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

FORM 10-Q

(Mark One)



|[X]   | Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended March 31, 2001, or    
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------
|     
|[   ] | Transition Period Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Transition Period From ________ to ________.

Commission file number 0-19591

EPIMMUNE INC.
(Exact name of Registrant as specified in its charter)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 33-0245076                          
|                         |  |                                     
|(State of Incorporation) |  | (I.R.S. Employer
Identification No.)

5820 Nancy Ridge Drive
San Diego, California 92121

---

(Address of principal executive offices)


(858) 860-2500

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(Registrants telephone number)


Indicate by check mark whether the Registrant (1) has filed all reports 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  [X]     No  [   ]

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

Common Stock: $.01 par value 8,908,278 shares outstanding as of May 8, 2001.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|COVER PAGE                   
|TABLE OF CONTENTS            
|PART I. FINANCIAL INFORMATION
|                              | ITEM I. Financial Statements                                                                 
|                              |                                                                                               | Condensed Consolidated Balance Sheets               
|                              |                                                                                               | Condensed Consolidated Statements of Operations     
|                              |                                                                                               | Condensed Consolidated Statements of Cash Flows     
|                              |                                                                                               | Notes to Condensed Consolidated Financial Statements
|                              | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|                              | ITEM 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II. OTHER INFORMATION   
|                              | ITEM 2. Changes in Securities and Use of Proceeds                                            
|                              | ITEM 6. EXHIBITS                                                                             
|                              | SIGNATURES                                                                                   
|EXHIBIT 10.79                
|EXHIBIT 10.80                
|EXHIBIT 10.81                
|EXHIBIT 10.82                
|EXHIBIT 10.83                
|EXHIBIT 10.84                
|EXHIBIT 10.85                
|EXHIBIT 10.86                
|EXHIBIT 10.87                



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##### Table of Contents



EPIMMUNE INC.
QUARTERLY REPORT
FORM 10-Q







TABLE OF CONTENTS

|                              |           |   |                                                                                                    |  |    |  | 
|----------------------------- | --------- | - | -------------------------------------------------------------------------------------------------- |  | -- |  | 
|COVER PAGE                    |           | 1 |                                                                                                   
|                             
|                             
|                             
|                             
|TABLE OF CONTENTS             |           | 2 |                                                                                                   
|                             
|                             
|                             
|                             
|PART I. FINANCIAL INFORMATION
|                             
|                             
|                             
|                             
|                              | ITEM 1.   |   | Financial Statements                                                                               | 
|                             
|                             
|                             
|                             
|                              |           |   | Condensed Consolidated Balance Sheets as of
March 31, 2001 and December 31, 2000                   |  | 3  | 
|                             
|                             
|                             
|                             
|                              |           |   | Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2001 and 2000 |  | 4  | 
|                             
|                             
|                             
|                             
|                              |           |   | Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000 |  | 5  | 
|                             
|                             
|                             
|                             
|                              |           |   | Notes to Condensed Consolidated Financial Statements                                               |  | 6  | 
|                             
|                             
|                             
|                             
|                              | ITEM 2.   |   | Managements Discussion and Analysis of Financial
Condition and Results of Operations              |  | 8  | 
|                             
|                             
|                             
|                             
|                              | ITEM 3.   |   | Quantitative and Qualitative Disclosures about Market Risk                                         |  | 11 | 
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION   
|                             
|                             
|                             
|                             
|                              | ITEM 1.   |   | Legal Proceedings                                                                                  |  | *  | 
|                             
|                             
|                             
|                             
|                              | ITEM 2.   |   | Changes in Securities and Use of Proceeds                                                          |  | 20 | 
|                             
|                             
|                             
|                             
|                              | ITEM 3.   |   | Defaults upon Senior Securities                                                                    |  | *  | 
|                             
|                             
|                             
|                             
|                              | ITEM 4.   |   | Submission of Matters to a Vote of Security Holders                                                |  | *  | 
|                             
|                             
|                             
|                             
|                              | ITEM 5.   |   | Other Information                                                                                  |  | *  | 
|                             
|                             
|                             
|                             
|                              | ITEM 6.   |   | Exhibits and Reports on Form 8-K                                                                   |  | 20 | 
|                             
|                             
|                             
|                             
|                              | SIGNATURE |   | 21                                                                                                 | 

* No information provided due to inapplicability of item.



