blum filed a class action complaint entitledJohn R. Blum v. SuperGen, Inc., et
al., No. C 03-1576 in the U.S. District Court for the Northern District of California, against us and our current President and Chief Executive Officer
alleging violations of the Securities Exchange Act of 1934 and seeking unspecified damages. Subsequently, as of May 9, 2003, four similar actions were filed in the same court. Each of the
complaints purports to be a class action lawsuit brought on behalf of persons who purchased or otherwise acquired our common stock during the period of April 18, 2000 through March 13,
2003, inclusive (except that one complaint specified the period as between April 18, 2000 through March 14, 2003). The complaints allege that during such period, we issued materially
false and misleading statements and failed to disclose certain key information regarding Mitozytrex. The complaints do not specify the amount of damages sought. The complaints have not yet been
consolidated, we have not yet answered any of the complaints, discovery
has not commenced, and no trial date has been established. We intend to contest these and similar future actions vigorously. Although we believe that the class action lawsuits will not have a material
impact on our financial condition, they are not yet consolidated, and we cannot predict their outcomes with any certainty. See "Factors Affecting Future Operating ResultsPlaintiffs have
brought several securities class action lawsuits against us, any of which, if it results in an unfavorable resolution, could adversely affection our financial condition."

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Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our condensed consolidated financial statements and related notes included
elsewhere in this report. The results discussed below are not necessarily indicative of the results to be expected in any future periods. Our disclosure and analysis in this section of the report also
contains forward-looking statements. When we use the words "anticipate," "estimate," "project," "intend," "expect," "plan," "believe," "should," "likely" and similar expressions, we are making
forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. In particular, these statements include statements such as: the timing of filing
of a new drug application for Orathecin; our estimates about becoming profitable; our forecasts regarding our research and development expenses; and our statements regarding the sufficiency of our
cash to meet our operating needs. Our actual results could differ materially from those predicted in the forward-looking statements as a result of risks and uncertainties including, but not limited
to, delays and risks associated with conducing clinical trials, product development and obtaining regulatory approval; ability to establish and maintain collaboration relationships; competition;
ability to raise funding; continued adverse changes in general economic conditions in the United States and internationally; adverse changes in the specific markets for our products; ability to manage
our clinical trials; and ability to launch and commercialize our products. Certain unknown or immaterial risks and uncertainties can also affect our forward-looking statements. Consequently, no
forward-looking statement can be guaranteed and you should not rely on these forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.

Overview

We are an emerging pharmaceutical company dedicated to the acquisition, rapid development and commercialization of oncology therapies for solid tumors and
hematological malignancies. We seek to minimize the time, expense and technical risk associated with drug commercialization by identifying and acquiring pharmaceutical compounds in the later stages of
development, rather than committing significant resources to the research phase of drug discovery.

Our
primary objective is to become a leading supplier of oncology therapies for solid tumors, hematological malignancies, and blood disorders. Key elements of our strategy include:



Since
our incorporation in 1991 we have devoted substantially all of our resources to our product development efforts. Our product revenues to date have been limited and have been
principally from sales of Nipent, which we are marketing in the United States for the treatment of hairy cell leukemia. As a result of our substantial research and development expenditures and minimal
product revenues, we have incurred cumulative losses of $244.9 million for the period from inception through March 31, 2003. These losses included non-cash charges of
$20.0 million for the acquisition of in-process research and development.

We
are close to completing three randomized Phase III studies for Orathecin in approximately 1,800 patients with pancreatic cancer at over 200 study sites in North America and Europe.
The three studies are: "Gemzar refractory," where patients who failed treatment with Gemzar were randomized

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to
either Orathecin or 5-FU; "Chemotherapy refractory," where patients who have failed multiple types of chemotherapy are randomized to either Orathecin or the next best therapy; and
"Chemotherapy naïve," where patients who have had no prior chemotherapy are randomized to Orathecin or gemcitabine. We commenced the clinical trials in 1998, and more than 2,700
patients have been enrolled in the studies. We have submitted the first two (out of three total) sections of a "rolling" New Drug Application ("NDA") with the United States Food and Drug
Administration ("FDA"). We expect to complete our NDA filing during the second quarter of 2003. In addition, we have been granted "fast track" designation for Orathecin for the treatment of patients
with pancreatic cancer who have failed or are resistant to two or more chemotherapy agents, which means that the FDA will facilitate and expedite the development and review of the application.

We
have completed enrollment in a Phase III clinical program with Dacogen (our proposed brand name for decitabine) for treatment of MDS, and are continuing to pursue Phase I
and II clinical trials with Orathecin and a number of other drug candidates for treatment of other cancers and hematological malignancies. We are also conducting trials with Nipent, currently approved
for hairy cell leukemia, for use in other indications such as chronic lymphocytic leukemia, graft-versus-host disease, and non-Hodgkin's lymphoma.

We
expect to continue to incur operating losses at least through 2003. This is due primarily to projected spending for the ongoing clinical trials and related development of our product
candidates, as well as marketing launch expenditures for Orathecin. Our ability to become profitable will depend upon a variety of factors, including regulatory approvals of our products, the timing
of the introduction and market acceptance of our products and competing products, increases in sales and marketing expenses related to the launch of Orathecin and other drug candidates, if approved,
and our ability to control our costs. If Orathecin is not approved or commercially accepted we may remain unprofitable for longer than we currently anticipate.

Results of Operations



Revenues were $2.2 million in the first quarter of 2003 compared to $1.6 million 2002. The increase was due primarily to higher sales of Nipent, our
drug currently approved for the treatment of hairy cell leukemia. In the first quarter of 2002, we experienced unusually low inventory levels of Nipent due to the bankruptcy of the outside company
that had been purifying the drug. Sales in the first quarter of 2003 included approximately $116,000 in sales to Europe, compared to $50,000 in the first quarter of 2002. Unlike our Nipent sales
efforts in the U.S. market where we call on clinicians directly, our role in Europe is currently limited to that of a supplier. As such, we do not have a direct influence on Nipent sales at the
clinical level, making their timing and magnitude difficult to predict and dependent on the efforts of our European distributor.

Cost
of sales as a percentage of net sales revenue was 35% in the first quarter of 2003 compared to 54% during the same period in 2002. The improved cost of sales percentage in 2003 was
due to the increased sales of Nipent, which is sold at higher margins than our other generic drugs. In the first quarter of 2002, a larger proportion of our sales related to generic mitomycin, which
is sold at lower margins than Nipent. Current margins may not be indicative of future margins due to possible variations in product mix, average selling prices, and manufacturing costs.

Research
and development expenses were $6.7 million in the first quarter of 2003 compared to $7.2 million in 2002. The decline was due primarily to lower expenditures
relating to our Phase III clinical trials of Orathecin for pancreatic cancer. We completed enrollment of over 1,800 patients into the three Phase III Orathecin trials in 2001, and the expenditures for
these trials continue to decline as patients complete the studies. Although we are continuing to enroll new patients into our Phase III trials for Dacogen, we do not expect these trials to be as
costly as the Orathecin trials. However,

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conducting
clinical trials is a lengthy, expensive, and uncertain process. Completion of clinical trials may take several years or more. The length of time generally varies substantially according to
the type, complexity, novelty, and intended use of the product candidate. Our clinical trials may be suspended at any time if we or the FDA believe the patients participating in our studies are
exposed to unacceptable health risks. We may encounter problems in our studies which will cause us or the FDA to delay or suspend the studies. Because of these uncertainties, we cannot predict when or
whether we will successfully complete the development of our product candidates or the ultimate product development cost.

Selling,
general, and administrative expenses were $5.9 million in the first quarter of 2003 compared to $6.5 million in 2002. This decrease was due primarily to
$1.0 million in lower sales and marketing expenditures, particularly in sales bonuses; conferences, symposiums, and meetings; and travel expenses; offset by higher business development and
insurance costs.

Interest
income was $129,000 in the first quarter of 2003 compared to $724,000 in 2002. This was due to lower available cash and marketable securities balances and a decline in interest
rates.

Interest
expense was $186,000 and non-cash amortization of deemed discount on convertible debt was $216,000 in the first quarter of 2003. No such amounts were recorded in
2002 as the debt was issued in February 2003.

The
change in derivative valuation of $167,000 was recorded in the first quarter of 2003, which represents the change in the valuation of the option feature that allows holders of our
exchangeable convertible notes to receive a portion of the principal and interest in the shares of AVI BioPharma at $5.00 per share. As the fair value of the common stock of AVI has fluctuated
significantly in the past two years, the valuation of the derivative may have a significant impact on our results of operations.

Liquidity and Capital Resources

Our cash, cash equivalents, and both short and long-term marketable securities totaled $33.8 million at March 31, 2003, compared to
$22.4 million at December 31, 2002. In addition, at March 31, 2003 we held approximately 2.7 million shares of registered stock of AVI BioPharma, Inc., ("AVI") most
of which is held as collateral for our convertible debt, with a market value of $9.1 million, and thus is classified as a restricted investment at March 31, 2003.

The
net cash used in operating activities in the first quarter of 2003 was $9.3 million, which consisted primarily of the net loss of $11.7 million, less the decrease in
accounts receivable of $3.7 million, plus an increase in prepaid financing costs of $1.7 million. The net cash used in operating activities in the first quarter of 2002 was
$15.7 million, which consisted primarily of the net loss of $12.1 million and the decrease of $4.2 million in accounts payable and accrued liabilities.

