UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                FORM 10-Q

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

              FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

                     Commission File Number 0-9314

                      ACCESS PHARMACEUTICALS, INC.
          ------------------------------------------------------
          (Exact name of registrant as specified in its charter)


          Delaware                                      83-0221517
------------------------                         --------------------------
(State of Incorporation)                         (I.R.S. Employer I.D. No.)

             2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
             -----------------------------------------------
                (Address of principal executive offices)


                     Telephone Number  (214) 905-5100

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
requirement for the past 90 days.

Yes  X   No
   -----   -----

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

Yes  X    No
   -----    -----

The number of shares outstanding of the issuer's common stock,
as of November 12, 2004, was 15,520,687 shares, $0.01 par
value per share.



                       Total No. of Pages   28

<PAGE>
                       ACCESS PHARMACEUTICALS, INC.

                                 INDEX
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                                                              Page No.
                                                              -------
RISK FACTORS                                                     2

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

Condensed Consolidated Balance Sheets at
  September 30, 2004 and December 31, 2003                      24

Condensed Consolidated Statements of Operations and
  Comprehensive Loss for the three and nine months ended
  September 30, 2004 and September 30, 2003                     25

Condensed Consolidated Statements of Cash Flows for the Nine
  months ended September 30, 2004 and September 30, 2003        26

Notes to Unaudited Condensed Consolidated Financial Statements  27

Item 2. Management's Discussion and Analysis of Financial
  Condition and Results of Operations                           14

Item 3. Quantitative and Qualitative Disclosures About
  Market Risk                                                   20

Item 4. Controls and Procedures                                 20

PART II - OTHER INFORMATION

Item 1 Legal Proceedings                                        20

Item 2 Changes in Securities                                    21

Item 3 Defaults Upon Senior Securities                          21

Item 4 Submission of Matters to a Vote of Security Holders      21

Item 5 Other Information                                        21

Item 6. Exhibits and Reports on Form 8-K                        21

SIGNATURES                                                      23


                                   2
<PAGE>
                     PART I -- FINANCIAL INFORMATION


Risk Factors
------------

This Quarterly Report on Form 10-Q contains certain statements
that are forward-looking within the meaning of Section 27a of
the Securities Act of 1933 and that involve risks and
uncertainties, including, but not limited to the uncertainties
associated with research and development activities, clinical
trials, our ability to raise capital, the timing of and our
ability to achieve regulatory approvals, dependence on others
to market our licensed products, collaborations, future cash
flow, the timing and receipt of licensing and milestone
revenues, the future success of our marketed products and
products in development, our ability to manufacture amlexanox
products in commercial quantities, our sales projections, and
the sales projections of our licensing partners, our ability
to achieve licensing milestones and other risks described
below as well as those discussed elsewhere in this Form 10-Q,
the Annual Report on Form 10-K for the year ended December 31, 2003,
documents incorporated by reference, and other documents and
reports that we file periodically with the Securities and
Exchange Commission. Forward-looking statements contained in
this Form 10-Q include, but are not limited to our net cash
burn rate for the next twelve months to be approximately
$3400,000 per month, our outstanding convertible notes, and
our expected capital expenditures.

We have experienced a history of losses and we expect to incur
future losses.
--------------------------------------------------------------

We have recorded minimal revenue to date and we have incurred
a cumulative operating loss of approximately $61.6 million
through September 30, 2004. Losses for the years ended 2003,
2002 and 2001 were $6,935,000, $9,384,000 and $6,027,000,
respectively. Our losses have resulted principally from costs
incurred in research and development activities related to our
efforts to develop clinical drug candidates and from the
associated administrative costs. We expect to incur additional
operating losses over the next several years. We also expect
cumulative losses to increase due to expanded research and
development efforts and preclinical and clinical trials. Our
net cash burn rate for the first nine months of 2004 was
$700,000 per month. We project our net cash burn rate for the
next twelve months to be approximately $300,000 per
month. Capital expenditures are forecasted to be minor for the
next twelve months since most of our new equipment is leased
and the lease expense is included in the calculation of the
net cash burn rate.

We do not have significant operating revenue and we may never
attain profitability.
-------------------------------------------------------------

To date, we have funded our operations primarily through
private sales of common stock and convertible notes. Contract
research payments and licensing fees from corporate alliances
and mergers have also provided funding for our operations. Our
ability to achieve significant revenue or profitability
depends upon our ability to successfully complete the
development of drug candidates, to develop and obtain patent
protection and regulatory approvals for our drug candidates
and to manufacture and commercialize the resulting drugs. We
have not received significant royalties for sales of amlexanox,
Zindaclin(R) or OraDisc(TM) products to date and we may not generate
significant revenues or profits from the sale of these
products in the future. Furthermore, we may not be able to
ever successfully identify, develop, commercialize, patent,
manufacture, obtain required regulatory approvals and market
any additional products. Moreover, even if we do identify,
develop, commercialize, patent, manufacture, and obtain required

                                   3
<PAGE>
regulatory approvals to market additional products,
we may not generate revenues or royalties from commercial
sales of these products for a significant number of years, if
at all. Therefore, our proposed operations are subject to all
the risks inherent in the establishment of a new business
enterprise.  In the next few years, our revenues may be
limited to minimal product sales and royalties, any amounts
that we receive under strategic partnerships and research or
drug development collaborations that we may establish and, as
a result, we may be unable to achieve or maintain
profitability in the future or to achieve significant revenues
in order to fund our operations.

A failure to obtain necessary additional capital in the future
could jeopardize our operations.
----------------------------------------------------------

We have issued an aggregate of $13,530,000 of convertible
notes, which are due in two parts -- $8,030,000 is due on
September 13, 2005 and $5,500,000 is due on September 13,
2008. The notes may convert to common stock at a conversion
price of $5.50 and we can redeem the notes for the principal
amount of the notes plus interest if our common stock trades
above a price of $8.25 for any period of ten consecutive
trading days prior to our notice of redemption. We do not have
sufficient funds to repay our convertible notes at their
maturity. We may not be able to restructure the
convertible notes or obtain additional financing to repay them
on terms acceptable to us, if at all. If we raise additional
funds by selling equity securities, the relative equity
ownership of our existing investors would be diluted and the
new investors could obtain terms more favorable than previous
investors. A failure to restructure our convertible notes or
obtain additional funding to repay the convertible notes and
support our working capital and operating requirements, could
cause us to be in default of our convertible notes and prevent
us from making expenditures that are needed to allow us to
maintain our operations.

We may not successfully commercialize our drug candidates.
----------------------------------------------------------

Our drug candidates are subject to the risks of failure
inherent in the development of pharmaceutical products based
on new technologies and our failure to develop safe,
commercially viable drugs would severely limit our ability to
become profitable or to achieve significant revenues. We may
be unable to successfully commercialize our drug candidates
because:

* some or all of our drug candidates may be found to be unsafe
  or ineffective or otherwise fail to meet applicable regulatory
  standards or receive necessary regulatory clearances;

* our drug candidates, if safe and effective, may be too
  difficult to develop into commercially viable drugs;

* it may be difficult to manufacture or market our drug
  candidates on a large scale;

* proprietary rights of third parties may preclude us from
  marketing our drug candidates; and

* third parties may market superior or equivalent drugs.

The success of our research and development activities, upon
which we primarily focus, is uncertain.
-------------------------------------------------------------

Our primary focus is on our research and development
activities and the commercialization of compounds covered by
proprietary biopharmaceutical patents and patent applications.
Research and development activities, by their nature, preclude
definitive statements as to the time required and costs
involved in reaching certain objectives. Actual research and
development costs,

                                   4
<PAGE>
therefore, could exceed budgeted amounts
and estimated time frames may require extension. Cost
overruns, unanticipated regulatory delays or demands,
unexpected adverse side effects or insufficient therapeutic
efficacy will prevent or substantially slow our research and
development effort and our business could ultimately suffer.
We anticipate that we will remain principally engaged in
research and development activities for an indeterminate, but
substantial, period of time.