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PART I. FINANCIAL INFORMATION







ITEM I. FINANCIAL STATEMENTS







EPIMMUNE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |          |        | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------ | ----------- | ------ | ------------ | ------ | -------- | ------ | 
|                                     |                                                                                                                                                                                |                            |        | March 31,   |        | December 31,
|                                     |                                                                                                                                                                                |                            |        | 2001        |        | 2000        
|                                     |                                                                                                                                                                                |                            |        |             |        |             
|                                     |                                                                                                                                                                                |                            |        | (unaudited)
|Assets                              
|                                    
|                                    
|                                    
|                                    
|Current assets:                     
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                                                                      |                            | $      | 2,550       |        |              | $      | 4,181    |       
|                                    
|                                    
|                                    
|                                    
|                                     | Short-term investments                                                                                                                                                         |                            |        | 5,259       |        |              |        | 5,412    |       
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaids and other current assets                                                                                                                                              |                            |        | 481         |        |              |        | 507      |       
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|                                     |                                                                                                                                                                                | Total current assets       |        |             | 8,290  |              |        |          | 10,100 | 
|                                    
|                                    
|                                    
|                                    
|Restricted cash                      |                                                                                                                                                                                |                            | 472    |             |        |              | 472    |         
|                                    
|                                    
|                                    
|                                    
|Property and equipment, net          |                                                                                                                                                                                |                            | 898    |             |        |              | 966    |         
|                                    
|                                    
|                                    
|                                    
|Patents and other assets             |                                                                                                                                                                                |                            | 3,087  |             |        |              | 2,948  |         
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|                                     |                                                                                                                                                                                | Total assets               |        | $           | 12,747 |              |        | $        | 14,486 | 
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|Liabilities and stockholders equity
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable and accrued liabilities                                                                                                                                       |                            | $      | 790         |        |              | $      | 1,004    |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred contract revenues                                                                                                                                                     |                            |        | 178         |        |              |        | 229      |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued payroll and related expenses                                                                                                                                           |                            |        | 223         |        |              |        | 241      |       
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of equipment loans and notes payable                                                                                                                           |                            |        | 411         |        |              |        | 413      |       
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|                                     |                                                                                                                                                                                | Total current liabilities  |        |             | 1,602  |              |        |          | 1,887  | 
|                                    
|                                    
|                                    
|                                    
|Notes payable, less current portion  |                                                                                                                                                                                |                            | 282    |             |        |              | 389    |         
|                                    
|                                    
|                                    
|                                    
|Deferred rent                        |                                                                                                                                                                                |                            | 133    |             |        |              | 119    |         
|                                    
|                                    
|                                    
|                                    
|Commitments                         
|                                    
|                                    
|                                    
|                                    
|Stockholders equity:               
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, $.01 par value, 10,000,000 shares
authorized, 1,409,288 shares issued and outstanding
at March 31, 2001 and December 31, 2000                                 |                            |        | 14          |        |              |        | 14       |       
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $.01 par value, 25,000,000 shares
authorized, 8,892,674 shares and 7,847,343 shares
issued and outstanding at March 31, 2001 and
December 31, 2000, respectively |                            |        | 89          |        |              |        | 78       |       
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                                                                                     |                            |        | 156,417     |        |              |        | 153,720  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Note receivable held by stockholder                                                                                                                                            |                            |        | (2,641      | )      |              |        |         |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated deficit                                                                                                                                                            |                            |        | (143,164    | )      |              |        | (141,725 | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized gain on available-for-sale securities                                                                                                                               |                            |        | 15          |        |              |        | 4        |       
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|                                     |                                                                                                                                                                                | Total stockholders equity |        |             | 10,730 |              |        |          | 12,091 | 
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         
|                                     |                                                                                                                                                                                | $                          | 12,747 |             |        | $            | 14,486 |         
|                                     |                                                                                                                                                                                |                            |        |             |        |              |        |         

See accompanying notes.