Net
cash provided by financing activities was $2.3 million and $10.9 million for the first quarter of 2003 and 2002, respectively, primarily related to the sales and
maturities of marketable securities.

Net
cash provided by financing activities was $20.8 million for the first quarter of 2003, and was primarily from the issuance of $21.3 million exchangeable convertible
notes in February 2003. Net cash used in financing activities was $1.2 million in the first quarter of 2002 related primarily to the repurchase of the Company's common stock.

On
February 26, 2003 we entered into a Securities Purchase Agreement with a number of purchasers for the private placement of Senior Exchangeable Convertible Notes ("Notes") in
the principal amount of $21.25 million and related warrants. The Notes will accrue interest at a rate of 4% per year. The principal amount of the Notes will be repayable in four equal quarterly
installments beginning nine months after the closing of the transaction. The Notes will be, at the option of the investors, in whole or in part, (a) convertible into shares of our common stock
at a fixed conversion

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price
of $4.25 per share, and (b) exchangeable for up to 2,634,211 of our shares of common stock of AVI, at a fixed exchange price of $5.00 per share. We may pay interest due under the Notes in
shares of our common stock at a price tied to the then market price, and subject to certain conditions, we may also elect to pay principal due under the Notes in shares of our common stock and our AVI
Shares at prices tied to the then market price of our common stock and AVI common stock, respectively. Subject to certain conditions, at any time after the first anniversary of the effectiveness of a
registration statement we filed to cover the resale of the securities, all of the outstanding Notes will be redeemable by SuperGen for a cash redemption price at 120% of par plus accrued and unpaid
interest. Upon a change of control, the holders will have certain redemption rights, and we may also redeem the Notes, in each case subject to certain conditions and provided that, in the event of our
redemption, we will issue to the holders of the Notes certain warrants exercisable for the securities of the acquiring entity and the AVI Shares. Our exchange obligations under the Notes are secured
by a pledge of the AVI Shares. See "Factors Affecting Future Operating ResultsWe substantially increased our outstanding indebtedness with the issuance of certain senior exchangeable
convertible notes and we may not be able to pay our debt and other obligations;The conversion of the notes will have a dilutive effect upon the stockholders."

We
have financed our operations primarily through the issuance of equity and debt securities and milestone payments in connection with collaborative agreements. We believe that our
current cash, cash equivalents, marketable securities, and other investments will satisfy our cash requirements for at least the next twelve months. However, it is our intention to pursue additional
financing options, which include selling additional shares of stock and/or exploring marketing partnership opportunities for Orathecin and Dacogen.

Our
primary planned uses of cash are as follows:



We
believe that our need for additional funding will increase in the future, especially if we receive regulatory approval for Orathecin, and that our continued ability to raise
additional funds from external sources will be critical to our success. We continue to actively consider future contractual arrangements that would require significant financial commitments. If we
experience currently unanticipated cash requirements, we could require additional capital much sooner than presently anticipated. We may seek such additional funding through public or private
financings or collaborative or other arrangements with third parties. We may not be able to obtain additional funds on acceptable terms, if at all.

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Factors Affecting Future Operating Results

You should carefully consider the risks described below before making an investment decision. The risks and uncertainties described below
are not the only ones facing our company. Our business operations may be impaired by additional risks and uncertainties that we do not know of or that we currently consider
immaterial.

Our business, results of operations or cash flows may be adversely affected if any of the following risks actually occur. In such case, the trading price of our
common stock could decline, and you may lose all or part of your investment.

This report also contains and incorporates by reference forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this report.

Risks Related to Our Financial Condition and Common Stock

We have a history of operating losses and an accumulated deficit, we expect to continue to incur losses for the foreseeable
future.Since inception we have incurred cumulative losses of $244.9 million through March 31, 2003, and have never generated enough funds through
our operations to support our business. These losses include non-cash charges of $20.0 million for the acquisition of in-process research and development. Our product
revenues to date have been limited and have been principally from sales of Nipent, which we are marketing in the United States for the treatment of hairy cell leukemia. Our losses to date have
resulted principally from:



We
expect to continue to incur substantial operating losses at least through 2003.

We are currently unprofitable and may never become profitable.Since inception, we have funded our research and development
activities primarily from private placements and public offerings of our securities, milestone payments and revenues generated primarily from sales of Nipent, which we are
marketing in the United States for the treatment of hairy cell leukemia. As a result of our substantial research and development expenditures and limited product revenues, we have incurred substantial
net losses.

Our
ability to achieve profitability will depend primarily on our ability to obtain regulatory approval for and successfully commercialize Orathecin, our lead product candidate. Our
success will also depend, to a lesser extent, on our ability to develop and obtain regulatory approval of Nipent for indications other than hairy cell leukemia, to obtain regulatory approval for and
successfully commercialize Dacogen and other product candidates, and to bring to market our other proprietary products, i.e., products that are advancing through our internal clinical development
infrastructure,

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including
our Extra products. Our ability to become profitable will also depend upon a variety of other factors, including the following:



Our
products and product candidates, even if successfully developed and approved, may not generate sufficient or sustainable revenues to enable us to be profitable, or to sustain
profitability.

We may require additional financing, and an inability to raise the necessary capital or to do so on acceptable terms would threaten the continued success of our
business.We will continue to expend substantial resources for conducting research and development, including costs associated with conducting clinical trials.
While we raised $21.25 million through a senior exchangeable convertible debt offering in February 2003 and anticipate that our capital resources will be adequate to fund operations and
capital expenditures for at least the next twelve months, if we experience unanticipated cash requirements during this period, we could require additional funds much sooner. We may raise money by sale
of our equity securities or debt, or the exercise of outstanding warrants and stock options. However, given the uncertainties of the market conditions, we may not be able to sell our securities in
public offerings or private placements at prices and on terms that are favorable to us, or if at all. Also, the dilutive effect of those fundings could adversely affect our results per share. We may
also choose to obtain funding through licensing and other contractual agreements. Such arrangements may require us to relinquish our rights to our technologies, products or marketing territories, or
to grant licenses on terms that are not favorable to us. If we fail to obtain adequate funding in a timely manner, or at all, we may be forced to scale back our product development activities, or
forced to cease our operations.

Our stock price is highly volatile, and if our price declines further, we may encounter difficulty in raising capital in the equity
market.The trading price of our common stock has fluctuated dramatically in the last two years, from the high of $15.70 in January 2001 to a historic low
of $1.40 in October 2002. Our stock price is likely to remain volatile in the future, which is subject to the following factors, some of which are beyond our control:



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If
the trading price of our common stock continues to significantly fluctuate and decline, we may be unable to obtain additional capital that we may need through public or private
financing activities. Because outside financing is still critical to sustain our business operations, large fluctuations in our share price will harm our financing activities and may cause us to
significantly alter our business plans or cease operations altogether.

Plaintiffs have brought several securities class action lawsuits against us, any of which, if it results in an unfavorable resolution, could adversely affect our
financial condition.On April 14, 2003, John R. Blum filed a class action complaint entitledJohn R. Blum v. SuperGen, Inc.,
et al., in the U.S. District Court for the Northern District of California against us and our current President and Chief Executive Officer, alleging violations of the
Securities Exchange Act of 1934 and seeking unspecified damages. Subsequently, as of May 9, 2003, four similar actions have been filed in the same court. Each of the complaints purports to be a
class action lawsuit brought on behalf of persons who purchased or
otherwise acquired our common stock during the period of April 18, 2000 through March 13, 2003, inclusive (except that one complaint specified the period as between April 18, 2000
through March 14, 2003). The complaints allege that during such period, we issued materially false and misleading statements and failed to disclose certain key information regarding Mitozytrex.
The complaints do not specify the amount of damages sought. The complaints have not yet been consolidated, we have not yet answered any of the complaints, discovery has not commenced, and no trial
date has been established. We intend to contest these and similar future actions vigorously. Nevertheless, litigation is subject to inherent uncertainties, and if any of the lawsuits result in any
unfavorable resolution, our financial condition may be materially and adversely affected. In addition, regardless of the outcome of the lawsuits, defending the Company in these actions will inevitably
result in substantial costs and divert management's attention and resources, which may in turn harm our business, financial condition and results of operations.

Our equity investment in AVI BioPharma exposes us to equity price risk and any impairment charge would affect our results of
operations.We are exposed to equity price risk on our equity investment in AVI. Currently we own 2,684,211 shares of AVI. In the third quarter of 2002, we
recorded an other-than temporary loss of $8.2 million relating to our holding in AVI, resulting in a reduction of our cost basis in the AVI stock. Under our accounting policy,
marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At September 30,
2002, AVI common stock had been trading below our original cost basis for more than six months. As there was no compelling evidence to the contrary, we recorded the impairment charge of
$8.2 million in our results of operations. The amount of the charge was based on the difference between the market price of the securities as of September 30, 2002, and our original cost
basis. The public trading prices of the shares of AVI have fluctuated significantly since we purchased them and could continue to do so. If the public trading prices of these shares continue to trade
below their new cost basis in future periods, we may incur additional impairment charges relating to this investment, which in turn will affect our results of operations.

