---

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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 September 30, 2002
|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

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of November 8, 2002, was 32,859,068.

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TABLE OF CONTENTS

|                                                                      |  |                                                                                              |                                                                                                                        |    | Page No.
|--------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | -- | --------
|PART I                                                                |  | FINANCIAL INFORMATION                                                                        |                                                                                                                        |   
|                                                                      |  | Item 1Financial Statements (Unaudited)                                                      |                                                                                                                        |   
|                                                                      |  |                                                                                              | Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001                                   |    | 3       
|                                                                      |  |                                                                                              | Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2002 and 2001 |    | 4       
|                                                                      |  |                                                                                              | Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and 2001           |    | 5       
|                                                                      |  |                                                                                              | Notes to Condensed Consolidated Financial Statements                                                                   |    | 6       
|                                                                      |  | Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                        | 11
|                                                                      |  | Item 3Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                        | 21
|                                                                      |  | Item 4Disclosure Controls and Procedures                                                    |                                                                                                                        | 21
|PART II                                                               |  | OTHER INFORMATION                                                                            |                                                                                                                        |   
|                                                                      |  | Item 2Changes in Securities                                                                 |                                                                                                                        | 22
|                                                                      |  | Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                                        | 22
|SIGNATURES                                                            |  | 23                                                                                          
|CERTIFICATIONS UNDER SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 |  | 24                                                                                          

2

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

|                                       |                                                                                                                                                                                 | September 30,
2002                         |        | December 31,
2001 |       
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | ------
|
|ASSETS                                 |                                                                                                                                                                                
|Current assets:                        |                                                                                                                                                                                 |                                            |        |                   |       
|                                       | Cash and cash equivalents                                                                                                                                                       |                                            | $      | 11,243            |       
|                                       | Marketable securities                                                                                                                                                           |                                            |        | 16,033            |       
|                                       | Accounts receivable                                                                                                                                                             |                                            |        | 643               |       
|                                       | Inventories                                                                                                                                                                     |                                            |        | 2,620             |       
|                                       | Prepaid expenses and other current assets                                                                                                                                       |                                            |        | 2,542             |       
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total current assets                       |        |                   | 33,081
|Marketable securitiesnon-current      |                                                                                                                                                                                 |                                            | 5,131  |                   |       
|Investment in stock of related parties |                                                                                                                                                                                 |                                            | 14,849 |                   |       
|Due from related parties               |                                                                                                                                                                                 |                                            | 738    |                   |       
|Property, plant and equipment, net     |                                                                                                                                                                                 |                                            | 5,708  |                   |       
|Developed technology at cost, net      |                                                                                                                                                                                 |                                            | 842    |                   |       
|Goodwill and other intangibles, net    |                                                                                                                                                                                 |                                            | 1,039  |                   |       
|Restricted cash                        |                                                                                                                                                                                 |                                            | 3,469  |                   |       
|Other assets                           |                                                                                                                                                                                 |                                            | 30     |                   |       
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total assets                               |        | $                 | 64,887
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                                                                                                                                                
|Current liabilities:                   |                                                                                                                                                                                 |                                            |        |                   |       
|                                       | Accounts payable and accrued liabilities                                                                                                                                        |                                            | $      | 4,111             |       
|                                       | Payable to AVI BioPharma, Inc.                                                                                                                                                  |                                            |        | 750               |       
|                                       | Deferred revenue                                                                                                                                                                |                                            |        | 1,000             |       
|                                       | Accrued employee benefits                                                                                                                                                       |                                            |        | 2,093             |       
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total current liabilities                  |        |                   | 7,954 
|Deferred revenuenon-current           |                                                                                                                                                                                 |                                            | 1,417  |                   |       
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total liabilities                          |        |                   | 9,371 
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|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; 33,284,768 and 32,821,163 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively |                                            |        | 33                |       
|                                       | Additional paid in capital                                                                                                                                                      |                                            |        | 282,608           |       
|                                       | Deferred compensation                                                                                                                                                           |                                            |        | (66               | )     
|                                       | Accumulated other comprehensive gain (loss)                                                                                                                                     |                                            |        | (194              | )     
|                                       | Accumulated deficit                                                                                                                                                             |                                            |        | (226,865          | )     
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total stockholders' equity                 |        |                   | 55,516
|                                       |                                                                                                                                                                                 |                                            |        |                   |       
|                                       |                                                                                                                                                                                 | Total liabilities and stockholders' equity |        | $                 | 64,887
|                                       |                                                                                                                                                                                 |                                            |        |                   |       