We may be unable to obtain necessary additional capital to
fund operations in the future.
-----------------------------------------------------------

We require substantial capital for our development programs
and operating expenses, to pursue regulatory clearances and to
prosecute and defend our intellectual property rights. We
believe that our existing capital resources, interest income,
product sales, royalties and revenue from possible licensing
agreements and collaborative agreements will be sufficient to
fund our currently expected operating expenses (other than
debt obligations including the $8,030,000 of convertible notes
which may need to be repaid in September 2005) and capital
requirements for twelve months. However, unless our convertible
notes convert to common stock prior to their maturity or are
restructured, we will need to raise substantial additional
capital to support our ongoing operations and debt obligations
because our convertible notes will mature and/or our actual cash
requirements may vary materially from those now planned and will
depend upon numerous factors, including :

* the sales levels of our marketed products;

* the results of our research and development programs;

* the timing and results of preclinical and clinical trials;

* our ability to maintain existing and establish new
  collaborative agreements with other companies to provide
  funding to us;

* technological advances; and

* activities of competitors and other factors.

If we do raise additional funds by issuing equity securities,
further dilution to existing stockholders would result and
future investors may be granted rights superior to those of
existing stockholders. If adequate funds are not available to
us through additional equity offerings, we may be required to
delay, reduce the scope of or eliminate one or more of our
research and development programs or to obtain funds by
entering into arrangements with collaborative partners or
others that require us to issue additional equity securities
or to relinquish rights to certain technologies or drug
candidates that we would not otherwise issue or relinquish in
order to continue independent operations.

We may be unable to successfully develop, market, or
commercialize our products or our product candidates without
establishing new relationships and maintaining current
relationships.
------------------------------------------------------------

Our strategy for the research, development and
commercialization of our potential pharmaceutical products may
require us to enter into various arrangements with corporate
and academic collaborators, licensors, licensees and others,
in addition to our existing relationships with other parties.
Specifically, we may seek to joint venture, sublicense or enter
other marketing arrangements with parties that have an established
marketing capability or we may choose to pursue the commercialization
of such products on our own. We may, however, be unable to

                                   5
<PAGE>
establish such additional collaborative arrangements, license agreements,
or marketing agreements as we may deem necessary to develop,
commercialize and market our potential pharmaceutical products
on acceptable terms. Furthermore, if we maintain and establish
arrangements or relationships with third parties, our business
may depend upon the successful performance by these third
parties of their responsibilities under those arrangements and
relationships. For our commercialized products we currently
rely upon the following relationships in the following
marketing territories for sales, manufacturing or regulatory
approval efforts:

* amlexanox 5% paste
  o Strakan Ltd. - United Kingdom and Ireland manufacturing,
    marketing rights and regulatory approval
  o Zambon Group - France, Germany, Holland, Belgium,
    Luxembourg, Switzerland, Brazil, Colombia and Italy
    manufacturing and marketing rights
  o Laboratories Dr. Esteve SA - Spain, Portugal and Greece
    manufacturing and marketing rights
  o Meda, AB for Scandinavia, the Baltic states and Iceland
    marketing rights
  o Mipharm SpA for Italy manufacturing and marketing rights
  o Paladin Labs, Inc. for Canada manufacturing and marketing
    rights

* Zindaclin(R) and Residerm(R)
  o Strakan Ltd. - worldwide manufacturing, marketing and
    regulatory approval rights
  o Fujisawa GmbH - sublicensed continental Europe marketing
    rights
  o EpiTan - sublicensed Australia and New Zealand marketing
    rights
  o Hyundai - sublicensed Korea marketing rights
  o Taro - sublicensed Israel marketing rights
  o Biosintetica - sublicensed Brazil marketing rights
  o Six companies for eleven other smaller countries -
    sublicensed marketing rights

For one of our OraDisc(TM) products in development, on January
6, 2004, we entered into an exclusive license and supply
agreement with Wyeth Consumer HealthCare for sales of the product in
North America. If this product is marketed, we will be dependent
upon Wyeth Consumer HealthCare for sales of such product in this territory.

Our ability to successfully commercialize, and market our
products and product candidates could be limited if a number
of these existing relationships were terminated.

Furthermore, our strategy with respect to our polymer
platinate program is to enter into a licensing agreement with
a pharmaceutical company pursuant to which the further costs
of developing a product would be shared with our licensing
partner. Although we have had discussions with potential
licensing partners with respect to our polymer platinate
program, to date we have not entered into any licensing
arrangement. We may be unable to execute our licensing
strategy for polymer platinate.

We may be unable to successfully manufacture our products and
our product candidates in clinical quantities or for
commercial purposes without the assistance of contract

                                  6
<PAGE>
manufacturers, which may be difficult for us to obtain and maintain.
--------------------------------------------------------------------

We have limited experience in the manufacture of
pharmaceutical products in clinical quantities or for
commercial purposes and we may not be able to manufacture any
new pharmaceutical products that we may develop. As a result,
we have established, and in the future intend to establish
arrangements with contract manufacturers to supply sufficient
quantities of products to conduct clinical trials and for the
manufacture, packaging, labeling and distribution of finished
pharmaceutical products if any of our potential products are
approved for commercialization. If we are unable to contract
for a sufficient supply of our potential pharmaceutical
products on acceptable terms, our preclinical and human
clinical testing schedule may be delayed, resulting in the
delay of our clinical programs and submission of product candidates
for regulatory approval, which could cause our business to suffer.
Our business could suffer if there are delays or difficulties in
establishing relationships with manufacturers to produce, package,
label and distribute our finished pharmaceutical or other medical
products, if any, market introduction and subsequent sales of such
products. Moreover, contract manufacturers that we may use must adhere
to current Good Manufacturing Practices, as required by the
FDA. In this regard, the FDA will not issue a pre-market
approval or product and establishment licenses, where
applicable, to a manufacturing facility for the products until
after the manufacturing facility passes a pre-approval plant
inspection. If we are unable to obtain or retain third party
manufacturing on commercially acceptable terms, we may not be
able to commercialize our products as planned. Our potential
dependence upon third parties for the manufacture of our
products may adversely affect our ability to generate profits
or acceptable profit margins and our ability to develop and
deliver such products on a timely and competitive basis.

Our amlexanox 5% paste is marketed in the US as Aphthasol(R).
We selected Contract Pharmaceuticals Ltd. Canada as our new
manufacturer of amlexanox 5% paste and they manufactured
product for the US market and initial qualifying batches of
the product for Europe. We re-launched Aphthasol(R) in the US
market in September 2004 and recorded sales in the third quarter.

Amlexanox 5% paste was approved by regulatory authorities for
sale in the UK and is currently in the approval process in the
remaining EU countries. We licensed manufacturing rights to
Strakan, Zambon, Esteve and Mipharm for specific countries in
Europe. Contract Pharmaceuticals Ltd. Canada has also been
selected as our European supplier of amlexanox 5% paste and
this facility has been approved for European supply.

We licensed our patents for worldwide manufacturing and
marketing for Zindaclin(R) and our ResiDerm(R) technology to
Strakan Ltd. for the period of the patents. We receive a share
of the licensing revenues and royalty on the sales of the
product. Strakan has a contract manufacturer for Zindaclin(R) which
is a European Union approved facility. Zindaclin(R) was approved in
the UK and seven additional European Union countries and is
currently under review for approval in the remaining EU
countries. Zindaclin(R) is marketed in the UK, France,
Germany, Ireland, Belgium, Cyprus, Israel and Korea.
Zindaclin(R) is under review in other markets including
Australia, New Zealand, Brazil and others.

We received regulatory approval from the FDA to manufacture
and sell OraDisc(TM) A in September 2004 and are proceeding
with our manufacturing and marketing plans for 2005. We have
finalized with a third party a contract for manufacturing our
product OraDisc(TM) A.

                                  7
<PAGE>
AP5346 is manufactured by third parties for our
Phase I/II clinical trials. Manufacturing is ongoing for the
current clinical trials. Certain manufacturing steps are
conducted by the Company to enable significant cost savings to
be realized.