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

|                                                                |                                  |   |                              |       |      |   |           |       | 
|--------------------------------------------------------------- | -------------------------------- | - | ---------------------------- | ----- | ---- | - | --------- | ----- | 
|                                                                |                                  |   | Three months ended March 31,
|                                                                |                                  |   |                             
|                                                                |                                  |   | 2001                         |       | 2000
|                                                                |                                  |   |                              |       |     
|Revenues                                                       
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Research and development         |   | $                            | 300   |      |   | $         |      | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Research grants and other income |   |                              | 469   |      |   |           | 328   | 
|                                                                |                                  |   |                              |       |      |   |           |      
|Total revenues                                                  |                                  |   | 769                          |       |      |   | 328       |      
|                                                               
|                                                               
|                                                               
|                                                               
|Cost and Expenses                                              
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Research and development         |   |                              | 1,668 |      |   |           | 1,478 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | General and administrative       |   |                              | 650   |      |   |           | 661   | 
|                                                                |                                  |   |                              |       |      |   |           |      
|Total costs and expenses                                        |                                  |   | 2,318                        |       |      |   | 2,139     |      
|                                                                |                                  |   |                              |       |      |   |           |      
|Loss from operations                                            |                                  |   | (1,549                       | )     |      |   | (1,811    | )    
|                                                               
|                                                               
|                                                               
|                                                               
|Interest income, net                                            |                                  |   | 109                          |       |      |   | 136       |      
|                                                               
|                                                               
|                                                               
|                                                               
|Other income, net                                               |                                  |   |                             |       |      |   | 961       |      
|                                                                |                                  |   |                              |       |      |   |           |      
|                                                               
|                                                               
|                                                               
|                                                               
|Net loss                                                        |                                  | $ | (1,440                       | )     |      | $ | (714      | )    
|                                                                |                                  |   |                              |       |      |   |           |      
|Net loss per share  basic and diluted                          |                                  | $ | (0.19                        | )     |      | $ | (0.11     | )    
|                                                                |                                  |   |                              |       |      |   |           |      
|Shares used in computing net loss per share  basic and diluted |                                  |   | 7,775,907                    |       |      |   | 6,276,335 |      
|                                                                |                                  |   |                              |       |      |   |           |      

See accompanying notes.



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

|                                                                            |                                              |                                          |        |                              |      |      |        |     |      |  
|--------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | ------ | ---------------------------- | ---- | ---- | ------ | --- | ---- | -
|                                                                            |                                              |                                          |        | Three months ended March 31,
|                                                                            |                                              |                                          |        |                             
|                                                                            |                                              |                                          |        | 2001                         |      | 2000
|                                                                            |                                              |                                          |        |                              |      |     
|OPERATING ACTIVITIES                                                       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Net loss                                                                    |                                              | $                                        | (1,440 | )                            |      | $    | (714   | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Adjustments to reconcile net loss to net cash used in operating
activities:
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Depreciation and amortization                |                                          |        | 166                          |      |      |        | 125 |     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Amortization of deferred compensation        |                                          |        | 69                           |      |      |        |    |     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Deferred rent                                |                                          |        | 14                           |      |      |        | 19  |     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Deferred revenue                             |                                          |        | (51                          | )    |      |        | 6   |     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Gain on disposal of assets                   |                                          |        |                             |      |      |        | (5  | )   
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Restructuring operating expenses             |                                          |        |                             |      |      |        | (89 | )   
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Changes in operating assets and liabilities:
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Other current assets                     |        |                              | 26   |      |        |     | (194 | )
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Accounts payable and accrued liabilities |        |                              | (214 | )    |        |     | 84   |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            |                                              | Accrued payroll and related expenses     |        |                              | (18  | )    |        |     | 41   |  
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|Net cash used in operating activities                                       |                                              |                                          | (1,448 | )                            |      |      | (727   | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|INVESTING ACTIVITIES                                                       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchases of available-for-sale securities                                  |                                              |                                          | (506   | )                            |      |      | (2,150 | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Maturities of available-for-sale securities                                 |                                              |                                          | 670    |                              |      |      | 1,129  |    
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Proceeds from sale of property and equipment                                |                                              |                                          |       |                              |      |      | 5      |    
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Purchase of property and equipment                                          |                                              |                                          | (3     | )                            |      |      | (83    | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Patents                                                                     |                                              |                                          | (233   | )                            |      |      | (101   | )  
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|Net cash used in investing activities                                       |                                              |                                          | (72    | )                            |      |      | (1,200 | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|FINANCING ACTIVITIES                                                       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Principal payments under equipment notes payable and note
payable to bank   |                                              |                                          | (109   | )                            |      |      | (56    | )  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Net (repurchases) proceeds from issuance of common stock                    |                                              |                                          | (2     | )                            |      |      | 4,327  |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|Net cash (used in) provided by financing activities                         |                                              |                                          | (111   | )                            |      |      | 4,271  |    
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Increase (decrease) in cash and cash equivalents                            |                                              |                                          | (1,631 | )                            |      |      | 2,344  |    
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cash and cash equivalents at beginning of period                            |                                              |                                          | 4,181  |                              |      |      | 1,843  |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|Cash and cash equivalents at end of period                                  |                                              | $                                        | 2,550  |                              |      | $    | 4,187  |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                           
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Interest paid                                                               |                                              | $                                        | 18     |                              |      | $    | 16     |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING               
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|ACTIVITIES                                                                 
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Unrealized gains on available-for-sale securities                           |                                              | $                                        | 11     |                              |      | $    | 3      |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    
|Issuance of common stock for stockholder note receivable                    |                                              | $                                        | 2,641  |                              |      | $    |       |    
|                                                                            |                                              |                                          |        |                              |      |      |        |    

See accompanying notes.