See
accompanying notes to 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 September 30, |         | Nine months ended September 30, |       
|-------------------------------------------------------------------------------- | ------------------------------------ | -------------------------------- | ------- | ------------------------------- | ------
|
|Revenues:                                                                        |                                      |                                  |         |                                 |       
|                                                                                 | Net sales revenue                    |                                  | $       | 657                             |       
|                                                                                 | Other revenue                        |                                  |         | 250                             |       
|                                                                                 |                                      |                                  |         |                                 |       
|                                                                                 |                                      | Total revenue                    |         |                                 | 907   
|Operating expenses:                                                              |                                      |                                  |         |                                 |       
|                                                                                 | Cost of sales                        |                                  |         | 161                             |       
|                                                                                 | Research and development             |                                  |         | 7,776                           |       
|                                                                                 | Selling, general, and administrative |                                  |         | 4,987                           |       
|                                                                                 |                                      |                                  |         |                                 |       
|                                                                                 |                                      | Total operating expenses         |         |                                 | 12,924
|Loss from operations                                                             |                                      |                                  | (12,017 | )                               |       
|Interest income                                                                  |                                      |                                  | 259     |                                 |       
|Other expense                                                                    |                                      |                                  | (8,354  | )                               |       
|                                                                                 |                                      |                                  |         |                                 |       
|Net loss                                                                         |                                      | $                                | (20,112 | )                               | $     
|                                                                                 |                                      |                                  |         |                                 |       
|Basic and diluted net loss per share                                             |                                      | $                                | (0.63   | )                               | $     
|                                                                                 |                                      |                                  |         |                                 |       
|Weighted average shares used in basic and diluted net loss per share calculation |                                      |                                  | 32,056  |                                 |       
|                                                                                 |                                      |                                  |         |                                 |       

See
accompanying notes to consolidated financial statements

4

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

|                                                    |                                                                             | Nine months ended
September 30,                                        |                                       
|--------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------
|
|Operating activities:                               |                                                                             |                                                                        |                                       
|                                                    | Net loss                                                                    |                                                                        | $                                     
|                                                    | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                        |                                       
|                                                    |                                                                             | Depreciation and amortization                                          |                                       
|                                                    |                                                                             | Amortization of deferred revenue                                       |                                       
|                                                    |                                                                             | Expense related to stock options and warrants granted to non-employees |                                       
|                                                    |                                                                             | Non-cash charge related to acquisition of license agreement            |                                       
|                                                    |                                                                             | Changes in operating assets and liabilities:                           |                                       
|                                                    |                                                                             |                                                                        | Accounts receivable                   
|                                                    |                                                                             |                                                                        | Inventories                           
|                                                    |                                                                             |                                                                        | Prepaid expenses and other assets     
|                                                    |                                                                             |                                                                        | Due from related parties              
|                                                    |                                                                             |                                                                        | Other receivables                     
|                                                    |                                                                             |                                                                        | Restricted cash                       
|                                                    |                                                                             |                                                                        | Accounts payable and other liabilities
|                                                    |                                                                             |                                                                        |                                       
|Net cash used in operating activities               |                                                                             |                                                                        | (46,946                               
|                                                    |                                                                             |                                                                        |                                       
|Investing activities:                               |                                                                             |                                                                        |                                       
|                                                    | Purchases of marketable securities                                          |                                                                        |                                       
|                                                    | Sales or maturities of marketable securities                                |                                                                        |                                       
|                                                    | Purchase of investment in Peregrine Pharmaceuticals                         |                                                                        |                                       
|                                                    | Purchases of property and equipment                                         |                                                                        |                                       
|                                                    |                                                                             |                                                                        |                                       
|Net cash provided by (used in) investing activities |                                                                             |                                                                        | 42,207                                
|                                                    |                                                                             |                                                                        |                                       
|Financing activities:                               |                                                                             |                                                                        |                                       
|                                                    | Issuance of common stock, net of issuance costs                             |                                                                        |                                       
|                                                    | Repurchases of common stock                                                 |                                                                        |                                       
|                                                    |                                                                             |                                                                        |                                       
|Net cash used in financing activities               |                                                                             |                                                                        | (1,668                                
|                                                    |                                                                             |                                                                        |                                       
|Net decrease in cash and cash equivalents           |                                                                             |                                                                        | (6,407                                
|Cash and cash equivalents at beginning of period    |                                                                             |                                                                        | 17,650                                
|                                                    |                                                                             |                                                                        |                                       
|Cash and cash equivalents at end of period          |                                                                             | $                                                                      | 11,243                                
|                                                    |                                                                             |                                                                        |                                       
|Supplemental Disclosures of Cash Flow Information:  |                                                                             |                                                                        |                                       
|                                                    | Non-cash investing and financing activities:                                |                                                                        |                                       
|                                                    |                                                                             | Issuance of warrant related to consulting agreement                    |                                       

See
accompanying notes to consolidated financial statements

5

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SUPERGEN, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        SEPTEMBER 30, 2002        (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 accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods
ended September 30, 2002 are not necessarily indicative of results that may be expected for the year ended December 31, 2002.