We are subject to extensive governmental regulation which
increases our cost of doing business and may affect our
ability to commercialize any new products that we may develop.
--------------------------------------------------------------

The FDA and comparable agencies in foreign countries impose
substantial requirements upon the introduction of
pharmaceutical products through lengthy and detailed
laboratory, preclinical and clinical testing procedures and
other costly and time-consuming procedures to establish their
safety and efficacy. All of our drugs and drug candidates
require receipt and maintenance of governmental approvals for
commercialization. Preclinical and clinical trials and
manufacturing of our drug candidates will be subject to the
rigorous testing and approval processes of the FDA and
corresponding foreign regulatory authorities. Satisfaction of
these requirements typically takes a significant number of
years and can vary substantially based upon the type,
complexity and novelty of the product. The status of our
principal products is as follows:

* 5% amlexanox paste is an approved product for sale in the US
  (Aphthasol(R)); approved in the UK and Canada but not yet
  sold; and, in the approval process in the EU.

* Zindaclin(R) is an approved product for sale in the UK and
  seven additional European Union countries; in the approval
  process in the remaining EU countries and other markets.

* OraDisc(TM) A is an approved product for sale in the US as
  of September 2004; we are completing steps for manufacturing
  and sale of the product in 2005.

* Our other OraDisc(TM) products are currently in the pre-
  clinical phase.

* AP5280 has completed Phase I of its Phase I/II trial in Europe.

* AP5346 is currently in a Phase I trial in Europe.

* Mucoadhesive liquid technology patient recruitment in the
  clinical trial is on hold pending commercial developments.

* Vitamin mediated delivery technology is currently in the
  pre-clinical phase.

* We also have other products in the preclinical phase.

Due to the time consuming and uncertain nature of the drug
candidate development process and the governmental approval
process described above, we cannot assure you when we,
independently or with our collaborative partners, might submit
a New Drug Application, or "NDA", for FDA or other regulatory
review.

Government regulation also affects the manufacturing and
marketing of pharmaceutical products. Government regulations
may delay marketing of our potential drugs for a considerable
or indefinite period of time, impose costly procedural
requirements upon our activities and furnish a competitive
advantage to larger companies or companies more experienced in
regulatory affairs. Delays in obtaining governmental
regulatory approval could adversely affect our marketing as
well as our ability to generate significant revenues from
commercial sales. Our drug candidates may not receive FDA or
other regulatory approvals on a timely basis or at all.
Moreover, if regulatory approval of a drug candidate is
granted, such approval may impose limitations on the indicated
use for which such drug may be marketed. Even if we obtain
initial regulatory approvals for our drug candidates, Access,
our drugs and our manufacturing facilities would be

                                   8
<PAGE>
subject to continual review and periodic inspection, and later
discovery of previously unknown problems with a drug, manufacturer
or facility may result in restrictions on the marketing or
manufacture of such drug, including withdrawal of the drug
from the market. The FDA and other regulatory authorities
stringently apply regulatory standards and failure to comply
with regulatory standards can, among other things, result in
fines, denial or withdrawal of regulatory approvals, product
recalls or seizures, operating restrictions and criminal
prosecution.

The uncertainty associated with preclinical and clinical testing
may affect our ability to successfully commercialize new products.
-------------------------------------------------------------------

Before we can obtain regulatory approvals for the commercial
sale of any of our potential drugs, the drug candidates will
be subject to extensive preclinical and clinical trials to
demonstrate their safety and efficacy in humans.  Preclinical
or clinical trials of any of our future drug candidates may
not demonstrate the safety and efficacy of such drug
candidates at all or to the extent necessary to obtain
regulatory approvals. In this regard, for example, adverse
side effects can occur during the clinical testing of a new
drug on humans which may delay ultimate FDA approval or even
lead us to terminate our efforts to develop the drug for
commercial use. Companies in the biotechnology industry have
suffered significant setbacks in advanced clinical trials,
even after demonstrating promising results in earlier trials.
In particular, OraDisc(TM) and polymer platinate have taken longer
to progress through clinical trials than originally planned.
This extra time has not been related to concerns of the
formulations but rather due to the lengthy regulatory process.
The failure to adequately demonstrate the safety and efficacy
of a drug candidate under development could delay or prevent
regulatory approval of the drug candidate.  A delay or failure
to receive regulatory approval for any of our drug candidates
could prevent us from successfully commercializing such
candidates and we could incur substantial additional expenses
in our attempts to further develop such candidates and obtain
future regulatory approval.

We may incur substantial product liability expenses due to the
use or misuse of our products for which we may be unable to
obtain insurance coverage.
--------------------------------------------------------------

Our business exposes us to potential liability risks that are
inherent in the testing, manufacturing and marketing of
pharmaceutical products. These risks will expand with respect
to our drug candidates, if any, that receive regulatory
approval for commercial sale and we may face substantial
liability for damages in the event of adverse side effects or
product defects identified with any of our products that are
used in clinical tests or marketed to the public. We generally
procure product liability insurance for drug candidates that
are undergoing human clinical trials. Product liability
insurance for the biotechnology industry is generally
expensive, if available at all, and as a result, we may be
unable to obtain insurance coverage at acceptable costs or in
a sufficient amount in the future, if at all. We may be unable
to satisfy any claims for which we may be held liable as a
result of the use or misuse of products which we have
developed, manufactured or sold and any such product liability
claim could adversely affect our business, operating results
or financial condition.

We may incur significant liabilities if we fail to comply with
stringent environmental regulations or if we did not comply
with these regulations in the past.
--------------------------------------------------------------

Our research and development processes involve the controlled
use of hazardous materials. We are subject to a variety of
federal, state and local governmental laws and regulations
related to the

                                   9
<PAGE>
use, manufacture, storage, handling and
disposal of such material and certain waste products. Although
we believe that our activities and our safety procedures for
storing, using, handling and disposing of such materials
comply with the standards prescribed by such laws and
regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the
event of such accident, we could be held liable for any
damages that result and any such liability could exceed our
resources.

Intense competition may limit our ability to successfully
develop and market commercial products.
---------------------------------------------------------

The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological
change. Our competitors in the United States and elsewhere are
numerous and include, among others, major multinational
pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research
institutions.

The following products may compete with polymer platinate:

* Cisplatin, marketed by Bristol-Myers-Squibb, the originator
  of the drug, and several generic manufacturers;

* Carboplatin, marketed by Bristol-Myers-Squibb in the US; and

* Oxaliplatin, marketed exclusively by Sanofi-Synthelabo.

The following companies are working on therapies and
formulations that may be competitive with our polymer platinate:

* Antigenics and Regulon are developing liposomal
  formulations; and

* American Pharmaceutical Partners, Cell Therapeutics,
  Daiichi, Enzon and Debio are developing alternate drugs in
  combination with polymers and other drug delivery systems.

The following products may compete with Residerm(R) products:

* Benzamycin, marketed by a subsidiary of Aventis;

* Cleocin-T and a generic topical clindamycin, marketed by Pfizer;

* Benzac, marketed by Galderma; and

* Triaz, marketed by Medicis Pharmaceutical Corp.

Technology and prescription steroids such as Kenalog in
OraBase, developed by Bristol-Myers Squibb, may compete with
our commercialized Aphthasol(R) product. OTC products
including Orajel - Del Laboratories and Anbesol - Wyeth
Consumer Healthcare also compete in the aphthous ulcer market.

Companies working on therapies and formulations that may be
competitive with our vitamin mediated drug delivery system are
Bristol-Myers-Squibb, Centocor (acquired by Johnson &
Johnson), GlaxoSmithKline, Imclone and Xoma which are
developing targeted monoclonal antibody therapy.

Amgen, CuraGen, McNeil, MGI Pharma and OSI Pharmaceuticals are
developing products to treat mucositis that may compete with
our mucoadhesive liquid technology.