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EPIMMUNE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2001

1. Basis of Presentation

The interim unaudited condensed consolidated financial statements contained
herein have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In managements opinion, the
unaudited information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented.
Interim results are not necessarily indicative of results to be expected for
the full year. The financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes thereto included in the
Companys Form 10-K for the year ended December 31, 2000.

Basic and diluted net loss per share is computed using the weighted average
number of common shares outstanding during the period, excluding owned but
unvested shares. All potential common shares have been excluded from the
diluted net loss per share calculations, as they are antidilutive.

2. New Accounting Standard

In June 1998, the Financial Standards Accounting Board, or FASB, issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Statement will require the recognition of all
derivatives on our balance sheet at fair value. The FASB subsequently delayed
implementation of the standard for the financial years beginning after June 15,
2000. We have adopted the new Statement effective January 1, 2001. The impact
on our financial statements is not expected to be material.

3. CEO Recruitment

On January 16, 2001, we entered into an employment agreement with Dr. Emile
Loria for the position of President and Chief Executive Officer contingent upon
his obtaining satisfactory approval to work in the United States. Dr. Loria
was elected to the Companys Board of Directors.

Also on January 16, 2001, we entered into a Restricted Stock Purchase agreement
with Dr. Loria for the purchase of 1,056,301 common shares at $2.50 per share.
The shares vest daily over a four-year period and unvested shares are subject
to a repurchase option in favor of the Company. A promissory note was issued
for the purchase price of the shares, secured by the shares issued to Dr.
Loria. Principal and interest under the promissory note will be due and
payable four years from the date of the note.

4. Nexell

On March 28, 2001, we entered into a license agreement with Nexell Therapeutics
Inc. granting Nexell a non-exclusive license to certain cancer antigens and
associated technology for use in ex-vivocell therapy. In connection with the
agreement, we received an upfront license fee, half of which was paid on
signing and half of which will be paid four months from signing. We are also
entitled to receive milestones and royalties on product sales.



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5. Subsequent Event

On April 5, 2001, we entered into a license and option agreement with Elan
which gives Elan an exclusive license to use and evaluate our
PADRE® technology in animal studies and Phase I clinical trials
for prevention and treatment of neurodegenerative conditions including
Alzheimers Disease. Elan also has the right to negotiate an exclusive license
for continued development and commercialization of products using the
technology in that field. In connection with the agreement, we received an
upfront license fee.



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##### Table of Contents



PART I. FINANCIAL INFORMATION









|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include,
without limitation, those discussed below and in the section entitled Risks
and Uncertainties, as well as those discussed in the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2000.

Epimmune Inc. was a majority-owned subsidiary of Cytel Corporation until July
1, 1999, at which time Cytel and Epimmune merged. All references to we, us
or our company are to the combined entity of Cytel and Epimmune.
Epimmune and PADRE are trademarks of the Company.

Since Cytels inception in July 1987, we have devoted substantially all of our
resources to the discovery and development of potential therapeutic and
prophylactic products. To date, we have not received any revenues from the
sale of products. We have funded our research and development primarily from
equity-derived working capital and through strategic alliances with other
companies. We have been unprofitable since our inception and expect to incur
substantial operating losses for the next several years. As of March 31, 2001,
our accumulated deficit was approximately $143.2 million.

Results of Operations

Three months ended March 31, 2001 (2001), as compared with three months ended
March 31, 2000 (2000).

In 2001, we had total revenues of $0.8 million from research grants, research
and development contracts and license fees, as compared to $0.3 million in 2000
from research grants.

Research and development expenses increased to $1.7 million in 2001 from $1.5
million in 2000. The increase relates primarily to increased costs for
sponsored research as part of our HIV grant program, and higher equipment and
facility related costs in 2001 compared to 2000.

General and administrative costs were approximately $0.7 million in 2001 and
2000.

Net interest income was $0.1 million in 2001 and 2000, based on comparable
average cash balances.

Other income was zero in 2001 compared to other income of $1.0 million in 2000
which resulted from a payment from Elan of $0.5 million for the assignment of a
Cytel license agreement and release of $0.5 million from escrow under a 1999
agreement with Neose.

We expect to incur operating losses over the next several years due to
continuing expenses associated with our research and development programs,
including preclinical testing and clinical trials. Operating losses may
fluctuate from quarter to quarter as a result of differences in the timing of
revenues received and expenses incurred, and such fluctuations may be
substantial.