The
balance sheet at December 31, 2001 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, 2001.

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 September 30, 2002 (in thousands):

Amortized
Cost

Unrealized
Gains
(Losses)

Estimated
Fair ValueU.S. corporate debt securities

$
22,583

$
78

$
22,661U.S. government debt securities


3,961


12


3,973Marketable equity securities


14,836


(284
)

14,552Total

$
41,380

$
(194
)
$
41,186


6

---

Balance
sheet classification as of September 30, 2002 (in thousands):

Amortized
Cost

Unrealized
Gains
(Losses)

Estimated
Fair ValueAmounts included in Cash and cash equivalents

$
5,823




$
5,823Marketable securities, current


15,982

$
51


16,033Marketable securities, non-current


5,281


(150
)

5,131Amounts included in Investment in stock of related parties


14,294


(95
)

14,199Total

$
41,380

$
(194
)
$
41,186


Available-for-sale
securities by contractual maturity (in thousands):

Estimated Fair ValueSeptember 30,
2002

December 31,
2001Debt securities:Due in one year or less

$
21,856

$
65,201Due after one year through three years


4,778


5,55026,634


70,751Marketable equity securities


14,552


29,899Total

$
41,186

$
100,650


During
the quarter ended September 30, 2002, we recorded an other than temporary loss of $8,354,000 relating to our investments in the stocks of AVI BioPharma, Inc. and
Inflazyme, Inc. This write-down was recorded as Other expense on the Condensed Statement of Operations. The investment in AVI BioPharma is included on the Balance Sheet in
Investment in stock of related parties, and the investment in Inflazyme is included in Marketable securities, non-current. The write-down reduced our cost bases of these equity
investments to $14,294,000 and $18,000, respectively.

NOTE 3. INVENTORIES

Inventories consist of the following (in thousands):

September 30,
2002

December 31,
2001Raw material

$
133

$
176Work in process


1,494


960Finished goods


993


697$
2,620

$
1,833


7

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NOTE 4. STOCKHOLDERS' EQUITY

Private Placement Stock Issuance

In September 2002, we entered into a Securities Purchase Agreement and Registration Rights Agreement with several investors for the private placement of
shares of our common stock and warrants. In connection with these agreements, we issued 1,806,400 shares of our common stock to the investors at a per share price of $2.50, for an aggregate amount of
$4,516,000, and issued warrants to the investors for the purchase of the same number of shares.

The
warrants have the following characteristics: (i) 1,204,269 (662/3%) of the warrants have an exercise price of $4.00 and the other 602,131
(331/3%) of the warrants have an exercise price of $5.00 per share, (ii) the warrants will be exercisable for a term of four years, (iii) the exercise prices of the
warrants will be subject to adjustment so that, if we issue any shares of our common stock (including options and warrants, with standard exceptions), at a price that is lower than the respective
exercise prices, then the respective exercise prices will be reduced to each such lower price, provided, however, that after 540 days of issuance of the warrants, the respective exercise prices
shall not be reduced to less than $2.50, and (iv) after two years, the warrants will be redeemable by SuperGen if the shares of our common stock are trading at above 200% of the respective
exercise prices for twenty consecutive days.

As
compensation to the placement agent, we paid the placement agent $310,000 in cash and issued a five-year warrant to an affiliate of the placement agent for the purchase of
118,000 shares of our common stock at an exercise price of $3.00 per share. Using the Black-Scholes valuation method, we calculated the value of these warrants to be $176,000, which was treated as
part of the cost of the offering.

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 nine months ended September 30, 2002, we repurchased 1,460,000 shares of our common stock at a cost, net of commissions, of $6,451,000. Since inception of the stock
repurchase plan, we have repurchased 2,608,000 shares of our common stock at a cost, net of commissions, of $17,964,000. All shares repurchased have been retired.