In
addition, the holders of our senior exchangeable convertible notes issued in February 2003 may exchange their notes into up to 2,634,211 of our AVI shares six months after the
notes issuance at an exchange price of $5.00 per share, and we pledged the AVI shares to secure our exchange obligation under the notes. As a result, our ability to gain from the increases of AVI's
stock price is limited.

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We substantially increased our outstanding indebtedness with the issuance of certain senior exchangeable convertible notes and we may not be able to pay our debt
and other obligations.On February 26, 2003, we privately placed certain senior exchangeable convertible notes in the aggregate principal amount of
$21.25 million with several institutional investors. The notes are payable in four equal quarterly installments beginning in November 2003 and will accrue interest at a rate of 4% per
annum. Prior to the issuance of the notes, we did not have any indebtedness. Therefore, by issuing the notes we increased our indebtedness substantially. In addition, the note holders have imposed
certain restrictive
covenants, including a limit on our future indebtedness and a limit on structuring equity financings with variable pricing. As a result, the issuance of the notes will:



Currently,
our revenues from our operations will not generate sufficient cash flow to satisfy the principal payment under the notes when they become due. Under the terms of the notes, we
have the right to pay the principal and interest then due under the notes through the issuance of shares of common stock at a conversion price tied to the then market price. Nevertheless, our
principal payment through issuance of shares of our common stock is subject to certain conditions, including limitation based on trading volumes in our common stock at such time. Therefore, we may be
required to use cash to pay the principal amount when it is due under the notes. If we decide to make payments under the notes in cash, we may deplete our financial resources and adversely affect our
product development. If we are unable to satisfy our payment obligations under the notes, we will default on the notes.

The conversion of the notes will have a dilutive effect upon the stockholders.Pursuant to the terms of the senior
exchangeable convertible notes we issued in February 2003, the note holders may convert the notes at any time prior to their maturity at a fixed conversion price of $4.25, and we have the
right, subject to certain conditions, to pay the principal and interest then due under the notes through the issuance of shares of common stock at a conversion price tied to the then market price. If
we issue shares of our common stock upon the note holders' conversion of the notes or to make payments, such issuance will be dilutive to our stockholders. In addition, if we decide to redeem the
notes in connection with a change of control, we will be required to issue to the note holders certain warrants for the securities of the acquiror, which will be dilutive and may negatively affect the
deal consideration the stockholders would otherwise receive in absence of such issuance.

Risks Related to Our Industry

Before we can seek regulatory approval of any of our product candidates, we must successfully complete clinical trials, which are expensive and have uncertain
outcomes.Most of our products are in the development stage and, prior to their sale, will require regulatory approval and the commitment of substantial resources.
Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through pre-clinical testing and clinical trials that our product
candidates are safe and effective for use in humans. Conducting clinical trials is a lengthy, time-consuming and expensive process, and their results are inherently uncertain. We have
incurred and will continue to incur substantial expense for, and we have devoted and expect to continue to devote a significant amount of time to, preclinical testing and clinical trials. In addition,
we must overcome all kinds of difficulties and setbacks in our clinical trials, which are an inherent part of the drug development process.

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We are currently conducting late stage Phase III clinical trials for two of our product candidates: Orathecin for pancreatic cancer and Dacogen for treatment of advanced myelodysplastic
syndrome. In addition, we have a broad portfolio of other cancer drugs in various stages of development, including Avicine in colorectal cancer (Phase II), Nipent (for indications other than hairy
cell leukemia, Phase IV), Partaject busulfan, inhaled Orathecin (Phase I), and are conducting pre-clinical studies for VEGF, inhaled paclitaxel and Cremophor-free paclitaxel.
Clinical trials that we conduct or that third parties conduct on our behalf may not demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals for any of our product
candidates. We expect to commence new clinical trials from time to time in the course of our business as our product development work continues. However, regulatory authorities may not permit us to
undertake any additional clinical trials for our product candidates.

In
addition, we have ongoing research and pre-clinical projects that may lead to product candidates, but we have not begun clinical trials for these projects. Our
pre-clinical or clinical development efforts may not be successfully completed and we may not commence clinical trials as planned.

Our clinical trials may be delayed or terminated, which would prevent us from seeking necessary regulatory
approvals.Completion of necessary clinical trials may take several years or more. The length of time generally varies substantially according to the type,
complexity, novelty and intended use of the product candidate. For example, the design of our three Orathecin studies are complex, and we have been conducting clinical trials since 1998, which may
make statistical analysis difficult and regulatory approval hard to predict. Our commencement and rate of completion of clinical trials may be delayed by many factors, including:



In
addition, we have limited experience in conducting and managing clinical trials. We rely on third parties, including contract research organizations, to assist us in managing and
monitoring clinical trials. Our reliance on these third parties may result in delays in completing, or in failure to complete, these trials if the third parties fail to perform under our agreements
with them.

We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in compliance with regulatory requirements, if the trial results
are negative, inconclusive or if they fail to demonstrate safety or efficacy.Our clinical trials must be conducted in accordance with the FDA's regulations and
are subject to oversight by the FDA and institutional review boards at the medical institutions where the clinical trials are conducted. We outsource our research and development activities with
respect to our primary product candidates. We have agreements with third-party contract research organizations ("CRO's") to provide monitors and to manage data for our clinical programs, including the
phase III Orathecin program in pancreatic cancer. We and our CRO's are required to

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comply
with current Good Clinical Practices ("GCP's") regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces GCP's through periodic
inspections of study sponsors, principal investigators, and study sites. We are not aware of any material GCP deficiencies with any of these research organizations that might impact regulatory
approval of our products. If, however, in the future we or our CRO's fail to comply with applicable GCP's, the clinical data generated in our studies may be deemed unreliable and the FDA may require
us to perform additional studies before approving our marketing applications. We cannot assure you that upon inspection the FDA will determine that any of our studies for products in clinical
development comply with GCP's. In addition, our clinical trials must be conducted with product candidates produced under current Good Manufacturing Practices regulations and may require large numbers
of test subjects. Our failure to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process.

Even
if we achieve positive interim results in clinical trials, these results do not necessarily predict final results, and acceptable results in early trials may not be repeated in
later trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. Negative or
inconclusive results or adverse medical events during a clinical trial could cause us to repeat or terminate a clinical trial. Our clinical trials may be suspended at any time if we or the FDA believe
the patients participating in our studies are exposed to unacceptable health risks or if the FDA finds deficiencies in the conduct of these trials.

We
may encounter other problems and failures in our studies that will cause us or the FDA to delay or suspend the studies. The potential failures will delay development of our product
candidates, hinder our ability to conduct related preclinical testing and clinical trials, and further delay the commencement of regulatory approval process. Moreover, we then may be required to
conduct other clinical trials for the product candidates, which will require substantial funding and time. We may be unable to obtain corporate funding or other financing to conduct such clinical
trials. The failures or perceived failures in our clinical trials will directly delay our product development and regulatory approval process, damage our business prospect, make it difficult for us to
establish collaboration and partnership relationships, and negatively affect our reputation and competitive position in the pharmaceutical community.

If we fail to obtain regulatory marketing approvals of our product candidates in a timely manner, commercialization of our products will be delayed or prevented
and we will not be able to generate revenue and achieve profitability.All new drugs, including our products under development, are subject to extensive and
rigorous regulation by the FDA, and comparable agencies in foreign countries. These
regulations govern, among other things, the development, testing, manufacturing, labeling, storage, pre-market approval, advertising, promotion, sale and distribution of our products.
Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug
and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both
safe and effective for each indication where approval is sought. Satisfaction of these requirements typically takes several years and the time needed to satisfy them may vary substantially, based on
the type, complexity and novelty of the pharmaceutical product.

We
are currently selling Nipent (which we acquired from the Parke-Davis division of the Warner-Lambert Company in 1996) for the treatment of hairy cell leukemia, and sales of Nipent
constitute our principal source of product revenues. We received regulatory approval to market our generic daunorubicin for a variety of acute leukemias in November 2001, and in
November 2002 received regulatory approval to market Mitozytrex, our generic drug mitomycin for injection, for use in the therapy of disseminated adenocarcinoma of the stomach or pancreas in
proven combinations with other approved chemotherapeutic agents and as palliative treatment when other modalities have failed. We

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have
submitted the first two sections of a rolling NDA for Orathecin for the treatment of pancreatic cancer. We have also filed an ANDA for our generic paclitaxel. Our other existing product
candidates, including our proprietary drugs, i.e., drugs that are advancing through our internal clinical trials, such as Dacogen, and our generic drugs, i.e., drugs for which there is no patent
protection and are marketed by multiple sources, will require significant additional development, lengthy clinical trials, regulatory review and approvals, and additional investment before they can be
commercialized.

The
FDA has substantial discretion in the drug approval process. We generally cannot predict with certainty if or when we might submit for regulatory review of any of our product
candidates currently under development. Once we submit our product candidates for review, there cannot be any guarantee that the FDA or other regulatory agencies will grant approvals for any of our
products on a timely basis or at all. Any approvals we obtain may not cover all the clinical indications for which we are seeking approval. Also, an approval might contain significant limitations in
the form of narrow indications, warnings, precautions, or contraindications with respect to conditions of use.