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Liquidity and Capital Resources

We have financed operations since inception primarily through private
placements of our equity securities, two public common stock offerings,
revenues under collaborative research and development agreements, grant
revenues, capital and operating lease transactions, certain asset divestitures
and interest income. Through March 2001, we have raised approximately $151.4
million from the sale of equity securities. As of March 31, 2001, we had
10,397,611 shares outstanding on an as-converted basis, assuming conversion of
preferred shares held by Pharmacia Corporation (formerly known as G.D. Searle &
Co., a wholly-owned subsidiary of Monsanto Company).

As of March 31, 2001, our cash, cash equivalents, restricted cash and
short-term investments were $8.3 million compared to $10.1 million at December
31, 2000. The decrease was due to cash used for operations. We expect to
continue to use our cash, cash equivalents and short-term investments to fund
our ongoing vaccine research programs. We had net working capital of $6.7
million as of March 31, 2001 compared to $8.2 million as of December 31, 2000.

Capital expenditures were negligible in the first quarter 2001, compared to
$0.1 million in the first quarter 2000 for laboratory equipment. We have
financed our laboratory equipment and research and office facilities primarily
through operating lease arrangements and a note payable.

Payments related to capitalized patent expenses was $0.2 million in the first
quarter 2001, compared to $0.1 million in the first quarter 2000.

We expect to incur substantial additional research and development expenditures
in connection with our ongoing vaccine research programs, including costs
related to preclinical testing, clinical trials and manufacturing, as well as
marketing and distribution expenses. It is our intention to seek collaborative
research and development relationships with suitable corporate partners.
There can be no assurance that any agreements that may result from
these discussions will successfully reduce our funding requirements or will not
be terminated. For example, Pharmacia ended our collaboration in the cancer
field. We will require additional equity or debt financing in order to pursue
our research and development programs, and there can be no assurance that these
funds will be available on favorable terms, if at all. If adequate financing
is not available we may be required to delay, scale back or eliminate one or
more of our drug discovery or development programs, or obtain funds through
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of our technologies, product candidates or
products that we would not otherwise relinquish, sell the Company or certain of
its assets or technologies or cease operations.

We anticipate that our existing resources will enable us to maintain our
current and planned operations through the end of 2001. The estimate for the
period for which we anticipate our existing resources to enable us to maintain
our current and planned operations is a forward-looking statement that involves
risks and uncertainties as set forth herein.

Our future capital requirements will depend on many factors, including:



| |  | our ability to establish and maintain collaborative arrangements;     
|- |  | ----------------------------------------------------------------------
| 
| |  | progress with preclinical testing and clinical trials;                
| 
| |  | the time and costs involved in obtaining regulatory approvals;        
| 
| |  | the costs involved in filing, prosecuting and enforcing patent claims;



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| |  | competing technological and market developments;             
|- |  | -------------------------------------------------------------
| 
| |  | changes in our existing research relationships;              
| 
| |  | continued scientific progress in our drug discovery programs;
| 
| |  | the magnitude of our drug discovery programs;                
| 
| |  | the cost of manufacturing scale-up; and                      
| 
| |  | effective commercialization activities and arrangements.     

As is typical in the biotechnology industry, our commercial success will depend
in part on neither infringing patents issued to competitors nor breaching the
technology licenses upon which our products might be based. Our business is
also subject to other significant risks, including the uncertainties associated
with our ability to enter new collaborations, and the lengthy regulatory
approval process and with potential competition from other products. Even if
our products appear promising at an early stage of development, they may not
reach the market for a number of reasons. Such reasons include, but are not
limited to our inability to fund clinical development of such products, or the
possibilities that the potential products will be found ineffective during
clinical trials, fail to receive necessary regulatory approvals, be difficult
to manufacture on a large scale or be uneconomical to market.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At March 31, 2001, our investment portfolio included fixed-income securities of
$7.8 million. These securities are subject to interest rate risk and will
decline in value if interest rates increase. Due to the short duration of our
investment portfolio, an immediate 10 percent increase in interest rates would
have no material impact on our financial condition or results of operations.



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RISK FACTORS

We wish to caution readers that the following important factors, among others,
in some cases have affected our results and in the future could cause our
actual results and needs to vary materially from forward-looking statements
made from time to time by us on the basis of managements then-current
expectations. The business in which we are engaged is in rapidly changing and
competitive markets and involves a high degree of risk, and accuracy with
respect to forward-looking projections is difficult.

We are at an early stage of development and we may experience delays and other
problems in developing products.