NOTE 5. COMPREHENSIVE LOSS

For the three months ended September 30, 2002 and 2001, total comprehensive losses amounted to $13,954,000 and $20,191,000, respectively. For the nine
months ended September 30, 2002 and 2001, total comprehensive losses amounted to $59,186,000 and $32,740,000, respectively. Comprehensive losses consisted primarily of the net losses and
unrealized gains or losses on investments.

8

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NOTE 6. 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 7. GOODWILL AND OTHER INTANGIBLES

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142"). Under SFAS 142, which became effective for fiscal years beginning after December 15, 2001, goodwill and indefinite lived intangible assets are no
longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Intangible assets with finite useful lives will continue to be amortized over their
respective useful lives. The standard also establishes specific guidance for testing impairment of goodwill and intangible assets with indefinite useful lives. We adopted SFAS 142 on
January 1, 2002. At September 30, 2002, we had approximately $730,000 in goodwill that is no longer being amortized. The amortization expense and adjusted net income for the three and
nine month periods ended September 30, 2002 and 2001 is as follows (in thousands):

Three months ended
September 30,

Nine months ended
September 30,2002

2001

2002

2001Net loss as reported

$
(20,112
)
$
(13,447
)
$
(43,138
)
$
(40,154
)Amortization expense





68





204Adjusted net loss

$
(20,112
)
$
(13,379
)
$
(43,138
)
$
(39,950
)Adjusted basic and diluted net loss per share

$
(0.63
)
$
(0.41
)
$
(1.33
)
$
(1.21
)


NOTE 8. RECENT ACCOUNTING PRONOUNCEMENT

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"). SFAS 144 amends existing accounting guidance on asset impairment and provides a single accounting model for long-lived assets to
be disposed of. Among other provisions, the new rules change the criteria for classifying an asset as held-for-sale. The standard also broadens the scope of businesses to be
disposed of that qualify for reporting as discontinued operations, and changes the timing of recognizing losses on such operations. The provisions of SFAS 144 became effective for our fiscal
year 2002. The adoption of SFAS 144 did not have a material effect on our financial statements.

9

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NOTE 9. TERMINATION OF AGREEMENTS WITH ABBOTT LABORATORIES

In December 1999, we entered into two agreements with Abbott Laboratories ("Abbott"), a Common Stock and Option Purchase Agreement and a Worldwide Sales,
Distribution and Development Agreement relating to our drug candidate Orathecin. Under these agreements, Abbott was to invest in shares of our common stock and would participate with us
in the marketing and distribution of Orathecin. We would have co-promoted Orathecin with Abbott in the United States and Abbott had 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
transfers 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.

On
March 4, 2002, SuperGen and Abbott mutually terminated the Common Stock and Option Purchase Agreement and the Worldwide Sales, Distribution and Development Agreement. We
regained all marketing rights to Orathecin worldwide and are no longer obligated to share profits from product sales of Orathecin. Abbott no longer has the right or obligation to purchase the
remaining aggregate amount of $52.5 million of shares of our common stock, no longer has the option to purchase up to 49% of our outstanding shares, no longer has the right of first discussion
with respect to our product portfolio, and no longer has a right of first refusal to acquire us. In connection with this termination agreement, we agreed to reimburse Abbott for development work they
completed on our behalf totaling $1.6 million. Of this total, $80,000 remained in Accounts payable and accrued liabilities at September 30, 2002.

NOTE 10. AGREEMENT WITH EUROGEN PHARMACEUTICALS LTD.

In September 2001, we entered into a Supply and Distribution Agreement with EuroGen Pharmaceuticals Ltd. ("EuroGen"), a company incorporated and
registered in England and Wales. Under the agreement, we granted EuroGen the exclusive European and South African rights to promote and sell certain of our existing generic and other products or
compounds. The agreement also establishes a process for granting EuroGen rights to sell additional products in Europe and South Africa, subject to our compliance with our other existing licensing and
distribution arrangements. After complying with these existing obligations, we will be required to offer EuroGen the option to obtain European and South African rights to our future products. EuroGen
will seek and pay for all necessary regulatory approvals and authorizations necessary for the commercial sale of the products in the territories where they market and sell the products.

EuroGen
is not yet an operating company, but we intend to hold a substantial equity interest in the company once it raises additional capital and is operational. We have not yet
determined our ownership share of EuroGen, but it may be as much as ninety-five percent. Through September 30, 2002, we had advanced $776,000 to EuroGen to fund its
start-up operations. We do not expect to be reimbursed for these advances, and have charged this amount to selling, general, and administrative expenses in the current year.