                                  10
<PAGE>
BioDelivery, Biovail Corporation, Cellgate, CIMA Labs, Inc.,
Depomed Inc., Emisphere Technologies, Inc., Eurand, Flamel
Technologies, Nobex and Xenoport are developing products which
compete with our oral drug delivery system.

Many of these competitors have and employ greater financial
and other resources, including larger research and development,
marketing and manufacturing organizations, than us or our
collaborative partners. As a result, our competitors may
successfully develop technologies and drugs that are more
effective or less costly than any that we are developing or
which would render our technology and future products obsolete
and noncompetitive.

In addition, some of our competitors have greater experience
than we do in conducting preclinical and clinical trials and
obtaining FDA and other regulatory approvals. Accordingly, our
competitors may succeed in obtaining FDA or other regulatory
approvals for drug candidates more rapidly than we do.
Companies that complete clinical trials, obtain required
regulatory agency approvals and commence commercial sale of
their drugs before their competitors may achieve a significant
competitive advantage. Drugs resulting from our research and
development efforts or from our joint efforts with
collaborative partners therefore may not be commercially
competitive  with our competitors' existing products or
products under development.

Our ability to successfully develop and commercialize our drug
candidates will substantially depend upon the availability of
reimbursement funds for the costs of the resulting drugs and
related treatments.
--------------------------------------------------------------

The successful commercialization of, and the interest of
potential collaborative partners to invest in the development
of our drug candidates, may depend substantially upon
reimbursement of the costs of the resulting drugs and related
treatments at acceptable levels from government authorities,
private health insurers and other organizations, including
health maintenance organizations, or HMOs. To date, the costs
of our marketed products Aphthasol(R) and Zindaclin(R)
generally have been reimbursed at acceptable levels; however,
the amount of such reimbursement in the United States or
elsewhere may be decreased in the future or may be unavailable
for any drugs that we may develop in the future. Limited
reimbursement for the cost of any drugs that we develop may
reduce the demand for, or price of such drugs, which would
hamper our ability to obtain collaborative partners to
commercialize our drugs, or to obtain a sufficient financial
return on our own manufacture and commercialization of any
future drugs.

The market may not accept any pharmaceutical products that we
successfully develop.
-------------------------------------------------------------

The drugs that we are attempting to develop may compete with
a number of well-established drugs manufactured and marketed
by major pharmaceutical companies. The degree of market
acceptance of any drugs developed by us will depend on a
number of factors, including the establishment and
demonstration of the clinical efficacy and safety of our drug
candidates, the potential advantage of our drug candidates
over existing therapies and the reimbursement policies of
government and third-party payers. Physicians, patients or the
medical community in general may not accept or use any drugs
that we may develop independently or with our collaborative
partners and if they do not, our business could suffer.

In 1996, the 5% amlexanox paste product was approved for sale in the
United States. To date, the product sales have not been significant. On
July 22, 2002, we acquired the rights to it from Block Drug Company.
The product has been approved in the UK and Canada but has not been
launched

                                 11
<PAGE>
in any markets other than the United States. We re-launched
Aphthasol(R) in the US market in September 2004 and recorded sales in
the third quarter.

We received regulatory approval from the FDA to manufacture and sell
OraDisc(TM) A in September 2004 and are proceeding with our
manufacturing and marketing plans for 2005.

Trends toward managed health care and downward price pressures on
medical products and services may limit our ability to profitably sell any
drugs that we may develop.
--------------------------------------------------------------------------

Lower prices for pharmaceutical products may result from:

* third-party payers' increasing challenges to the prices charged for
  medical products and services;

* the trend toward managed health care in the United States and the
  concurrent growth of HMOs and similar organizations that can control or
  significantly influence the purchase of healthcare services and products;
  and

* legislative proposals to reform healthcare or reduce government
  insurance programs.

The cost containment measures that healthcare providers are instituting,
including practice protocols and guidelines and clinical pathways, and the
effect of any healthcare reform, could limit our ability to profitably sell
any drugs that we may successfully develop. Moreover, any future
legislation or regulation, if any, relating to the healthcare industry or
third-party coverage and reimbursement, may cause our business to suffer.

We may not be successful in protecting our intellectual property and
proprietary rights.
---------------------------------------------------------------------

Our success depends, in part, on our ability to obtain U.S. and foreign
patent protection for our drug candidates and processes, preserve our trade
secrets and operate our business without infringing the proprietary rights
of third parties. Legal standards relating to the validity of patents covering
pharmaceutical and biotechnological inventions and the scope of claims
made under such patents are still developing and there is no consistent
policy regarding the breadth of claims allowed in biotechnology patents.
The patent position of a biotechnology firm is highly uncertain and
involves complex legal and factual questions. We cannot assure you that
any existing or future patents issued to, or licensed by, us will not
subsequently be challenged, infringed upon, invalidated or circumvented
by others. As a result, although we, together with our subsidiaries, are
either the owner or licensee of 24 U.S. patents and to 19
U.S. patent applications now pending, and 8 European patents and 15
European patent applications, we cannot assure you that any additional
patents will issue from any of the patent applications owned by, or
licensed to, us. Furthermore, any rights that we may have under issued
patents may not provide us with significant protection against competitive
products or otherwise be commercially viable.

Our patents for the following technologies expire in the years and during
the date ranges indicated below:

* 5% amlexanox paste in 2011
* Zindaclin(R) and Residerm(R) between 2007 and 2011
* OraDisc(TM) in 2020

                                  12
<PAGE>
* AP5280 in 2021
* AP5346 in 2021
* Mucoadhesive technology, patents are pending
* Vitamin mediated technology between 2004 and 2019

In addition, patents may have been granted to third parties or may be
granted covering products or processes that are necessary or useful to the
development of our drug candidates. If our drug candidates or processes
are found to infringe upon the patents or otherwise impermissibly utilize
the intellectual property of others, our development, manufacture and sale
of such drug candidates could be severely restricted or prohibited. In such
event, we may be required to obtain licenses from third parties to utilize
the patents or proprietary rights of others. We cannot assure you that we
will be able to obtain such licenses on acceptable terms, if at all. If we
become involved in litigation regarding our intellectual property rights or
the intellectual property rights of others, the potential cost of such
litigation, regardless of the strength of our legal position, and the
potential damages that we could be required to pay could be substantial.

Our business could suffer if we lose the services of, or fail to attract, key
personnel.
-----------------------------------------------------------------------------

We are highly dependent upon the efforts of our senior management and
scientific team, including our President and Chief Executive Officer,
Kerry Gray. The loss of the services of one or more of these individuals
could delay or prevent the achievement of our research, development,
marketing, or product commercialization objectives. While we have
employment agreements with Mr. Gray and David Nowotnik, PhD our
Senior Vice President Research and Development, their employment may
be terminated by them or us at any time. Mr. Gray's and Dr. Nowotnik's
agreements expire within one year and are extendable each year on the
anniversary date. We do not have employment contracts with our other
key personnel. We do not maintain any "key-man" insurance policies on
any of our key employees and we do not intend to obtain such insurance.
In addition, due to the specialized scientific nature of our business, we are
highly dependent upon our ability to attract and retain qualified scientific
and technical personnel. In view of the stage of our development and our
research and development programs, we have restricted our hiring to
research scientists and a small administrative staff and we have made only
limited investments in manufacturing, production, marketing, product sales
or regulatory compliance resources. If we develop pharmaceutical
products that we will commercialize ourselves, we will need to
hire additional personnel skilled in the clinical testing and regulatory
compliance process and in marketing and product sales. There is intense
competition among major pharmaceutical and chemical companies,
specialized biotechnology firms and universities and other research
institutions for qualified personnel in the areas of our activities, however,
and we may be unsuccessful in attracting and retaining these personnel.

Ownership of our shares is concentrated, to some extent, in the hands of
a few investors which could limit the ability of our other stockholders to
influence the direction of the company.
--------------------------------------------------------------------------

Larry N. Feinberg (Oracle Partners LP, Oracle Institutional Partners LP
and Oracle Investment Management Inc.) and Heartland Advisors, Inc.
each beneficially owned approximately 12.0% and 11.6%, respectively,
of our common stock as of November 12, 2004. Accordingly, they
collectively may have the ability to significantly influence or determine the
election of all of our directors or the outcome of most corporate actions
requiring stockholder approval. They may exercise this ability in a manner
that advances their best interests and not necessarily those of our

                                  13
<PAGE>
other stockholders.