We are a research and development focused company. There are many factors
outside of our control that may affect the timing of commencement and
completion of clinical trials of any of our drug candidates, and we cannot
assure you that clinical trials will commence or be completed within any
anticipated timeframe. For example, although we previously indicated that
Pharmacia was expected to initiate Phase I/II human clinical trials of a drug
candidate in our cancer program by late 2000 or early 2001, Pharmacia recently
terminated our collaboration in the cancer field. We expect to work with
Pharmacia to implement an orderly conclusion to the collaboration and transfer
of applicable materials and documentation to us so that we may proceed with the
cancer program, either alone or with another partner. As a result, the
clinical trials for our cancer program will not begin within the previously
indicated timeframe. Although we expect to initiate clinical trials for a
therapeutic vaccine targeting HIV by late 2001 or early 2002, we may experience
unexpected delays in our research and development efforts that would require us
to delay these trials.

We cannot guarantee that our research and development programs will be
successful or that we can show that our products are safe and effective in
humans. Unacceptable toxicities or side effects may occur at any time in the
course of human clinical trials or during commercial use. Delays in planned
patient enrollment in our clinical trials may result in increased costs,
program delays or both. The appearance of any unacceptable toxicities or side
effects could interrupt, limit, delay or abort the development of any of our
products or, if previously approved, necessitate their withdrawal from the
market.

We may never obtain approvals from the U.S. Food and Drug Administration, or
FDA, or other necessary regulatory approvals to successfully commercialize any
of our products under development. Further, we may not be able to manufacture
any products in commercial quantities in compliance with regulatory
requirements at an acceptable cost. Even if we successfully develop and obtain
approval for our products, we may fail to achieve the necessary market
acceptance of these products. Our failure to address problems and delays
relating to research and development, regulatory approval, manufacturing and
marketing would harm our business.

If we do not successfully develop and commercialize our products, we may never
generate significant revenues.

We have not completed the development of any product and, accordingly, have not
begun to market or generate revenues from the commercialization of any product.
We do not expect to market any of our therapeutic or prophylactic products for
a number of years. If we do not successfully develop and commercialize
products, we may never generate significant revenues. Our potential therapies
under development will require time consuming and costly research and
development efforts, preclinical studies, clinical testing, regulatory
approvals and additional investment prior to their commercialization, which may
never occur.



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Pharmacias decision to end our collaboration may delay or limit our ability to
develop our cancer epitope products.

Pharmacia recently terminated our research and development collaboration with
respect to the production, use and sale of pharmaceutical products derived from
our cancer epitopes and the use of these epitopes in therapeutic vaccines.
This collaboration was our only significant collaboration, and we have been
substantially dependent upon it. We do not expect to receive further revenues
from Pharmacia.

In light of the termination of our collaboration with Pharmacia, our
preclinical or clinical development of drug candidates in our cancer program is
delayed and could be terminated, which could harm our business.

If we cannot obtain and maintain collaboration or license agreements on
acceptable terms in the future, we may not successfully develop some of our
products.

We expect to rely on collaborative arrangements both to develop and
commercialize pharmaceutical products. We cannot be certain that we will be
able to enter into collaborative arrangements in the future, that any such
arrangements will remain in place or be successful or that we will receive
royalty revenues, license fees or milestone payments from any such
collaborative arrangements. For example, our cancer vaccine collaboration with
Pharmacia was recently terminated. Our collaborative partners may pursue
alternative technologies or develop alternative compounds either on their own
or in collaboration with others as a means of developing treatments for the
disease targeted by any collaborative program with us. In addition, we may be
required to enter into licenses or other collaborative agreements with third
parties in order to access technologies that are necessary to successfully
develop certain of our products. We cannot be certain that we will be able to
successfully negotiate acceptable licenses or other collaborative arrangements
that will allow us to access such technologies. In addition, we cannot be
certain that any technologies accessed through such licenses or other
collaborations will successfully meet our requirements.

Our additional financing requirements and limited access to financing may
adversely affect our ability to develop products.

As of March 31, 2001, we had $8.3 million in cash, cash equivalents, restricted
cash and short-term investments. Our future capital requirements will depend
on many factors, including: continued scientific progress in our drug
discovery programs; the magnitude of our drug discovery programs; our ability
to establish and maintain collaborative arrangements; progress with preclinical
testing and clinical trials; the time and costs involved in obtaining
regulatory approvals; the costs involved in filing, prosecuting and enforcing
patent claims; competing technological and market developments; our ability to
establish and maintain collaborative arrangements; the cost of manufacturing
scale-up; and effective commercialization activities and arrangements.

We intend to seek additional funding through collaborative arrangements or
equity or debt financings. If additional financing is not available, we
anticipate that our existing resources will enable us to maintain our current
and planned operations through the end of 2001. We may not be able to obtain
financing on favorable terms, if at all, or enter into additional
collaborations to reduce our funding requirements. If we acquire funds by
issuing securities, further dilution to existing stockholders may result. If
we acquire funds through additional collaborations, we will likely have to
relinquish some or all of the rights to products or technologies that we may
have otherwise developed ourselves. If we are unable to obtain funding, we may
be required to sell the Company or certain of its assets or technologies or to
cease operations.