10

---



Item 2.

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

You should read the following discussion together with our 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. Forward-looking statements provide our current expectations or forecasts of future events and include the following: our statements regarding the timing of filing of a new
drug application for Orathecin; our estimates about becoming profitable; our forecasts regarding our research and development expenses; our estimates of the cost of decitabine clinical
trials and our statements regarding the sufficiency of our cash to meet our operating needs. Any or all of these forward-looking statements may turn out to be wrong. For example, our clinical data in
our Orathecin clinical trials may not support filing of an NDA or the FDA may not approve our application if filed; the analysis of our clinical trial data may be more complex than we anticipate
causing delays; we may not be successful in commercializing our products and may not become profitable when planned or at all; our research and development expenses may be larger than we currently
anticipate; our decitabine trials may be more complex than we currently anticipate and our cash and capital resources may be insufficient to meet our needs. Inaccurate assumptions we might make and
known or unknown risks and uncertainties can affect our forward-looking statements. Consequently, no forward-looking statement can be guaranteed and our actual results may differ materially. 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 and hematological malignancies. 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 $226.9 million for the period from inception through September 30, 2002. These losses include
non-cash charges of $20 million for the acquisition of in-process research and development.

We
have completed patient enrollment in each of the three separate stand-alone pivotal Phase III clinical trials with Orathecin for treatment of pancreatic cancer. The three
studies"Gemzar refractory," where patients who failed treatment with Gemzar were randomized to either Orathecin or 5-FU; "Chemotherapy refractory," where patients who have
failed multiple types of chemotherapy are

11

---

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
Gemzarhave enrolled a combined total of over 1,800 patients. We met with the Food and Drug Administration ("FDA") in late October 2002 to discuss the data from the first two Phase
III clinical studies noted above, along with data from our Phase II studies with Orathecin that had previously been presented at a meeting of the American Society of Clinical Oncology. The FDA has
granted Orathecin "fast track" designation for the treatment of patients with locally advanced or metastatic pancreatic cancer that is resistant or refractory to chemotherapies. Fast track designation
allows the FDA to initiate review of sections of an NDA before the application is complete. This rolling review is available if the applicant provides a schedule for the submission of the remaining
information and pays applicable user fees. Additionally,
under the fast track provisions, the FDA is committed to working with us for the purpose of expediting the clinical development and evaluation of the drug safety, and efficacy for the fast track
indication. After a favorable meeting with the FDA, we will begin submitting sections of the NDA by the end of 2002.

We
have initiated Phase III clinical trials with decitabine for treatment of myelodysplastic syndrome, 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 graft-versus-host disease, chronic lymphocytic leukemia, 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 development of our product candidates. Our ability to become
profitable will depend upon a variety of factors, including regulatory approvals of our products, the indications in which our products are approved to treat, 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, and our ability to control our costs.

In
late 1999, we entered into two agreements related to Orathecin with Abbott Laboratories under which Abbott would market and distribute Orathecin and under which Abbott was obligated
to make investments in the Company based on achievements of milestone events. We were to co-promote Orathecin with Abbott in the United States and Abbott had exclusive rights to market
Orathecin outside of the United States. In the U.S. market, we would have shared profits from product sales equally with Abbott. Outside the U.S. market, Abbott would have paid us royalties and
transfer fees based on product sales. In March 2002, we mutually terminated these agreements with Abbott and they no longer have any marketing, promotion, or royalty rights relating to
Orathecin. We agreed to pay Abbott $1.6 million for development activities undertaken by Abbott and we relieved Abbott of any obligation to pay us further milestone payments. We continue to be
responsible for pursuing and funding the clinical development of Orathecin and obtaining regulatory approval for the product in the United States, Canada and the member states of the European Union.

As
a result of the termination of the agreements with Abbott, we now have the flexibility to pursue opportunities with Orathecin and other compounds on our own or with a new strategic
partner. We are currently evaluating our options as we work toward completion of the ongoing Orathecin trials and evaluate the trial results. Assuming we receive regulatory approval, if we elect to
pursue marketing of Orathecin on our own, we will be required to significantly increase our sales and marketing departments to a greater extent than currently planned.