Therefore,
our product development efforts may not lead to commercial drugs or other products for a number of reasons, including the failure of our product candidates to be safe and
effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Except the possibility for Orathecin, we do not
expect to be able to market any of our existing product candidates currently in development for a number of years, if at all. If we fail to obtain regulatory approval of our drug candidates in a
timely manner, we will not be able to generate revenues and achieve profitability.

Our failure to obtain separate regulatory approvals to market our product candidates in foreign countries could adversely affect our
revenues.Sales of our products outside the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. We
must obtain separate regulatory approvals in order to market our products in other jurisdictions. Approval in the U.S., or in any other jurisdiction, does not ensure approval in other jurisdictions.
Obtaining foreign approvals could result in significant delays, difficulties and costs for us, and require additional trials and additional expenses. So far, we have applied, through an affiliate, for
regulatory approval to market mitomycin and paclitaxel in the United Kingdom and in certain other countries within the EU. While many of the regulations applicable to our products in these foreign
countries are similar to those of the FDA, these requirements may vary widely from country to country and could delay the introduction of our products in those countries. Failure to comply with these
regulatory requirements or obtain required approvals could impair our ability to commercialize our products in foreign markets.

Currently,
Nipent is being sold in Europe. However, our role in Europe is currently limited to that of a supplier, and as such, we do not have a direct influence on Nipent sales at the
clinical level, making their timing and magnitude difficult to predict and depend on the efforts of our European distributors. Our revenue from supplying Nipent for European sales is currently
insignificant. Our strategy is to obtain regulatory approvals to sell our products in Europe and other parts of the world, and we currently intend to contract with third party licensees or
distributors for sales outside the United States. Sales outside the United States in the future may constitute a material source of revenues. As a result, any delays in obtaining regulatory approval
from foreign jurisdictions will impair the commercialization of our products and our revenues.

Even if we obtain regulatory approval, we will continue to be subject to extensive government regulation that may cause us to delay the introduction of our
products or withdraw our products from the market.Even if regulatory approval is obtained, later discovery of previously unknown problems may result in
restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if
we obtain governmental approval, our manufacturing facilities and those of our third-party manufacturers are subject to unannounced inspections by the FDA and must comply with the FDA's current GMP's
and

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other
regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If we or our third-party manufacturers fail to comply with any of the manufacturing
regulations, we may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution.

Physicians
may prescribe drugs for uses that are not described in a product's labeling for uses that differ from those tested by us and approved by the FDA. While such
"off-label" uses are common and the FDA does not regulate physicians' choice of treatments, the FDA does restrict a manufacturer's communications on the subject of off-label
use. Companies cannot actively promote FDA-approved drugs for off-label uses, but they may disseminate to physicians articles published in peer-reviewed journals.
To the extent allowed by law, we intend to disseminate peer-reviewed articles on our products to our
physician customers. If, however, our promotional activities fail to comply with the FDA's regulations or guidelines, we may be subject to warnings from, or enforcement action by, the FDA.

If
our promotional activities fail to comply with the FDA's regulations or guidelines, we may be subject to warnings from, or enforcement action by, the FDA. For example, in
November 2002 we issued a press release announcing our receipt of FDA approval to market Mitozytrex, our generic drug mitomycin for injection. In March 2003, the FDA issued a "Talk
Paper" regarding this press release, taking the position that we made certain unsupported claims about the drug and did not disclose the serious side effects such as suppressing bone marrow activity.
We have responded to the FDA and we are revising our internal procedures to ensure our promotional activities and public disclosure will meet regulatory requirements.

The continuing efforts of government and third-party payers to contain or reduce the costs of healthcare may adversely affect our
revenues.Sales of our products depend in part upon the availability of reimbursement from third-party payers, such as government health administration authorities
like Medicare/Medicaid, managed care providers and private health insurers. While we have not been challenged by third-party payers with respect to reimbursement of prices for our marketed products,
in general third-party payers are increasingly challenging the price and examining the cost effectiveness of medical products and services, which may effectively limit physicians' ability to select
products and procedures.

In
addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. For example, currently Medicare does not reimburse
self-administered products, which could cover some of our product candidates. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product development. In addition, we believe government agencies will continue to propose and pass legislation designed to reduce the cost of
healthcare, which could further limit reimbursement for pharmaceuticals, and we anticipate that there will continue to be proposals in the U.S. to implement government control over the pricing or
profitability of prescription pharmaceuticals, as is currently the case in many foreign markets. If our current and proposed products are not considered cost-effective, reimbursement to
the consumer may not be available or be sufficient to allow us to sell products on a competitive basis. The failure of the government and third-party payers to provide adequate coverage and
reimbursement rates for our product candidates could adversely affect the market acceptance of our products, our competitive position and our financial performance.

If we are unable to comply with environmental laws and regulations, our business may be harmed.We are subject to federal,
state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We currently maintain a supply of several hazardous
materials at our facilities. We believe our safety procedures for these materials comply with governmental standards, and we carry insurance coverage we believe is adequate for the size of our
business. We believe we are in compliance with all applicable environmental laws and regulations. However, we cannot entirely eliminate the risk of accidental contamination or injury from

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these
materials. If an accident or environmental discharge occurs, we could be held liable for any resulting damages, which could exceed our insurance coverage and financial resources.

We
currently outsource our research and development programs involving the controlled use of biohazardous materials. We believe our collaborators have in place safety procedures for
these materials that comply with governmental standards. Nevertheless, if an accident does occur, our research and product development will be negatively affected.

Risks Associated with Our Business

We are dependent on the successful outcome of the clinical trials for our lead product candidate Orathecin. If our clinical data for Orathecin cannot support the
submission of an NDA with the FDA or if filing or approval of the NDA is delayed, our business will be substantially harmed.Orathecin is our lead product
candidate, which we are developing for the treatment of pancreatic cancer. Pancreatic cancer is a highly lethal disease, with the poorest likelihood of survival among all of the major malignancies.
Based on a study on cancer for 1988-1992 by National Cancer Institute, pancreatic cancer accounts for only 2% of all newly diagnosed cancers in the United States each year, but 5% of all
cancer deaths. We believe that our Orathecin clinical program is the largest registration program ever undertaken in pancreatic cancer. To date, only two drugs have been approved by the FDA for the
treatment of pancreatic cancergemcitabine and 5-FU. Based on the FDA's summary basis of approval, the program sizes for those two drugs were as follows: gemcitabine had 126
patients in front-line use and 63 patients in second-line use, and 5-FU was approved on data from 20 pancreatic cancer patients. We have been conducting and are
close to completing three randomized Phase III registrational studies in over 1,800 patients with pancreatic cancer at over 200 study sites in North America and Europe. We commenced clinical trials in
1998, and more than 2,700 patients have been enrolled in the studies. Our ongoing Orathecin clinical trials are large and complex and have required a significant amount of financial commitment and
human resources. Over the years, we have expended substantial resources on developing Orathecin and preparing an infrastructure to support its sales and marketing, if approved for sale by regulatory
authorities.

While
we believe we have a portfolio of product candidates with promise, we have focused much of our attention and resources on developing Orathecin, and from 1998 to
December 2002 we have spent approximately 25% of our research and development expenses, or approximately $58 million, on the Orathecin program, and we expect to spend an additional
$5 million in 2003 to complete the clinical trials for Orathecin and assemble the NDA for regulatory approval for the product. In addition, we must establish sales and marketing capability to
support the worldwide sale of Orathecin, either by entering into a sales and marketing agreement with a collaborator or to build up our own sales force, which will involve substantial costs and
expenses. If we are successful in obtaining necessary regulatory approval and successfully commercialize the product, we believe sales of Orathecin could generate more than $100 million in
revenues annually, which could constitute more than 80% of our future revenues. These sales projections are based on the fact that, according to Eli Lilly's 2001 annual report, gemcitabine (the last
drug approved for pancreatic cancer) has sales of more than $500 million dollars annually, yet we believe that gemcitabine and 5-FU do not adequately serve the market of refractory
pancreatic cancer patients. In addition, administration of gemcitabine and 5-FU require intravenous injection, while Orathecin is taken orally. We believe that based on these factors, in
combination with our commercial experience, we can reasonably expect to achieve at least 20% of the sales of gemcitabine with Orathecin, although there can be no assurance in this regard even if we
receive the regulatory approval.

Given
the large scale, the complexity of the clinical trials, and the inherent uncertainties associated with clinical trials of such magnitude and complexity, there can be no assurance
that the data or statistical analysis from our trials will support regulatory approval or that we will not be required to perform additional studies before seeking regulatory approval. For example,
the trial design of these

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studies
allows patients who initially were being treated with gemcitabine or other therapies to switch over to treatment with Orathecin. At the time the trials were designed, based on results of
cancer studies conducted by others, we believed that the percentage of patients that would cross over for treatment with Orathecin would be in the range of 10% to 20% of the enrolled patients. Based
on a preliminary review of the clinical trial information, we believe that the number of patients in our Orathecin studies that have actually crossed over to treatment with Orathecin has significantly
exceeded the number anticipated and was greater than 40% in two of our Phase III studies. The extent of this cross over will likely negatively affect the statistical analysis of the study, making it
difficult to determine if the product is effective. We cannot predict how this cross-over percentage will affect regulatory approval, but additional trials may be required before we can
obtain regulatory approval.