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Our history of operating losses and our expectations of continuing losses may
hurt our ability to continue operations.

We have experienced significant operating losses since our inception in 1987.
As of March 31, 2001, we had an accumulated deficit of $143.2 million. We have
not generated revenues from the commercialization of any product. All of our
revenues to date have consisted of contract research and development revenues,
license and milestone payments, research grants, certain asset divestitures and
interest income. We expect that substantially all of our revenues for the
foreseeable future will result from research grants and, if we are able to
establish new collaborations, payments under those future collaborations,
including royalties on product sales and interest income. We expect to
continue to incur substantial net operating losses which may imperil our
ability to continue operations. To achieve profitable operations, we, alone or
with partners, must successfully identify, develop, register and market
proprietary products. We may not be able to generate sufficient product
revenue to become profitable on a sustained basis or at all.

If we cannot cost-effectively manufacture our products and the products of our
partners in commercial quantities and in compliance with regulatory
requirements, we may not be able to successfully commercialize our products.

To be successful, our products and the products of our partners must be
manufactured in commercial quantities in compliance with regulatory
requirements and at an acceptable cost. We have not commercialized any
products, nor have we demonstrated that we can manufacture commercial
quantities of our product candidates or our partners product candidates in
accordance with regulatory requirements. We intend to rely on third party
contract manufacturers to produce materials needed for clinical trials and
product commercialization. Third party manufacturers may not be able to meet
our needs with respect to timing, quantity or quality. If we are unable to
contract for a sufficient supply of needed materials on acceptable terms, or if
we should encounter delays or difficulties in our relationships with
manufacturers, it may delay clinical trials, regulatory approvals and marketing
efforts for our products. Such delays could adversely affect our competitive
position and our chances of achieving profitability. We cannot be sure that we
can manufacture, either on our own our through contracts with third parties,
such products at a cost or in quantities which are commercially viable.

The lengthy approval process and uncertainty of government regulatory
requirements may delay or prevent us from commercializing products.

We cannot commercialize our products if we do not receive FDA or foreign
approval for our products. Clinical testing, manufacture, promotion and sale
of our products are subject to extensive regulation by numerous governmental
authorities in the United States, principally the FDA, and corresponding state
and foreign regulatory agencies. These regulations may delay or prevent us
from commercializing products. Noncompliance with applicable requirements can
result in, among other things, fines, injunctions, seizure of products, total
or partial suspension of product marketing, failure of the government to grant
pre-market approval, withdrawal of marketing approvals and criminal
prosecution.

The regulatory process for new therapeutic drug products, including the
required preclinical studies and clinical testing, is lengthy and expensive.
We may not receive necessary FDA or foreign clearances for any of our potential
products in a timely manner, or at all. The length of the clinical trial
process and the number of patients the FDA will require to be enrolled in the
clinical trials in order to establish the safety and efficacy of our products
is uncertain. The FDA or we and our collaborators may decide to discontinue or
suspend clinical trials at any time if the subjects or patients who are
participating in such trials are being exposed to unacceptable health risks or
if the results show no or limited benefit in patients treated with the drug
compared to patients in the control group.



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We may encounter significant delays or excessive costs in our efforts to secure
necessary approvals. Regulatory requirements are evolving and uncertain.
Future United States or foreign legislative or administrative acts could also
prevent or delay regulatory approval of our products. We may not receive the
necessary approvals for clinical trials, manufacturing or marketing of any of
our products under development. Even if we obtain commercial regulatory
approvals, the approvals may significantly limit the indicated uses for which
we may market our products. In addition, the FDA may continually review a
product after its initial approval and commercialization. Later discovery of
previously unknown problems or failure to comply with the applicable regulatory
requirements may result in restrictions on the marketing of a product or
withdrawal of the product from the market, as well as possible civil or
criminal sanctions.

To market any drug products outside of the United States, we are also subject
to numerous and varying foreign regulatory requirements, implemented by foreign
health authorities, governing the design and conduct of human clinical trials
and marketing approval. The approval procedure varies among countries and can
involve additional testing, and the time required to obtain approval may differ
from that required to obtain FDA approval. The foreign regulatory approval
process includes all of the risks associated with obtaining FDA approval set
forth above, and approval by the FDA does not ensure approval by the health
authorities of any other country, nor does the approval by foreign health
authorities ensure approval by the FDA.