Results of Operations



Revenues were $0.9 million in the third quarter of 2002 compared to $2.8 million 2001. The decrease was attributed to lower sales of Nipent, our
drug currently approved for the treatment of

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hairy cell leukemia, due primarily to the timing of our annual price increase. In 2002, the price increase went into effect on June 30, which prompted higher sales in the second quarter of
2002. In 2001, the price increase went into effect on July 15, which shifted some of the increased sales into the third quarter of that year. Sales in the third quarters of both 2002 and 2001
did not include any sales to Europe. 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 25% in the third quarter of 2002 compared to 24% during the same period in 2001. 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 $7.8 million in the third quarter of 2002 compared to $12.1 million in 2001. The decline was due primarily to the completion of
enrollment in 2001 of over 1,800 patients into our Phase III clinical trials of Orathecin for pancreatic cancer. Although we are continuing to enroll new patients into our Phase III trials for
decitabine, we do not expect these trials to be as costly as the Orathecin trials. However, 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 $5.0 million in the third quarter of 2002 compared to $4.8 million in 2001. This increase was due primarily to higher
expenditures for liability insurance, business development relating to our European start up operations, and administrative salaries and bonuses.

Interest
income was $0.3 million in the third quarter of 2002 compared to $1.2 million in 2001. This was due to lower available cash and marketable securities balances and
a decline in interest rates.

During
the third quarter of 2002, we recorded other expense of $8.4 million, which represented an other than temporary decline in the value of our investments in the stocks of AVI
BioPharma, Inc. and Inflazyme, Inc.



Revenues were $8.4 million in the first nine months of 2002 compared to $8.2 million 2001. The increase was due primarily to higher sales of Nipent,
our drug currently approved for the treatment of hairy cell leukemia. We have increased our market share for the treatment of hairy cell leukemia, due to publication of ten-year survival
data for Nipent, and there has been increased demand for the drug for use in clinical development programs and off label uses in the treatment of graft-versus-host disease, chronic
lymphocytic leukemia, and non-Hodgkin's lymphoma. Sales in the first nine months of 2002 included approximately $400,000 in sales to Europe, compared to $338,000 in the first nine months
of 2001. 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 nine months of 2002 compared to 25% during the same period in 2001. The increase in cost of sales percentage in
2002 was due to a larger portion of our sales being related to generic mitomycin, which is sold at lower margins

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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 $23.8 million in the first nine months of 2002 compared to $35.6 million in 2001. The decline was due primarily to the completion of
enrollment in 2001 of over 1,800 patients into our Phase III clinical trials of Orathecin for pancreatic cancer. Although we are continuing to enroll new patients into our Phase III trials for
decitabine, we do not expect these trials to be as costly as the Orathecin trials. However, 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 $18.2 million in the first nine months of 2002 compared to $15.5 million in 2001. This increase was due primarily to
higher expenditures for patent
and copyright legal expenses, liability insurance, business development relating to our European start up operations, and administrative salaries and bonuses.

Interest
income was $1.4 million in the first nine months of 2002 compared to $4.6 million in 2001. This was due to lower available cash and marketable securities balances
and a decline in interest rates.

During
the first nine months of 2002, we recorded other expense of $8.4 million, which represented an other than temporary decline in the value of our investments in the stocks of
AVI BioPharma, Inc. and Inflazyme, Inc.

Liquidity and Capital Resources

Our cash, cash equivalents, and both short and long-term marketable securities totaled $32.4 million at September 30, 2002, compared to
$74.0 million at December 31, 2001. In addition, at September 30, 2002 we held approximately 2.7 million shares of registered stock of AVI BioPharma, Inc., with a
market value of $14.2 million.

The
net cash used in operating activities in the first nine months of 2002 was $46.9 million, which consisted primarily of the net loss of $43.1 million, a decrease in
accounts receivable of $1.9 million, and the reduction of accounts payable and accrued liabilities totaling $4.8 million. In addition, during the first nine months of 2002, we
repurchased 1.5 million shares of our common stock on the open market at a net cost of $6.5 million.

We
have financed our operations primarily through the issuance of equity securities and milestone payments in connection with collaborative agreements. We raised approximately
$4.5 million in September 2002 through a private placement of shares of our common stock and warrants. As a result of the termination of our Orathecin agreements with Abbott, we no
longer receive any milestone payments from Abbott. Nevertheless, we believe that our current cash, cash equivalents, marketable securities, and other investments will satisfy our cash requirements at
least through December 2003. 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 decitabine.

Our
primary planned uses of cash are as follows:



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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.

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.