Provisions of our charter documents could discourage an acquisition of
our company that would benefit our stockholders and may have the effect
of entrenching, and making it difficult to remove, management.
------------------------------------------------------------------------

Provisions of our Certificate of Incorporation, By-laws and Stockholders
Rights Plan may make it more difficult for a third party to acquire control
of our company, even if a change in control would benefit our
stockholders. In particular, shares of our preferred stock may be issued
in the future without further stockholder approval and upon such terms
and conditions, and having such rights, privileges and preferences, as our
Board of Directors may determine, including, for example, rights to
convert into our common stock. The rights of the holders of our common
stock will be subject to, and may be adversely affected by, the rights of
the holders of any of our preferred stock that may be issued in the future.
The issuance of our preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes,
could have the effect of making it more difficult for a third party to
acquire control of us. This could limit the price that certain investors
might be willing to pay in the future for shares of our common stock and
discourage these investors from acquiring a majority of our common
stock. Further, the existence of these corporate governance provisions
could have the effect of entrenching management and making it more
difficult to change our management.

Substantial sales of our common stock could lower our stock price.
-------------------------------------------------------------------

The market price for our common stock could drop as a result of sales of
a large number of our presently outstanding shares. All of the 15,520,687
shares of our common stock that are outstanding as of November 12,
2004, are unrestricted and freely tradable or tradable pursuant to a resale
registration statement or under Rule 144 of the Securities Act.

ITEM 1 FINANCIAL STATEMENTS

The response to this Item is submitted as a separate section of this report.

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
       CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains certain statements that are
forward-looking within the meaning of Section 27a of the Securities Act
of 1933 and that involve risks and uncertainties, including, but not limited
to the uncertainties associated with research and development activities,
clinical trials, our ability to raise capital, the timing of and our ability to
achieve regulatory approvals, dependence on others to market our licensed
products, collaborations, future cash flow, the timing and receipt of
licensing and milestone revenues, the future success of our marketed
products and products in development, our ability to manufacture
amlexanox products in commercial quantities, our sales projections, and
the sales projections of our licensing partners, our ability to achieve
licensing milestones and other risks described below as well as those
discussed elsewhere in this Form 10-Q, our Annual Report on Form 10-K
for the year ended December 31, 2003 and documents incorporated by
reference and other documents and other documents and reports that we
file periodically with the Securities and Exchange Commission. Forward-
looking statements contained in this Form 10-Q include, but are not limited
to our net cash burn rate for the next twelve months to be approximately
$300,000 per month, our outstanding convertible

                                  14
<PAGE>
notes, and our expected capital expenditures.

OVERVIEW

We are an emerging pharmaceutical company focused on developing both
novel low development risk product candidates and technologies with
longer-term major product opportunities. We are a Delaware corporation.

Together with our subsidiaries, we have proprietary patents or rights to
several drug delivery technology platforms, including:

* synthetic polymer targeted delivery,
* vitamin mediated targeted delivery,
* vitamin mediated oral delivery,
* bioerodible hydrogel technology,
* erodible mucoadhesive oral film technology,
* hydrogel particle aggregate technology, and
* Residerm(R) topical delivery.

We re-introduced Aphthasol(R) into the United States market in September
2004, which is the first FDA approved product for the treatment of canker
sores. We have developed a new formulation of amlexanox, a mucoadhesive
disc which in September 2004 received regulatory approval from the FDA.

Also, Strakan Limited, our United Kingdom partner, uses our patented
Residerm(R) technology to produce and sell zinc clindamycin for the
treatment of acne. Strakan began marketing  zinc clindamycin in the
United Kingdom under the trade name Zindaclin(R) in March 2002. The
process to achieve marketing authorization for Zindaclin(R) throughout
Europe has been initiated, with approvals in eight European Union
countries to date and activities ongoing to expand approval throughout the
European Union.

Since our inception, we have devoted our resources primarily to fund our
research and development programs. We have been unprofitable since
inception and to date have received limited revenues from the sale of
products. We cannot assure you that we will be able to generate sufficient
product revenues to attain profitability on a sustained basis or at all. We
expect to incur losses for the next several years as we continue to invest
in product research and development, preclinical studies, clinical trials and
regulatory compliance. As of September 30, 2004, our accumulated deficit
was $61,562,000.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations primarily through private sales of common
stock and convertible notes and our principal source of liquidity is cash
and cash equivalents. Contract research payments, licensing fees and
milestone payments from corporate alliances and mergers have also
provided funding for operations. As of September 30, 2004 our cash, cash
equivalents and short-term investments were $5,026,000 and our working
capital was $(4,986,000). Our working capital at September 30, 2004
represented a decrease of $6,192,000 as compared to our working capital
as of December 31, 2003 of $1,206,000. The decrease in working capital
was due to $8,030,000 of convertible notes that is coming due within
twelve months and by the loss from operations for

                                  15
<PAGE>
the nine months ended September 30, 2004 offset by a private placement of
common stock and warrants raising $9.1 million of net proceeds.

We have issued an aggregate of $13,530,000 of convertible notes, which
are due in two parts -$8,030,000 is due on September 13, 2005 and
$5,500,000 is due on September 13, 2008. The notes which bear interest
at a rate of 7.7% per annum with $1,042,000 of interest due annually on
each September 13, may convert to common stock at a conversion price
of $5.50 per share. Should the holders of the notes not elect to convert
them to common stock, or if we are not able to force the conversion of
the notes by their terms, we must repay the amounts on the due dates.
A failure to restructure our existing convertible notes or obtain necessary
additional capital in the future could jeopardize our operations. We do not
have sufficient funds to repay our convertible notes at their maturity.
We may not be able to restructure the convertible notes or obtain additional
financing to repay them on terms acceptable to us, if at all. If we raise
additional funds by selling equity securities, the relative equity ownership
of our existing investors would be diluted and the new investors could obtain
terms more favorable than previous investors. A failure to restructure our
convertible notes or obtain additional funding to repay the convertible notes
and support our working capital and operating requirements, could cause us
to be in default of our convertible notes and prevent us from making
expenditures that are needed to allow us to maintain our operations.

We have generally incurred negative cash flows from operations since
inception, and have expended, and expect to continue to expend in the
future, substantial funds to complete our planned product development
efforts. Since inception, our expenses have significantly exceeded
revenues, resulting in an accumulated deficit as of September 30, 2004
of $61,562,000. We expect that our existing capital resources together
with anticipated licensing revenues and royalties will be adequate to
fund our current level of operations for twelve months excluding any
obligation to repay the convertible notes and the debt service on the
convertible notes. We cannot assure you that we will ever be able to
generate significant product revenue or achieve or sustain profitability.

We will expend substantial funds to conduct research and development
programs, preclinical studies and clinical trials of potential products,
including research and development with respect to our acquired and
developed technology. Our future capital requirements and adequacy of
available funds will depend on many factors, including:

* the successful commercialization of amlexanox and Zindaclin(R);

* the ability to establish and maintain collaborative arrangements
  with corporate partners for the research, development and commercialization
  of products;

* the ability to convert, repay or restructure our outstanding
  convertible notes;

* continued scientific progress in our research and development programs;

* the magnitude, scope and results of preclinical testing and clinical trials;

* the costs involved in filing, prosecuting and enforcing patent claims;

* the costs involved in conducting clinical trials;

* competing technological developments;

* the cost of manufacturing and scale-up;

* the ability to establish and maintain effective commercialization
  arrangements and activities; and

                                 16
<PAGE>
* successful regulatory filings.