We
have submitted the first two sections of a "rolling" NDA with the FDA, and anticipate completing our filing during the second quarter of 2003. However, the approval process may take a
significant amount of time and we may not be approved. The FDA's approval of our application will be based on its review of Orathecin's safety and efficacy. Important factors to be taken into account
in the FDA's review will include, among other things, the overall survival of patients randomized to receive Orathecin, time to disease progression as well as toxicities seen in patients who were
treated with Orathecin. If our Orathecin development activities are unsuccessful for these or other reasons and if we fail to obtain the FDA approval in a timely fashion, if at all, we will not be
able to realize the
projected revenues, have sufficient funds to support another program or continue our other clinical trials, and we may be forced to substantially scale down our operations.

The fast track designation of Orathecin may not actually lead to a faster regulatory review or approval.If a drug is
intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and the drug demonstrates the potential to address unmet medical needs for
the condition, the drug sponsor may apply for FDA fast track designation. The fast track classification does not apply to the product alone, but applies to the combination of the product and the
specific indication for which it is being studied. Under fast track provisions, the FDA is committed to working with the sponsor for the purpose of expediting the clinical development and evaluation
of the drug safety and efficacy for the fast track indication. A fast track designation will allow the pharmaceutical company sponsor to submit a rolling NDA, which will allow the FDA to initiate
review of sections of the application before it is complete. In some cases, a fast track designated product may also qualify for priority review, or review within a six-month time frame
from the time an NDA is completed and filed.

Although
we have obtained a fast track designation from the FDA for Orathecin for the treatment of patients with locally advanced or metastatic pancreatic cancer that is resistant or
refractory to two or more chemotherapies, we cannot guarantee a faster development process, review or approval compared to the conventional FDA procedures. Orathecin may not be granted priority
review, or review within six months, and our fast track designation may be withdrawn by the FDA if the FDA believes that such designation is no longer supported by emerging data from our clinical
development program. Our fast track designation does not guarantee that we will qualify for or be able to take advantage of the accelerated approval procedures, which are procedures that allow the FDA
to approve a drug, intended to treat serious or life threatening illnesses, based upon a surrogate end point that is reasonably likely to predict clinical benefit. Even if the accelerated approval
procedures are available to us, we may elect to use the traditional approval process for strategic and marketing reasons. If Orathecin is approved under the accelerated approval procedures, we will
most likely be required to conduct Phase IV studies to provide confirmatory evidence that Orathecin is safe and effective and provides a clinically meaningful benefit to patients. If we fail to verify
that Orathecin is safe, effective and provides a clinically meaningful benefit to patients, our FDA approval can be withdrawn on an expedited basis. Accelerated approval will also require that we
submit all promotional labeling and advertising to the FDA for pre-approval prior to dissemination of these materials. Furthermore, if serious adverse effects

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are
identified at any time after marketing, our approval may be rapidly revoked and we will not be allowed to continue to market the drug. If the regulatory approval for Orathecin is delayed, or the
approval is withdrawn or revoked for any reason, our business will be substantially harmed.

The termination of our Orathecin related agreements with Abbott may negatively impact our business and collaborative
relationships.In December 1999, we entered into agreements with Abbott Laboratories pursuant to which Abbott would market and distribute our drug candidate
Orathecin and provide milestone payments and invest in our shares of stock. We would have co-promoted Orathecin with Abbott in the United States and Abbott would have exclusive rights to
market
Orathecin outside of the United States. In the United States market, we would have shared profits from product sales equally with Abbott, while outside of the United States market, Abbott would have
paid us royalties and transfer fees based on product sales. Abbott was obligated to purchase up to $81.5 million in shares of our common stock over a period of time. In addition, Abbott had an
option to purchase up to 49% of the shares of our common stock outstanding at the time of the exercise at $85 per share. Abbott also had a right of first discussion with respect to our product
portfolio and a right of first refusal to acquire us.

The
Orathecin related agreements were terminated by the parties in March of 2002. While we believe that the termination was advantageous to us in a number of respects, the termination
also creates some challenges and uncertainties. By terminating our Orathecin related agreements we have eliminated restraints on our business activities and expanded some of our strategic alternatives
that we deem very beneficial. Specifically, we regained all marketing rights to Orathecin worldwide, are no longer obligated to share profits from product sales of Orathecin, and Abbott no longer has
the option to purchase up to 49% of our outstanding shares, the right of first discussion with respect to our product portfolio and the right of first refusal to acquire us. As a result, we are able
to market and sell Orathecin ourselves or to explore strategic partnerships with other pharmaceutical companies.

In
connection with these agreements, Abbott made a $26.5 million investment in our shares of common stock in January 2000, and a $2.5 million equity milestone
payment in July 2001. By terminating the agreement, we have foregone the opportunity to receive future milestone payments and equity investments from Abbott (in the aggregate amount of up to
$52.5 million), potential royalty payments and other benefits from a well established and respected pharmaceutical company, including our access to Abbott's worldwide sales capability. In
addition, the termination of the agreements may be perceived negatively by other potential partners, and unless we are successful with our regulatory approval of Orathecin, we may not be able to
establish collaboration relationships with established pharmaceutical companies for Orathecin, if we elected to pursue such relationships.

Expanding indications for Nipent is important to our future revenues. If we are unable to receive regulatory approval for use of Nipent to treat additional
diseases our revenues will not expand as hoped.Part of our strategy involves expanding the market opportunities for our approved drugs by seeking regulatory
approval and/or their reimbursement support of their use for treatment of additional diseases. We are currently marketing Nipent for hairy cell leukemia, and revenues from selling Nipent provided over
90% of our revenues in the past three years. We believe Nipent has promise for treatment of a variety of diseases and are conducting a series of clinical trials with Nipent that are important to the
expansion of our business. These trials include Phase IV trials for chronic lymphocytic leukemia, low grade non-Hodgkin's lymphoma, cutaneous and peripheral T-cell lymphomas,
and Phase II/III studies for graft-versus-host disease. If these and our other Nipent clinical trials are not successful or additional regulatory approvals, we will not be able to increase
our revenue above the current level.

If we cannot complete our clinical trials for Dacogen and cannot receive regulatory approval, we may not realize future
revenues.We have initiated Phase III clinical trials with Dacogen for treatment of advanced myelodysplastic syndrome, and we completed patient enrollment in
March 2003. We have also received orphan drug designation for Dacogen for the treatment of myelodysplastic syndrome in the

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United
States and Europe, and for the treatment of sickle cell anemia in the United States. There is no assurance that we will be able to complete our clinical trials, or that the clinical trial
results will support submission of an NDA or regulatory approval. Even if we complete the clinical trials and submit an NDA, the approval process may take a significant amount of time and we may not
receive approval. Moreover, the future sales of Dacogen could constitute a material source of our product revenues. According to a paper published in Nature Review in 2002, Dacogen reverses the
biological mechanism that has been implicated as a fundamental defect in cancer. We believe that potential sales of this product may equal or exceed that of Orathecin and thus amount to
$100 million annually, although there can be no assurance in this regard even if we receive the regulatory approval. As a result, if our Dacogen development activities are unsuccessful for any
reason, future revenues will not be realized.

We depend on third parties for manufacturing and storage of our products and our business may be harmed if the manufacture of our products is interrupted or
discontinued.Even if we obtain governmental approval of our product candidates, our manufacturing facilities and those of our contract manufacturers are subject
to unannounced inspections by the FDA and must comply with the FDA's cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If we
or our contract manufacturers fail to comply with any of the manufacturing regulations, we may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or
revocations of marketing licenses, operating restrictions and criminal prosecution.

We
have no manufacturing facilities and we currently rely on third parties for manufacturing activities related to all of our products. As we develop new products and increase sales of
our existing products, we must establish and maintain relationships with manufacturers to produce and package sufficient supplies of our finished pharmaceutical products, including Orathecin. Our
manufacturing strategy presents the following risks:



Any
of these factors could delay clinical trials or commercialization of our product candidates under development, interfere with current sales and entail higher costs.

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We
currently outsource manufacturing for all of our products to United States and foreign suppliers. We expect to continue to outsource manufacturing in the near term. We believe our
current suppliers are and will be able to efficiently manufacture our proprietary and generic compounds in sufficient quantities and on a timely basis, while maintaining product quality. We maintain
quality control over manufacturing through ongoing inspections, rigorous review, control over documented operating procedures, and thorough analytical testing by outside laboratories, and, to our
knowledge, none of our manufacturers have had problems complying with regulatory requirements for our products. At this time we do not intend to replace our manufacturing or storage contracts.

However,
we may be unable to maintain our current relationships. In the event we need to replace or seek new manufacturing arrangements, we may have difficulty locating and entering into
arrangements with qualified contract manufacturers on acceptable terms, if at all. We are aware of only a limited number of companies on a worldwide basis who operate manufacturing facilities in which
our products can be manufactured to our specifications and in compliance with cGMP's. It could take several
months, or significantly longer for a new contract manufacturing facility to obtain FDA approval and to develop substantially equivalent processes for the production of our products. We may not be
able to contract with any of these companies on acceptable terms, if at all. For example, the company that had been purifying our Nipent finished product filed for bankruptcy in mid 2001. We
contracted with a new manufacturer for the purification of Nipent in mid 2001, and the manufacturer was qualified by the FDA in May 2002. We experienced unusually low inventory levels during
the first quarter of 2002, while we were waiting for the new company to be qualified by the FDA.