If the results of further clinical testing indicate that our proposed products are not safe and effective for human use, our business will
suffer.Most of our products are in the development stage and prior to their sale will require the commitment of substantial resources. All of the potential
proprietary products that we are currently developing will require extensive pre-clinical and clinical testing before we can submit any application for regulatory approval. Before
obtaining regulatory approvals for the commercial sale
of any of our products, we must demonstrate through pre-clinical testing and clinical trials that our product candidates are safe and effective in humans. 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. Our commencement and rate of completion of clinical trials may be delayed by many factors,
including:



The
clinical results we have obtained to date do not necessarily predict that the results of further testing, including later-stage controlled human clinical testing, will be successful.
If our trials are not successful, or are perceived as not successful by the FDA or physicians, our business, financial condition and results of operations will be materially harmed.

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If we fail to obtain regulatory marketing approvals in a timely manner, commercialization of our products will be delayed or prevented and our business will
suffer.Even if we believe our trials are successful, the FDA may require additional clinical testing and, therefore we would have to commit additional
unanticipated resources. The FDA has substantial discretion in the drug approval process. We cannot assure you that we will obtain the necessary regulatory approvals to market our products. The FDA
and comparable agencies in foreign countries impose substantial requirements for the introduction of both new pharmaceutical products and generic products through lengthy and detailed clinical testing
procedures, sampling activities and other costly and time-consuming compliance procedures. We have not yet received marketing approval for any of our internally developed proprietary
products. Our proprietary drugs and products will require lengthy clinical trials along with FDA and comparable foreign agency review as new drugs. Our generic drugs will also require regulatory
review and approval.

We
generally cannot predict with certainty if or when we might submit for regulatory review those products currently under development. Once we submit our potential products for review,
we cannot assure you that the FDA or other regulatory agencies will grant approvals for any of our pharmaceutical products on a timely basis or at all, or if granted 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. Any delays or complications in obtaining regulatory approval could hinder our efforts to commercialize our products, generate revenues, and achieve profitability.

Sales
of our products outside the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. These requirements 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, develop these markets, and have material adverse effects on our results of operations and financial condition.

If our clinical data for Orathecin cannot support the regulatory approval for or if filing or approval of an NDA with the FDA is delayed our business will be
harmed.We have expended significant 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. Our ongoing Phase III
Orathecin clinical trials are large and complex and are requiring a significant amount of time and statistical analysis. There is no assurance that the data or statistical analysis from these trials
will support an approved NDA or that we will not be required to perform additional studies. Once we file an NDA, the approval process may take a significant amount of time and we may not be approved.
If
our Orathecin development activities are unsuccessful for these or other reasons our business will be substantially harmed.

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. The FDA may also initiate review of sections of an NDA before the NDA is complete.

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

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chemotherapies, we cannot guarantee a faster development process, review or approval compared to the conventional FDA procedures. Our fast track designation may be withdrawn by the FDA if the FDA
believes that it 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. 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 clinical meaningful benefit to patients, our FDA approval can be withdrawn
on an expedited basis. Furthermore, if serious adverse effects 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.While we believe that the
termination of our agreements with Abbott are 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 which we deem very beneficial. At the same time we have foregone the opportunity to
receive future milestone payments and other potential revenue and benefits from a well established and respected pharmaceutical company. In this respect the termination of the Abbott agreements may
negatively impact our liquidity as we can not offset our development expenses with milestone payments. In addition, the termination of the agreements may be perceived negatively by other potential
partners and may make it difficult for us to pursue opportunities with Orathecin or any other of our proprietary compounds. Because strategic relationships are critical to our business strategy and
success such a perception may negatively impact our business.

If we cannot complete our clinical trials for decitabine and cannot receive regulatory approval, our business will suffer.We
have initiated Phase III clinical trials with decitabine for treatment of advanced myelodysplastic syndrome, and we are nearing the completion of patient enrollment. We have also received
orphan-drug designation for decitabine. There is no assurance that we will be able to complete the patient enrollment as anticipated or that the clinical trial results will support an
approved NDA. Even if we will be able to file an NDA, the approval process may take a significant amount of time and we may not be approved. If our decitabine development activities are unsuccessful
for these or other reasons our business will be harmed.

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 approval of
their use for treatment of additional diseases. Nipent, which has provided over 80% of our revenues in the past three years, is a product that we believe has promise for treatment of a variety of
diseases. We 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 our business may not develop as planned.

We have a history of operating losses and an accumulated deficit, we may not achieve or maintain profitability in the future, and we may need to obtain additional
funding.We incurred cumulative losses of $226.9 million for the period from inception through September 30, 2002. These losses included
non-cash charges of $20.0 million for the acquisition of in-process research and development. Currently

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we are not profitable and we expect to continue to incur substantial operating losses at least through 2003. Our ability to achieve profitability will depend primarily on our ability to obtain
regulatory approval for and successfully commercialize Orathecin. 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 decitabine, and to bring our other proprietary products to market. Our ability to become profitable
will also depend upon a variety of other factors, including the following:



We
cannot predict the outcome of these factors and we cannot assure you that we will ever become profitable.