THIRD QUARTER 2004 COMPARED TO THIRD QUARTER 2003

Our licensing revenue in the third quarter of 2004
was $49,000, as compared to licensing revenue of
$4,000 in same quarter of 2003, an increase of
$45,000 due to one time initial licensing fees
received in 2004. We recognize licensing revenue
over the period of the performance obligation under
our licensing agreements. Licensing revenue
recognized in both 2004 and 2003 was from several
agreements, including agreements related to various
amlexanox projects and Residerm(R).

There were product sales of Aphthasol(R) in the third
quarter of 2004 of $106,000 as compared to no in
sales in the third quarter of 2003 due to a supply
interruption of the product. Currently, new
supplies have been manufactured and sales commenced
late in September 2004.

Royalty income in the third quarter of 2004 was
$30,000, as compared to $7,000 in the third quarter
of 2003, an increase of $23,000 due to the sales of
Zindaclin(R) in additional countries.

Total research spending for the third quarter of
2004 was $1,406,000, as compared to $1,254,000 for
the same period in 2003, an increase of $152,000.
The increase in expenses was primarily due to:

* higher production and testing costs for
  Aphthasol(R) and start-up production costs for
  OraDisc(TM) A ($171,000); and

* higher expenses at our Australian laboratory ($50,000);

* start-up costs for the mucositis clinical trial ($30,000) and

* other net increases ($28,000).

The increase in expenses was partially offset by
lower clinical costs ($127,000) for our OraDisc(TM)
A clinical trial which was completed in 2003.

Our cost of product sales was $40,000 in the third
quarter of 2004, as compared to $30,000 in the
third quarter of 2003, an increase of $10,000.  The
increase in cost of product sales was due to the
shipment of Aphthasol(R) in September 2004.

Total general and administrative expenses were
$799,000 for the third quarter of 2004, an increase
of $287,000 as compared to the same period in 2003.
The increase in spending was due primarily to the
following:

* higher professional expenses ($136,000)
  principally due to increased accounting and legal
  fees associated with compliance with the Sarbanes-
  Oxley Act, new contracts and legal proceedings;

* higher business consulting expenses for new
  business development activities ($27,000);

* higher investor relations expenses ($38,000);

* higher patent expenses ($38,000); and

* other net increases ($48,000).

Depreciation and amortization was $169,000 for the
third quarter of 2004 as compared to $158,000 for
the same period in 2003 reflecting an increase of
$11,000. The increase in depreciation and
amortization was due to increased depreciation
resulting from the acquisition of additional capital

                                 17
<PAGE>
assets.

Total operating expenses in the third quarter of
2004 were $2,414,000 as compared to total operating
expenses of $1,954,000 for the same period in 2003,
an increase of $460,000.

Loss from operations in the third quarter of 2004
was $2,229,000 as compared to a loss of $1,943,000
for the same period in 2003, an increased loss of $286,000.

Interest and miscellaneous income was $133,000 for
the third quarter of 2004 as compared to $54,000
for the same period in 2003, an increase of
$79,000. The increase in miscellaneous income
($97,000) was due to foreign exchange gains on a Euro
denominated receivable. This increase was offset by a
decrease in interest income due to lower interest rates
in 2004 as compared with 2003.

Interest and other expense was $332,000 for the
third quarter of 2004 as compared to $317,000 for
the same period in 2003, an increase of $15,000 due
principally to the write-down of an investment in a
publicly traded stock received in connection with a
product development agreement.

Net loss in the third quarter of 2004 was
$2,428,000, or a $0.16 basic and diluted loss per
common share, compared with net loss of $2,206,000,
or a $0.17 basic and diluted loss per common share
for the same period in 2003, an increased loss of $222,000.

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 2003

Our licensing revenue in the first nine months of
2004 was $97,000, as compared to licensing revenue
of $537,000 in the same period of 2003, a decrease
of $440,000 due to one time initial licensing fess
received in 2003. We recognize licensing revenue
over the period of the performance obligation under
our licensing agreements. Licensing revenue
recognized in both 2004 and 2003 was from several
agreements including agreements related to various
amlexanox projects and ResiDerm(R).

There were product sales of Aphthasol(R) in the
first nine months of 2004 of $106,000 as compared
to $532,000 in sales in the same period of 2003.
Sales were limited in 2004 due to a supply
interruption of the product. Currently, new
supplies have been manufactured and sales commenced
in late September 2004.

Royalty income for the first nine months of 2004
was $70,000, as compared to $18,000 in the same
period of 2003, an increase of $52,000 due to the
sales of Zindaclin(R) in additional countries.

Total research spending for the first nine months
of 2004 was $3,831,000, as compared to $4,548,000
for the same period in 2003, a decrease of
$717,000. The decrease in expenses was the result of:

* lower clinical costs ($824,000) for our
  OraDisc(TM) A clinical trial which was completed in
  2003;

* lower costs for the AP5280 and AP5346 polymer
  platinate clinical trials ($531,000) of which the
  AP5280 trial was completed in 2003; and

* other net decreases ($44,000).

                                  18
<PAGE>
The decrease in expenses was partially offset by:

* higher production and testing costs for
  Aphthasol(R) and start-up production costs for
  OraDisc(TM) A ($335,000);

* higher scientific salary costs ($186,000)
  principally due to the hiring of additional
  employees; and

* higher expenses associated with our Australian
  laboratory ($161,000).

Our cost of product sales was $97,000 for the first
nine months of 2004, as compared to $243,000 in the
same period of 2003, a decrease of $146,000. The
decrease in cost of product sales was due to reduced
Aphthasol(R) sales in 2004.

Total general and administrative expenses were
$2,325,000 for the first nine months of 2004, an
increase of $646,000 as compared to the same period
in 2003. The increase in general and administrative
expenses was due primarily to the following:

* higher professional expenses ($407,000)
  principally due to increased accounting and legal
  fees associated with compliance with the Sarbanes-
  Oxley Act, new contracts and legal proceedings;

* higher business consulting expenses for new
  business development activities ($88,000);

* higher patent expenses ($46,000);

* higher investor relations expenses ($34,000); and

* other net increases ($71,000).

Depreciation and amortization was $489,000 for the
first nine months of 2004 as compared to $448,000
for the same period in 2003 reflecting an increase
of $41,000. The increase in depreciation and
amortization was due to increased depreciation
resulting from the acquisition of additional
capital assets.

Total operating expenses in the first nine months
of 2004 were $6,742,000 as compared to total
operating expenses of $6,918,000 for the same
period in 2003, a decrease of $176,000.

Loss from operations in the first nine months of
2004 was $6,469,000 as compared to a loss of
$5,831,000 for the same period in 2003, an
increased loss of $638,000.

Interest and miscellaneous income was $201,000 for
the first nine months of 2004 as compared to
$2,486,000 for the same period in 2003, a decrease
of $2,285,000. The decrease in miscellaneous income
was due to a one-time payment associated with a settlement
agreement with Block Drug Company in 2003 and a decrease
in interest income due to lower interest rates in 2004
as compared with 2003.

Interest and other expense was $1,064,000 for the
first nine months of 2004 as compared to $956,000
for the same period in 2003, an increase of
$108,000 due principally to the write-down of an
investment in a publicly traded stock received in
connection with a product development agreement .

Net loss in the first nine months of 2004 was
$7,332,000, or a $0.49 basic and diluted loss per
common share, compared with a loss of $4,301,000,
or a $0.32 basic and diluted loss per common share
for the same period in 2003, an increased loss of
$3,031,000.

                                 19
<PAGE>
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest our excess cash in certificates of
deposit, corporate securities with high quality
ratings, and U.S. government securities. These
investments are not held for trading or other
speculative purposes. These financial investment
securities all mature in 2004 and 2005 and their
estimated fair value approximates cost. Changes in
interest rates affect the investment income we earn
on our investments and, therefore, impact our cash
flows and results of operations. A hypothetical 50
basis point decrease in interest rates would result
in a decrease in annual interest income and a
corresponding increase in net loss of approximately
$8,000. The estimated effect assumes no changes in
our short-term investments at September 30, 2004.
We do not believe that we are exposed to any other
market risks. We are not exposed to risks for
changes in commodity prices, foreign currencies or
any other market risks.