Currently
we store the majority of the unpurified, bulk form of Nipent at the manufacturer's location. Improper storage, fire, natural disaster, theft or other conditions at this
location that may lead to the loss or destruction of the bulk concentrate. While the manufacturer carries adequate insurance consistent with industry standard and we also carry insurance for drug
storage, such event would inevitably cause delays in distribution and sales of our products and harm our operating results.

We
do not currently intend to manufacture any pharmaceutical products, although we continually evaluate our options for commercial production of our products, including the possibility
of establishing our own commercial scale manufacturing facility. If we decide to manufacture products, we would be subject to the regulatory risks and requirements described above. We will also be
subject to similar risks regarding delays or difficulties encountered in manufacturing these pharmaceutical products and we will require additional facilities and substantial additional capital. We
cannot assure you that we would be able to manufacture any of these products successfully in accordance with regulatory requirements and in a cost-effective manner.

If our suppliers cannot provide the product or components we require, our product sales and revenue could be harmed.We rely
on third party suppliers to provide us with certain components used in our products under development, including Orathecin and Dacogen. Relying on third party suppliers makes us vulnerable to
component part failures and to interruptions in supply, either of which could impair our ability to conduct clinical tests or to ship our products to our customers on a timely basis. Using third party
vendors makes it difficult and sometimes impossible for us to maintain quality control, manage inventory and production schedules and control production costs. Vendor lead times to supply us with
ordered components vary significantly and can exceed six months or more. Both now and as we expand our need for manufacturing capacity, we cannot be sure that our suppliers will furnish us with
required components when we need them. These factors could make it more difficult for us to effectively and efficiently manufacture our products, and could adversely impact our clinical trials,
product development and sales of our products.

Some
suppliers are our only source for certain product or a particular component, which makes us vulnerable to cost increases and supply interruptions. We generally rely on one
manufacturer for each product. We have one manufacturer for the future production of our generic compounds required for

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both
our Extra and generic dosage forms. We rely on one manufacturer for Nipent, a sole source supplier for the purification and processing of pentostatin, which is used in the manufacturing of
Nipent, and a sole source supplier for the ingredient used in the purification of pentostatin. We also rely on sole source suppliers for mitomycin products and components used in the production of
Mitozytrex.

Vendors
may decide to limit or eliminate sales of certain products to the medical industry due to product liability or other concerns. For example, one component used in the purification
of pentostatin is no longer commercially available, although we believe our current inventory of this component will last four to five years during which time we believe we will be able to qualify a
substitute. Therefore, for products or components for which we rely on a sole source, in the event the supplier decides not to manufacture the product or go out of business, or decides to cut off our
supply, we may be unable to locate replacement supply sources, or the sources that we may locate may not provide us with similar reliability or pricing and our business could suffer. If we cannot
obtain a necessary component, we may need to find, test and obtain regulatory approval for a replacement component, produce the component or redesign the related product, which would cause significant
delay and could increase our manufacturing costs. Any of these events could adversely impact our sales and results of operations.

We have limited sales and marketing capabilities and no distribution capabilities and may not be able to successfully commercialize our
products.We currently have limited sales and marketing resources and no distribution capability. Although we have approximately 34 sales and marketing personnel
focusing on the sale of our products to hospitals and hospital buying groups, we have contractual relationships with third parties and anticipate relying on third parties to distribute, sell and
market some of our primary products. We currently rely on third parties to distribute our products and expect to continue to do so in the future. For example, Abbott is our exclusive U.S. distributor
of Nipent until 2005. Before the termination of our Orathecin agreements with Abbott we anticipated relying on Abbott to assist in the distribution and sale of Orathecin. Our current sales and
marketing resources are inadequate to effectively market and sell Orathecin and other products if we were to receive regulatory approval.

We
continue to evaluate our options and explore opportunities with respect to sales and marketing of Orathecin, if approved for sale. We may decide to enter into arrangements with a
strategic partner. However, we may not be able to negotiate such arrangement on acceptable terms, if at all. Moreover, such arrangements will involve sharing of sales profit, may require us to
relinquish certain rights to our products or marketing territories, and may impose other limitations on our business operations. Further, if we enter into a collaborative relationship with a large
pharmaceutical company with established distribution systems and direct sales forces to market Orathecin, we cannot assure you that we will be able to maintain such relationship on acceptable terms,
if at all.

If
we are unable to enter into third-party arrangements or if our arrangements with third parties are not successful, we will need to substantially expand our sales and marketing force
and build our sales and distribution capabilities, which will require significant expenses. We may not succeed in expanding and enhancing our sales and marketing capabilities or have sufficient
resources to do so. If we do develop such capabilities, we will compete with other companies that have experienced and well-funded sales and marketing operations. Our inability to upgrade
our sales expertise and in-house sales and distribution capabilities may limit our ability to gain market acceptance for Orathecin worldwide and generate revenues. If we fail to establish
successful sales and marketing capabilities or fail to enter into successful marketing arrangements with third parties, or if our third party distributors fail to perform their obligations, we will
not be able to market or sell our products effectively and our business, financial condition and results of operations will be materially and adversely affected.

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Our collaborative relationships with AVI BioPharma, Inc. and other third party collaborators could cause us to expend significant money on development
costs with no assurance of financial return.From time to time we enter into collaboration relationships with third parties to co-develop and market
products. For example, we have collaborative relationships with AVI BioPharma, Inc. whereby in exchange for marketing and other rights in the United States for Avicine, AVI's proprietary cancer
vaccine currently in late-stage clinical testing against a variety of solid tumors, we made significant equity investments in AVI, and agreed to make substantial milestone payments to fund
AVI's clinical development and regulatory activities.

Specifically,
in consideration of past research and development performed by AVI, in 1999 and 2000 we made substantial equity investments in AVI in the aggregate amount of more than
$27 million (including $7.5 million cash and 447,826 shares of our common stock), in exchange for 2,684,211 shares of AVI common stock. Moreover, we are obligated to make additional
payments to AVI based on successful achievement of developmental, regulatory approval, and commercialization milestones over the next several years that could total $80 million. At the time the
transactions were entered, the chief executive officer of AVI, Dennis Burger, was a member of our Board of Directors (Mr. Burger resigned from our Board in May of 2002). Our president and chief
executive officer is a member of the Board of Directors of AVI. The transaction was approved by members of our Board who had no interest in the transaction and evaluated the transaction with input
from members of our financial and scientific staffs.

In
addition, we also entered into an arrangement with Peregrine Pharmaceuticals in February 2001, pursuant to which we licensed a drug-targeting technology known as
Vascular Targeting Agent, which is a proprietary platform designed to specifically target a tumor's blood supply and subsequently destroy the tumor with various attached therapeutic agents. The
licensed technology is specially related to Vascular Endothelial Growth Factor. Under the agreement, we made an up-front equity investment in Peregrine of $600,000 and will be obligated to
make subsequent milestone payments that ultimately could total $8 million. In addition, we will pay royalties to Peregrine based on the net revenues of any drugs we commercialize using the VEGF
technology.

The
above relationships require substantial financial commitments from us, and at the same time the product developments are subject to the same regulatory requirements, risks and
uncertainties associated with the development of our other product candidates. AVI's Avicine will require significant additional expenditures to complete the clinical development necessary to gain
marketing approval from the FDA and equivalent foreign regulatory agencies. In addition, Avicine and other compounds underlying these strategic relationships may prove to be ineffective, may fail to
receive regulatory approvals, may be unprotectable by patents or other intellectual property rights, or may otherwise not be commercially viable. If these collaborative relationships are not
successful, our product
developments will be adversely affected, and our investments and efforts devoted to the product developments will be wasted.

If we are not able to maintain and successfully establish new collaborative and licensing arrangements with third parties, our product development and business
will be harmed.Our business model is based on establishing collaborative relationships with other parties both to license compounds upon which our products and
technologies are based and to manufacture, market and sell our or our collaborators' products. As a development company we must have access to compounds and technologies to license for further
development. For example, we licensed the exclusive worldwide royalty-bearing rights to Orathecin from the Stehlin Foundation for Cancer Research, and we also established relationships with suppliers
and manufacturers to manufacture our compounds and products. Additionally, we have a collaborative relationship with AVI for the development, marketing and sales of Avicine. Due to the expense of the
drug approval process it is critical for us to have relationships with established pharmaceutical companies to offset some of our development costs in exchange for a combination of development,
marketing and distribution rights. We formerly had a significant relationship with Abbott

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for
the sales and marketing of Orathecin. To facilitate the commercialization of Orathecin, we may decide to establish a new collaborative relationship with another party.

We
from time to time also enter into discussions with various companies regarding the establishment of new collaborations. If we are not successful in establishing new collaborative
partners for our product candidates, we may not be able to pursue further development of such product candidates and/or may have to reduce or cease our current development programs, which would
materially harm our business. Even if we are successful in establishing new collaborations, they are subject to numerous risks and uncertainties including the following:



In
addition, our collaborators may undergo business combinations, which could have the effect of making a collaboration with us less attractive to them for a number of reasons. For
example, if an existing collaborator purchases a company that is one of our competitors, that company could be less willing to continue its collaboration with us. In addition, a company that has a
strategy of purchasing companies with attractive technologies might have less incentive to enter into a collaboration agreement with us. Moreover, disputes may arise with respect to the ownership of
rights to any technology or products developed with any current or future collaborator. Lengthy negotiations with potential new collaborators or disagreements between us and our collaborators may lead
to delays or termination in the research, development or commercialization of product candidates or result in time-consuming and expensive litigation or arbitration.