Even
if we do become profitable, we may need substantial additional funding. We expect that our rate of spending will accelerate as a result of increased clinical trial costs,
manufacturing, sales, and other expenses associated with regulatory approval and commercialization of our products now in development. We anticipate that our capital resources will be adequate to fund
operations and capital expenditures at least through December 2003. However, if we experience unanticipated cash requirements during this period, we could require additional funds much sooner.
Our business, results of operations and cash flows will be adversely affected if we fail to obtain adequate funding in a timely manner, or at all. We may receive funds from the sale of equity
securities, or the exercise of outstanding warrants and stock options. However, we cannot assure you that any of those fundings will occur, or if they occur, that they will be on terms favorable to
us. Also, the dilutive effect of those fundings could adversely affect our results per share. To the extent we raise additional funds through collaboration and licensing arrangements, we may be
required to relinquish some rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

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.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:



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Any
of these factors could delay clinical trials or commercialization of our products under development, interfere with current sales, entail higher costs, and result in our being unable
to effectively sell our products. In addition, 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. 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 2001 and it has completed two production batches. We had experienced unusually low inventory levels during the first quarter of 2002, while we were waiting for the new company that was
purifying Nipent to be qualified by the FDA. The manufacturer was qualified by the FDA in May 2002 and all back orders were fulfilled.

In
addition, we store the majority of the unpurified, bulk form of Nipent at a single 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 could adversely affect our business, results of operations and cash flows.

We
do not currently intend to manufacture any pharmaceutical products, although we may choose to do so in the future. 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. In addition, we have only limited experience in manufacturing pharmaceutical products. 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.

Asserting, defending and maintaining intellectual property rights could be difficult and costly and failure to do so will harm our ability to compete and the
results of our operations.If competitors develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, if
our trade secrets are disclosed or if we cannot effectively protect our rights to unpatented trade secrets, our business will be harmed.

The
pharmaceutical fields are characterized by a large number of patent filings. 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.

We
actively seek patent protection for our proprietary products and technologies. We have a number of United States patents and also have licenses to, or assignments of, numerous patents
issued both in the United States and elsewhere. We may also license our patents outside the United States. Limitations on patent protection outside the United States, and differences in what
constitutes

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patentable subject matter in countries outside the United States, may limit the protection we have on patents or licenses of patents outside 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.

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 business, results of operations and cash flows.

From
time to time we receive correspondence inviting us to license patents from third parties. 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 proposed products, 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. 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. However, we may be at a disadvantage to the extent that potential employees may favor larger, more established employers.

Our stock price is highly volatile.The stock market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular companies. The trading price of our common stock has fluctuated significantly in recent years and is likely to remain
volatile in the future. The following factors may affect our stock price:



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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.

We
do not use or hold derivative financial instruments.

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 2. Changes in Securities

In September 2002, we entered into a Securities Purchase Agreement and Registration Rights Agreement with several investors for the private placement of
shares of our common stock and warrants. In connection with these agreements, we issued 1,806,400 shares of our common stock to the investors at a per share price of $2.50, for an aggregate amount of
$4,516,000, issued warrants to the investors for the purchase of the same number of shares, and issued a warrant to the placement agent for the purchase of 118,000 shares. The sale was to several
accredited investors, and we relied on Rule 506 promulgated under Section 4(2) of the Securities Act of 1933, as amended, as the exemption from registration. We filed a Registration
Statement on Form S-3 in October 2002 to register the resale of the shares and shares issuable upon exercise of warrants issued in the private placement.

In
August 2002, we issued 64,599 shares of our common stock to Orphan Europe SARL in connection with a settlement agreement to resolve a dispute relating to a distribution
agreement between Orphan Europe and Sparta Pharmaceuticals, Inc., a wholly owned subsidiary of SuperGen.

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: |  | November 14, 2002 |  | By:           
|      |  |                   |  | By:           

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

I, Joseph Rubinfeld, certify that:





|Date: |  | November 14, 2002 |  | 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: |  | November 14, 2002 |  | By: |  | /s/EDWARD L. JACOBSEdward L. Jacobs Chief Business Officer and Chief Financial Officer (Principal
Financial and Accounting Officer)
|----- |  | ----------------- |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------

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