ITEM 4 CONTROLS AND PROCEDURES

(a)  Evaluation Of Disclosure Controls And
Procedures: We maintain disclosure controls and
procedures designed to ensure that we are able to
collect the information that we are required to
disclose in the reports we file with the Securities
and Exchange Commission, or the SEC, and to
process, summarize and disclose this information
within the time periods specified in the rules of
the SEC. Based on their evaluation of our
disclosure controls and procedures (defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
September 30, 2004, our Chief Executive and Chief
Financial Officers have concluded that such
disclosure controls and procedures are effective to
ensure that information required to be disclosed in
our periodic reports filed under the Exchange Act
is recorded, processed, summarized and reported
within the time periods specified by the SEC's
rules and regulations.

(b) Changes In Internal Controls: No changes in our
internal controls over financial reporting occurred
during the quarter ended September 30, 2004 that
have materially affected, or are reasonably likely
to materially affect, our internal controls over
financial reporting.

                      PART II -- OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

Mipharm S.p.A. ("Mipharm") filed an arbitration
against Access in the International Court of
Arbitration of the International Chamber of
Commerce (the "ICC") on or about October 23, 2003.
Mipharm claimed that we breached certain license
agreements that existed between Mipharm and Access
by failing to (1) make commercially reasonable
efforts to obtain European Union regulatory
approval for certain pharmaceutical products and
(2) inform Mipharm of all significant news and
actions relating to the approval process. Mipharm
sought damages of approximately $350,000, and an
order compelling us to perform pursuant to the
license agreements.

We answered Mipharm's arbitration demand and
simultaneously asserted counterclaims against
Mipharm. In the counterclaims, we alleged, inter
alia, that Mipharm had itself breached the license
agreements and that Mipharm was pursuing claims
that it had previously agreed to release in
exchange for valuable consideration. We believed
that the claims in Mipharm's complaint

                                  20
<PAGE>
were without merit.

On January 16, 2004, Mipharm commenced a related
lawsuit in Texas Federal Court, in which it alleged
that one of Access's counterclaims should have been
brought before a different arbitral body. The Texas
Court dismissed that action on April 20, 2004. On
or about August 5, 2004, Mipharm filed a Notice of
Appeal of the Texas Federal Court judgment (the
"Texas Appeal").

In October 2004, the parties agreed to dismiss all
claims and counterclaims in both the ICC
arbitration and the Texas Appeal.

ITEM 2 CHANGES IN SECURITIES

None

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 OTHER INFORMATION

None

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

31.1  Certification of Chief Executive Officer of Access
Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

31.2  Certification of Chief Financial Officer of Access
Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

32.1* Certification of Chief Executive Officer of Access
Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

32.2* Certification of Chief Financial Officer of Access
Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

______________

* This exhibit shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities
of that Section, nor shall it be deemed
incorporated by reference in any filings under the
Securities Act of 1933 or the Securities and
Exchange Act of 1934, whether made before or after
the date hereof and irrespective of any general
incorporation language in any filings.

Reports on Form 8-K:

* On October 1, 2004, we filed a Current Report on
Form 8-K (Item 8.01) furnishing a press release
announcing results from the Phase I clinical trial
of AP5346, a DACH Platinum Polymer Therapeutic.

                                 21
<PAGE>
* On September 30, 2004, we filed a Current Report
on Form 8-K (Item 8.01) furnishing a press release
announcing the approval of our new drug application
for OraDisc(TM) A from the United States Food and
Drug Administration.

* On August 13, 2004, we filed a Current Report on
Form 8-K (Item 9) furnishing a press release
announcing our financial results for the second
quarter ended June 30, 2004.


                                 22
<PAGE>
                              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.


                                      ACCESS PHARMACEUTICALS, INC.

Date: November 15, 2004              By: /s/ Kerry P. Gray
     -------------------                -------------------
                                        Kerry P. Gray
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

Date: November 15, 2004              By: /s/ Stephen B. Thompson
     -------------------                -------------------------
                                        Stephen B. Thompson
                                        Vice President and Chief Financial
                                          Officer
                                        (Principal Financial and Accounting
                                          Officer)

                                 23
<PAGE>
           Access Pharmaceuticals, Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                        September 30, 2004 December 31, 2003
                                           --------------  --------------
ASSETS                                       (unaudited)
<S>                                        <C>             <C>
Current assets
 Cash and cash equivalents                  $ 4,491,000     $   727,000
 Short term investments, at cost                535,000       1,860,000
 Accounts receivable                            819,000       1,149,000
 Inventory                                      153,000         108,000
 Prepaid expenses and other current assets      774,000         975,000
                                           --------------  --------------
Total current assets                          6,772,000       4,819,000

Property and equipment, net                   1,090,000       1,004,000

Debt issuance costs, net                        175,000         313,000

Patents, net                                  2,399,000       2,652,000

Licenses, net                                   305,000         367,000

Goodwill, net                                 1,868,000       1,868,000

Other assets                                  1,054,000         788,000
                                           --------------  --------------
Total assets                               $ 13,663,000    $ 11,811,000
                                           ==============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
 Accounts payable and accrued expenses     $  1,434,000    $  1,780,000
 Accrued interest payable                       783,000         311,000
 Deferred revenues                            1,173,000       1,184,000
 Current portion of note payable,
  other future obligations and
  convertible notes                           8,368,000         338,000
                                           --------------  --------------
Total current liabilities                    11,758,000       3,613,000

Long-term obligations for purchased patents           -         158,000

Note payable, net of current portion            204,000         335,000

Convertible notes, net of current portion     5,500,000      13,530,000
                                           --------------  --------------
Total liabilities                            17,462,000      17,636,000
                                           --------------  --------------

Commitments and contingencies                         -               -

Stockholders' equity
 Preferred stock - $.01 par value;
  authorized 2,000,000 shares;
  none issued or outstanding                          -               -
 Common stock - $.01 par value;
  authorized 50,000,000 shares;
  issued, 15,518,687 at September 30, 2004
  and 13,397,034 at December 31, 2003           155,000         134,000
 Additional paid-in capital                  59,003,000      49,597,000
 Notes receivable from stockholders          (1,045,000)     (1,045,000)
 Unamortized value of restricted stock grants  (339,000)       (294,000)
 Treasury stock, at cost - 819 shares            (4,000)         (4,000)
 Accumulated other comprehensive income (loss)   (7,000)         14,000
Accumulated deficit                         (61,562,000)    (54,227,000)
                                           --------------  --------------
Total stockholders' deficit                  (3,799,000)     (5,825,000)
                                           --------------  --------------
Total liabilities and stockholders' deficit $13,663,000     $11,811,000
                                           ==============  ==============
</TABLE>

       The accompanying notes are an integral part of these statements.

                                  24
<PAGE>
              Access Pharmaceuticals, Inc. and Subsidiaries
           Condensed Consolidated Statements of Operations and
                           Comprehensive Loss
                              (unaudited)
<TABLE>
<CAPTION>
                                Three months ended          Nine months ended
                                  September 30,                September 30,
                             ------------------------- -------------------------
                                 2004         2003         2004         2003
                             ------------ ------------ ------------ ------------
<S>                          <C>          <C>          <C>          <C>
Revenues
 Licensing revenues          $    49,000  $     4,000  $    97,000  $   537,000
 Product sales                   106,000            -      106,000      532,000
 Royalty income                   30,000        7,000       70,000       18,000
                             ------------ ------------ ------------ ------------
Total revenues                   185,000       11,000      273,000    1,087,000

Expenses
 Research and development      1,406,000    1,254,000    3,831,000    4,548,000
 Cost of product sales            40,000       30,000       97,000      243,000
 General and administrative      799,000      512,000    2,325,000    1,679,000
 Depreciation and amortization   169,000      158,000      489,000      448,000
                             ------------ ------------ ------------ ------------
Total expenses                 2,414,000    1,954,000    6,742,000    6,918,000
                             ------------ ------------ ------------ ------------
Loss from operations          (2,229,000)  (1,943,000)  (6,469,000)  (5,831,000)