Any
failure in maintaining relationships with our collaborators could materially affect our product development and commercialization.

If we fail to compete effectively, particularly against larger, more established pharmaceutical companies with greater resources, our business will
suffer.The pharmaceutical industry in general and oncology sector in particular is highly competitive and subject to significant and rapid technological change.
Our competitors and probable competitors include established companies such as Eli Lilly & Co., Ortho Biotech, Berlex, Bristol-Myers Squibb Company, Immunex Corp and others.

Many
of our competitors and research institutions are addressing the same diseases and disease indications and working on products to treat such diseases as we are, and have
substantially greater financial, research and development, manufacturing and marketing experience and resources than we do and represent substantial long-term competition for us. Some of
our competitors have received regulatory approval of or are developing or testing product candidates that compete directly with our product candidates. For example, while we received orphan drug
status for Orathecin and there is currently no competitor in the oral delivery market for the treatment of pancreatic cancer, there are approved drugs for the treatment of pancreatic cancer, including
gemcitabine by Eli Lilly. For another example, Berlex's fludarabine and Ortho Biotech's cladrabine compete with our Nipent in the leukemia market.

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In
addition, many of these competitors, either alone or together with their customers, have significantly greater experience than we do in developing products, undertaking preclinical
testing and clinical trials, obtaining FDA and other regulatory approvals, and manufacturing and marketing products. Accordingly, our competitors may succeed in obtaining patent protection, receiving
FDA approval or commercializing products before we do. If we commence commercial product sales of our product candidates, we will be competing against companies with greater marketing and
manufacturing capabilities, areas in which we have limited or no experience.

Developments
by competitors may render our product candidates or technologies obsolete or non-competitive. These competitors, either alone or with their customers, may
succeed in developing technologies or products that are more effective than ours. We also face and will continue to face intense competition from other companies for collaborative relationships, for
establishing relationships with academic and research institutions, and for licenses to proprietary technology.

Our
products that are under patent protection face intense competition from competitors' proprietary products. This competition may increase as new products enter the market. We also
face increasing competition from lower-cost generic products after patents on our proprietary products expire. Loss of patent protection typically leads to a rapid loss of sales for that
product and could affect future results. As new products enter the market, our products may become obsolete or our competitors' products may be more effective or more effectively marketed and sold
than our products. If we fail to maintain our competitive position, this could have a material adverse effect on our business and results of operations.

Our
competitive positions in our generic drugs are uncertain and subject to risks. The market for generic drugs, including the pricing for generic drugs, is extremely competitive. As a
result, unless our generic drugs are the first or among the initial few to launch, there is a high risk that our products would not gain meaningful market share, or we would not be able to maintain
our price and continue the product line. Moreover, marketing of generic drugs is also subject to regulatory approval, and we may not be able to obtain such approval before our competitors to gain the
competitive advantage.

We are developing generic and Extra products based upon compounds which may be covered by patents held by third parties that are expected to expire or already
expired. These compounds may be also the subject of method, formulation, and manufacturing process patents held by third parties. If these patents do not expire as anticipated or are expanded in
scope, we will not be able to develop our generic and Extra products as planned.We developed, or are in the process of developing, and are planning to market
several generic and Extra products based on existing compounds. Specifically, with respect to our generic products, we received an ANDA approval of our generic mitomycin for solid tumors, and
daunorubicin for a variety of acute leukemias, and have filed an ANDA for our generic paclitaxel. We are currently selling mitomycin and in the process of commercializing daunorubicin.

Our
proprietary Extra technology is a platform technology that employs the use of an inert chemical excipient, cyclodextrin, combined with a drug. Most anticancer drugs are cytotoxic,
and most must be administered intravenously. If a vein is missed on injection, the drug can leak to surrounding tissue, causing ulceration that sometimes requires plastic surgery to correct. Our
proprietary Extra technology is designed to "shield" the drug from the injection site, thus providing the patient protection from tissue ulceration. It may increase the relative solubility of
hard-to-dissolve anticancer drugs, hence increasing its stability or shelf life. However, each of these benefits must be supported by appropriate data and approved by the FDA
before we can make any claim in this regard. Our first product utilizing our Extra technology, Mitozytrex, which is an Extra formulation of generic mitomycin, was approved by the FDA in
November 2002 for use in the therapy of disseminated adenocarcinoma of the stomach or pancreas in proven combinations with other approved chemotherapeutic agents and as palliative treatment
when other modalities have failed. Currently, we cannot promote Mitozytrex as providing any injection site ulceration protection, nor can we promote any increased stability, solubility

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or
shelf life extension, as compared to generic mitomycin. We must develop and submit additional data to the FDA and receive FDA approval before we can make these claims. We are currently exploring
marketing opportunities and/or marketing partners for Mitozytrex.

So
far we have spent approximately $6 million on developing and marketing our generic and Extra products. We have currently completed our pre-commercial investment in
developing Mitozytrex, and as of now we have not committed to an internal budget for additional "Extra" development programs. In addition, we have no further generic drug development commitments, as
we are focusing on developing our proprietary drug candidates.

We
do not hold any intellectual property rights as to the underlying compounds on which our generic or Extra products are based. We may in the future evaluate the generic drugs market
and develop additional generic or proprietary Extra products based on these compounds, which may also be the subject of method, formulation and manufacturing process patents held by third parties. Our
development of generic or Extra products may also take place prior to, but in anticipation of, the expected expiration of existing patent protection for drugs developed by third parties. However, if
existing patent protection on such products is otherwise maintained, extended or expanded, it is
unlikely that we will be able to market our own generic or Extra products without obtaining a license from the patent owner, which may not be available on commercially acceptable terms, if at all.

Our ability to protect our intellectual property rights will be critically important to the success of our business, and we may not be able to protect these
rights in the United States or abroad.Our business operation and success depends in part on our ability to obtain patents, protect trade secrets, operate without
infringing the proprietary rights of others and prevent others from infringing our proprietary rights.

We
will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or
are effectively maintained as trade secrets. We attempt to protect our intellectual property position by filing U.S. and foreign patent applications related to our proprietary technology, inventions
and improvements that are important to the development of our business. Currently we have acquired licenses to or assignments of at least 37 U.S. patents covering various aspects of our proprietary
drugs, including 29 patents for Orathecin, 5 patents for Nipent, 5 patents for our paclitaxel related products and 2 patents for our 5-beta-steroid related compounds. These
issued U.S. patents will begin to expire in October 2012. We have been granted patents and have received patent licenses relating to our Extra technology, Partaject, and Oral Prodrug
technologies, among which at least 5 patents are issued to us. In addition, we are prosecuting a number of patent applications for drug candidates that we are not actively developing at this time.

From
time to time we receive correspondence inviting us to license patents from third parties. Our proprietary products are dependent upon compliance with numerous licenses and
agreements. These licenses and agreements require us to make royalty and other payments, reasonably exploit the underlying technology of the applicable patents, and comply with regulatory filings. If
we fail to comply with these licenses and agreements, we could lose the underlying rights to one or more of these potential products, which would adversely affect our product development and harm our
business.

We
also have patents or licenses to patents issued outside of the United States, including Europe, Australia, Japan, Canada, Mexico and New Zealand. In addition, we have patent
applications pending in these regions and countries as well as in China, Hungary and Israel. Limitations on patent protection in these countries, and the differences in what constitutes patentable
subject matter in these countries outside the United States, may limit the protection we have on patents issued or licensed to us outside of the United States. In addition, laws of foreign countries
may not protect our intellectual property to the same extent as would laws in the United States. To minimize our costs and expenses and to maintain effective protection, we focus our patent and
licensing activities within the European Union,

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Canada
and Japan. In determining whether or not to seek a patent or to license any patent in a certain foreign country, we weigh the relevant costs and benefits, and consider, among other things, the
market potential and profitability, the scope of patent protection afforded by the law of the jurisdiction and its enforceability, and the nature of terms with any potential licensees. Failure to
obtain adequate patent protection for our proprietary drugs and technology would impair our ability to be commercially competitive in these markets.

The
pharmaceutical fields are characterized by a large number of patent filings involving complex legal and factual questions, and, therefore, we cannot predict with certainty whether
our patents will be enforced. A substantial number of patents have already been issued to other pharmaceutical companies, research or academic institutions or others. Competitors may have filed
applications for or have been issued patents and may obtain additional patents and proprietary rights related to products or processes that compete with or are similar to ours. We may not be aware of
all of the patents potentially adverse to our interests that may have been issued to others. In addition, third parties may challenge, invalidate or circumvent any of our patents, once they are
issued. Thus, any patents that we own or license from third parties may not provide adequate protection against competitors. Our pending patent applications and those we may file in the future, or
those we may license from third parties, may not result in patents being issued. Also, patent rights may not provide us with adequate proprietary protection or competitive advantages against
competitors with similar technologies. The laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States.

Litigation
may be necessary to protect our patent position, and we cannot be certain that we will have the required resources to pursue the necessary litigation or otherwise to protect
our patent rights. Our efforts to protect our patents may fail. In addition to pursuing patent protection in appropriate cases, we also rely on trade secret protection for unpatented proprietary
technology. However, trade secrets are difficult to protect. Our trade secrets or those of our collaborators may become known or may be independently discovered by others.

Although
we know of no pending patent infringement suits, discussions regarding possible patent infringements or threats of patent infringement litigation either related to patents held
by us or our licensors or our products or product candidates, there has been, and we believe that there will continue to be, significant litigation in the pharmaceutical industry regarding patent and
other intellectual property rights. Claims may be brought against us in the future based on patents held by others. These
persons could bring legal actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the affected product. If we become involved in any litigation, it
could consume a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, in addition to any potential liability for damages, we could
be required to obtain a license to continue to manufacture or market the affected product. We cannot assure you whether we would prevail in any of these actions or that we could obtain any licenses
required under any of these patents on acceptable terms, if at all.

If we lose key personnel or are unable to attract and retain additional, highly skilled personnel required for the expansion of our activities, our business will
suffer.Our success is dependent on key personnel, including Dr. Rubinfeld, our President and Chief Executive Officer, and members of our senior management
and scientific staff. We carry key man insurance on Dr. Rubinfeld. Except for Dr. Rubinfeld (whose current employment contract will expire by December 31, 2003), none of our
officers or employees has any term employment contracts. During 2003, we intend to establish a succession plan for our senior management. We know of no plans by any of our executive officers or key
employees to retire or resign from our company. If any of our executive officers decides to leave the company and we cannot locate qualified replacement in time to allow a smooth transition, our
business operation may be adversely affected.

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To
successfully expand our operations, we will need to attract and retain additional, highly skilled individuals, particularly in the areas of sales, marketing, clinical administration,
manufacturing and finance. We compete with other companies for the services of existing and potential employees. We believe our compensation and benefits packages are competitive for our geographical
region and our industry group, and we have been successful in hiring, and retaining or replacing our employees. However, we may be at a disadvantage to the extent that potential employees may favor
larger, more established employers.

We may be subject to product liability lawsuits and our insurance may be inadequate to cover damages.Clinical trials and
commercial use of our current and potential products may expose us to liability claims from the use or sale of these products. Consumers, healthcare providers, pharmaceutical companies or others
selling such products might make claims of this kind. We may experience financial losses in the future due to product liability claims. We have obtained limited product liability insurance coverage
for our products and clinical trials, under which the coverage limits are $10 million per occurrence and $10 million in the aggregate. While we believe that this insurance is reasonable
and adequate, we cannot assure you that this coverage will be adequate to protect us in the event of a claim. We intend to expand our insurance coverage to include the sale of commercial products if
we obtain marketing approval for product candidates in development. We may not be able to obtain or maintain insurance coverage in the future at a reasonable cost or in sufficient amounts to protect
us against losses. If third parties bring a successful product liability claim or series of claims against us for uninsured liabilities or in excess of insured liabilities, we may not have sufficient
financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be adversely affected.

Earthquake or other natural or man-made disasters and business interruptions could adversely affect our
business.Our operations are vulnerable to interruption by fire, earthquake, power loss, floods, telecommunications failure and other events beyond our control. In
addition, our business operation is susceptible to disruption as a result of natural disasters such as earthquakes. So far we have never experienced any significant disruption of business operation as
a result of earthquakes or other natural disasters. While we carry adequate business interruption insurance and have in place a contingency recovery plan, any significant business interruption could
cause delays in our drug development and sales and harm our business.

Provisions in our certificate of incorporation, bylaws and applicable Delaware law may prevent or discourage third parties or stockholders from attempting to
replace our management.Anti-takeover provisions of our certificate of incorporation and bylaws make it more difficult for a third party to acquire
us, even if doing so would be beneficial to our stockholders. These provisions include:



Our
bylaws establish procedures, including notice procedures, with regard to the nomination, other than by or at the direction of our board of directors, of candidates for election as
directors or for stockholder proposals to be submitted at stockholder meetings.

We
are also subject to Section 203 of the Delaware General Corporation Law, an anti-takeover provision. In general, Section 203 of the Delaware General
Corporation Law prevents a stockholder owning 15% or more of a corporation's outstanding voting stock from engaging in business combinations with a Delaware corporation for three years following the
date the stockholder acquired 15% or more of a corporation's outstanding voting stock. This restriction is subject to exceptions,

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including
the approval of the board of directors and of the holders of at least two-thirds of the outstanding shares of voting stock not owned by the interested stockholder.

We
believe that the benefits of increased protection of our potential ability to negotiate with the proponents of unfriendly or unsolicited proposals to acquire or restructure us
outweigh the disadvantages of discouraging those proposals because, among other things, negotiation of those proposals could result in an improvement of their terms. Nevertheless, these provisions are
expected to discourage different types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with us, and
may have the effect of preventing or discouraging third parties or stockholders from attempting to replace our management.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Due to the short-term nature of our interest bearing assets, which consist primarily of certificates of deposit, U.S. corporate obligations, and U.S.
government obligations, we believe that our exposure to interest rate market risk would not significantly affect our operations.

Our
investment policy is to manage our marketable securities portfolio to preserve principal and liquidity while maximizing the return on the investment portfolio. Our marketable
securities portfolio is primarily invested in corporate debt securities with an average maturity of under one year and a minimum investment grade rating of A or A-1 or better to minimize
credit risk. Although changes in interest rates may affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless
the investments were to be sold prior to maturity.

In
February 2003, we issued $21.25 million in convertible debt with an annual interest rate of 4%. As the convertible debt can be repaid with AVI BioPharma common stock
that we own, we must account for this feature as a derivative instrument. At March 31, 2003, the valuation of the derivative is $2.5 million and has been included on the balance sheet.
As the fair value of the common stock of AVI has fluctuated significantly in the past two years, changes in the valuation of the derivative may have a significant impact on our results of operations.

We
operate primarily in the United States and all product sales are denominated in U.S. dollars. Accordingly, we do not have any exposure to foreign currency rate fluctuations.

Item 4. Disclosure Controls And Procedures

Our
chief executive officer and our chief financial officer, after evaluating our "disclosure controls and procedures" (as defined in Securities Exchange Act of 1934 (the "Exchange Act")
Rules 13a-14(c) and 15-d-14(c)) as of a date (the "Evaluation Date") within 90 days before the filing date of this Quarterly Report on
Form 10-Q, have concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Subsequent
to the Evaluation Date, there were no significant changes in our internal controls or in other factors that could significantly affect our disclosure controls and procedures,
nor were there any significant deficiencies or material weaknesses in our internal controls. As a result, no corrective actions were required or undertaken.

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SUPERGEN, INC.  PART IIOTHER INFORMATION

Item 1. Legal Proceedings

On April 14, 2003, John R. Blum filed a class action complaint entitledJohn R. Blum v. SuperGen, Inc.,
et al., No. C 03-1576 in the U.S. District Court for the Northern District of California, against us and our current President and Chief
Executive Officer alleging violations of the Securities Exchange Act of 1934 and seeking unspecified damages. Subsequently, as of May 9, 2003, four similar actions were filed in the same court.
Each of the complaints purports to be a class action lawsuit brought on behalf of persons who purchased or otherwise acquired our common stock during the period of April 18, 2000 through
March 13, 2003, inclusive (except that one complaint specified the period as between April 18, 2000 through March 14, 2003). The complaints allege that during such period, we
issued materially false and misleading statements and failed to disclose certain key information regarding Mitozytrex. The complaints do not specify the amount of damages sought. The complaints have
not yet been consolidated, we have not yet answered any of the complaints, discovery has not commenced, and no trial date has been established. We intend to contest these and similar future actions
vigorously. Although we believe that the class action lawsuits will not have a material impact on our financial condition, they are not yet consolidated, and we cannot predict their outcomes with any
certainty.

Item 2. Changes in Securities

In March 2003, we issued 61,653 shares of our common stock to Peregrine Pharmaceuticals, Inc. in connection with a license agreement between
SuperGen and Peregrine.

Item 6. Exhibits and Reports on Form 8-K

| | 99.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|      |  |              |  | SUPERGEN, INC.
|----- |  | ------------ |  | --------------
|Date: |  | May 15, 2003 |  | By:           
|      |  |              |  | By:           

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Certification under Section 302(a) of the Sarbanes-Oxley Act of 2002

I,
Joseph Rubinfeld, certify that:

|Date: |  | May 15, 2003 |  | By: |  | /s/JOSEPH RUBINFELDJoseph Rubinfeld, Ph.D. President and Chief Executive Officer
(Principal Executive Officer)
|----- |  | ------------ |  | --- |  | --------------------------------------------------------------------------------------------------------------

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Certification under Section 302(a) of the Sarbanes-Oxley Act of 2002

I,
Edward Jacobs, certify that:

|Date: |  | May 15, 2003 |  | By: |  | /s/EDWARD L. JACOBSEdward L. Jacobs Chief Business Officer and Chief Financial Officer (Principal
Financial and Accounting Officer)
|----- |  | ------------ |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------

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