Other income (expense)
Interest and miscellaneous
 income                          133,000       54,000      201,000    2,486,000
Interest and other expense      (332,000)    (317,000)  (1,064,000)    (956,000)
                             ------------ ------------ ------------ ------------
                                (199,000)    (263,000)    (863,000)   1,530,000
                             ------------ ------------ ------------ ------------
Net loss                     $(2,428,000) $(2,206,000) $(7,332,000) $(4,301,000)

Basic and diluted loss
  per common share                $(0.16)      $(0.17)      $(0.49)      $(0.32)
                             ============ ============ ============ ============
Weighted average basic and
  diluted common shares
  outstanding                 15,469,071   13,287,563   15,041,216   13,235,725
                             ============ ============ ============ ============

Net loss                     $(2,428,000) $(2,206,000) $(7,332,000) $(4,301,000)

Other comprehensive loss
  Foreign currency translation
    adjustment                    (6,000)     (17,000)     (21,000)     (14,000)
                             ------------ ------------ ------------ ------------
Comprehensive loss           $(2,434,000) $(2,223,000) $(7,353,000) $(4,315,000)
                             ============ ============ ============ ============
</TABLE>

   The accompanying notes are an integral part of these statements.

                                 25
<PAGE>

          Access Pharmaceuticals, Inc. and Subsidiaries
         Condensed Consolidated Statements of Cash Flows
                             (unaudited)

<TABLE>
<CAPTION>
                                                 Nine Months ended September 30,
                                                   -----------------------------
                                                        2004          2003
                                                   -------------- --------------
<S>                                                <C>            <C>
Cash flows from operating activities:
Net loss                                           $  (7,332,000) $  (4,301,000)
Adjustments to reconcile net loss to cash used
in operating activities:
Warrants issued in payment of consulting expenses         42,000         30,000
Amortization of restricted stock grants                   91,000         69,000
Depreciation and amortization                            489,000        448,000
Amortization of debt costs                               138,000        138,000
Change in operating assets and liabilities:
 Accounts receivable                                     330,000        619,000
 Accrued interest receivable                                   -         12,000
 Inventory                                               (45,000)       116,000
 Prepaid expenses and other current assets               198,000        252,000
 Other assets                                           (266,000)        85,000
 Accounts payable and accrued expenses                  (346,000)    (1,260,000)
 Accrued interest payable                                472,000       (260,000)
 Deferred revenue                                        (11,000)      (211,000)
                                                   --------------  -------------
Net cash used in operating activities                 (6,240,000)    (4,263,000)
                                                   --------------  -------------

Cash flows from investing activities:
 Capital expenditures                                   (260,000)      (332,000)
 Redemptions of short term investments and
   certificates of deposit                             1,325,000      4,122,000
                                                   --------------  -------------
Net cash provided by investing activities              1,065,000      3,790,000
                                                   --------------  -------------
Cash flows from financing activities:
 Payments of notes payable and long-term
   obligations                                          (289,000)      (730,000)
Proceeds from stock issuances                          9,249,000        219,000
                                                   --------------  -------------
Net cash provided by (used in) financing activities    8,960,000       (511,000)
                                                   --------------  -------------

Net increase (decrease) in cash and cash equivalents   3,785,000       (984,000)
Effect of exchange rate changes on cash                  (21,000)       (14,000)
Cash and cash equivalents at beginning of period         727,000      1,444,000
                                                   --------------  -------------
Cash and cash equivalents at end of period         $   4,491,000   $    446,000
                                                   ==============  =============

Cash paid for interest                                  $334,000     $1,066,000

Supplemental disclosure of non-cash transactions
 Assets acquired as a result of a settlement                   -        244,000
 Value of restricted stock grants                        136,000              -

</TABLE>

    The accompanying notes are an integral part of these statements

                                 26
<PAGE>
              Access Pharmaceuticals, Inc. and Subsidiaries
          Notes to Condensed Consolidated Financial Statements
              Nine Months Ended September 30, 2004 and 2003
                              (unaudited)

(1) Interim Financial Statements

The consolidated balance sheet as of September 30,
2004 and the consolidated statements of operations
for the three and nine months ended September 30, 2004
and 2003 and the consolodated statements of cash flows
for the nine months ended September 30, 2004 and 2003
were prepared by management without audit. In the opinion
of management, all adjustments, consisting only of
normal recurring adjustments, except as otherwise
disclosed, necessary for the fair presentation of
the financial position, results of operations, and
changes in financial position for such periods,
have been made.

Certain information and footnote disclosures
normally included in financial statements prepared
in accordance with accounting principles generally
accepted in the United States of America have been
condensed or omitted. It is suggested that these
interim financial statements be read in conjunction
with the financial statements and notes thereto
included in our Annual Report on Form 10-K for the
year ended December 31, 2003. The results of
operations for the period ended September 30, 2004
are not necessarily indicative of the operating
results which may be expected for a full year. The
consolidated balance sheet as of December 31, 2003
contains financial information taken from the
audited financial statements as of that date.

In preparing consolidated financial statements in conformity
with accounting principles generally accepted in the
United States of America, management is required to
make estimates and assumptions that affect the reported
assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results
could differ from those estimates.

(2) Intangible Assets

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                 September 30, 2004         December 31, 2003
                              ------------------------ ------------------------
                                 Gross                    Gross
                                carrying  Accumulated    carrying  Accumulated
                                 value    amortization    value    amortization
                              ----------- ------------ ----------- ------------
<S>                           <C>         <C>          <C>         <C>
Amortizable intangible assets
 Patents                       $   3,178   $     779    $   3,178   $     526
 Licenses                            830         525          830         463
                              ----------- ------------ ----------- ------------
Total                          $   4,008   $   1,304    $   4,008   $     989
                              =========== ============ =========== ============

</TABLE>

                                  27
<PAGE>
Amortization expense related to intangible assets
totaled $105,000 and $104,000 for the three months
ended September 30, 2004 and 2003, respectively and
totaled $315,000 and $315,000 for the nine months
ended September 30, 2004 and 2003, respectively.
The aggregate estimated amortization expense for
intangible assets remaining as of September 30,
2004 is as follows (in thousands):

2004             $   106
2005                 421
2006                 421
2007                 395
2008                 370
Thereafter           991
                 --------
Total            $ 2,704
                 ========

(3) Stock-Based Compensation

The following table illustrates the effect on net
loss and loss per share if we had applied the fair
value recognition provisions of FASB Statement 123,
Accounting for Stock-Based Compensation, using
assumptions described in Form 10-K, Note 1, to our
stock-based employee plans.

<TABLE>
<CAPTION>
                                 Three months               Nine months
                               ended September 30,       ended September 30,
                            ------------------------- -------------------------
                                2004         2003         2004         2003
                            ------------ ------------ ------------ ------------
<S>                         <C>          <C>          <C>          <C>
Net loss as reported        $(2,428,000) $(2,206,000) $(7,332,000) $(4,301,000)
  Deduct: Stock-based
    employee compensation
    expense determined
    under fair value based
    method                     (129,000)    (322,000)    (427,000)    (926,000)
                            ------------ ------------ ------------ ------------
Pro forma                   $(2,557,000) $(2,528,000) $(7,759,000) $(5,227,000)
                            ============ ============ ============ ============

Basic and diluted loss per share:
  As reported                    $(0.16)      $(0.17)      $(0.49)      $(0.32)
  Pro forma                       (0.17)       (0.19)       (0.52)       (0.39)

</TABLE>

The effect of our outstanding options and warrants
are anti-dilutive when we have a net loss. The
fully diluted shares are:

<TABLE>
<CAPTION>
                                Three months                  Nine months
                              ended September 30,         ended September 30,
                           ------------------------- -------------------------
                               2004         2003         2004         2003
                           ------------ ------------ ------------ ------------
<S>                        <C>          <C>          <C>          <C>
Fully diluted shares        21,424,687   19,008,797   20,996,832   18,956,969

</TABLE>
                                  28