Among the other requirements for regulatory approval is the requirement that
prospective manufacturers conform to the FDAs Good Manufacturing Practices, or
GMP, requirements specifically for biological drugs, as well as for other
drugs. In complying with the FDAs GMP requirements, manufacturers must
continue to expend time, money and effort in production, record keeping and
quality control to assure that the product meets applicable specifications and
other requirements. Failure to comply with the FDAs GMP requirements subjects
the manufacturer to possible FDA regulatory action. If we or our contract
manufacturers, if any, fail to maintain compliance with the FDAs GMP
requirements on a continuing basis, it could materially adversely affect our
operations, commercialization efforts and profitability.

Technological change and competition may render our potential products
obsolete.

The biotechnology industry continues to undergo rapid change and competition is
intense and is expected to increase. Our competitors may succeed in developing
technologies and products that are more effective or affordable than any of the
products we are developing or which would render our technology and products
obsolete and noncompetitive. We compete with many public and private
companies, including pharmaceutical companies, chemical companies, specialized
biotechnology companies and academic institutions. Many of our competitors
have substantially greater experience, financial and technical resources and
production, marketing and development capabilities than us. In addition, many
of our competitors have significantly greater experience conducting preclinical
studies and clinical trials of new products, and in obtaining regulatory
approvals for such products. Accordingly, some of our competitors may succeed
in obtaining developing and commercializing products more rapidly or
effectively than us, or in developing technology and products that would render
our technology and products obsolete or noncompetitive. We are aware of
companies that are pursuing the development of novel pharmaceuticals which
target the same diseases that we are targeting. These and other efforts by
potential competitors may be successful, and other technologies may be
developed to compete with our technologies. If we cannot successfully respond
to technological change in a timely manner, our commercialization efforts may
be harmed.

Our products under development address a range of markets. Our competition
will be determined in part by the potential indications for which our compounds
are developed and ultimately approved by regulatory authorities. For certain
of our potential products, an important factor in competition may be



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the timing of market introduction of our products and competitive products.
Accordingly, the relative speed with which we can develop products, complete
the clinical trials and approval processes and supply commercial quantities of
the products to the market are expected to be important competitive factors.
We expect that competition among products approved for sale will be based,
among other things, on product effectiveness, safety, reliability,
availability, price and patent position.

Our failure to obtain issued patents and, consequently, to protect our
proprietary technology, could impair our competitive position.

Our success will depend in part on our ability to obtain patent protection for
our products and processes, both in the United States and other countries. The
patent position of biotechnology and pharmaceutical companies is highly
uncertain and involves complex legal and factual questions. There is no
consistent policy regarding the breadth of claims allowed in biotechnology
patents. We intend to file applications and pursue patent prosecution as
appropriate for patents covering both our products and processes. We cannot be
sure that patents will issue from any of the patent applications that we own or
license or that, if patents do issue, that claims allowed will be sufficiently
broad to protect our products and processes. In addition, we cannot be certain
that third parties will not challenge, invalidate or circumvent any patents
issued to us, or that the rights granted under the patents will provide
proprietary protection to us.

We also protect our proprietary technology and processes in part by
confidentiality agreements with our collaborative partners, employees and
consultants. We cannot be certain that our collaborative partners, employees
and consultants will not breach these agreements, that we will have adequate
remedies for any breach, or that our trade secrets will not otherwise become
known or be independently discovered by competitors.

We may not be able to commercialize our other products under development if
they infringe existing patents or patents that have not yet issued, which would
materially harm our business.

As is typical in the biotechnology industry, our commercial success will depend
in part on our ability to avoid infringing patents issued to competitors or
breaching the technology licenses upon which we might base our products. If we
fail to obtain a license to any technology that we require to commercialize our
products, or to develop an alternative compound and obtain FDA approval within
an acceptable period of time if required to do so, our business would be
harmed. Litigation, which could result in substantial costs to us, may also be
necessary to enforce any patents issued to us or to determine the scope and
validity of others proprietary rights. In addition, we may have to
participate in interference proceedings declared by the United States Patent
and Trademark Office which could result in substantial costs to determine the
priority of inventions.

Our future success depends in part on the continued service of our key
scientific and management personnel and our ability to identify, hire and
retain additional personnel.

We are highly dependent on the principal members of our scientific and
management staff. We do not maintain key person life insurance on the life of
any employee. Our future success also will depend in part on the continued
service of our key scientific and management personnel and our ability to
identify, hire and retain additional qualified personnel.

There is intense competition for qualified personnel in the areas of our
activities, and we cannot be sure that we will be able to continue to attract
and retain such personnel necessary for the development of our business.
Because of the intense competition, we cannot be sure that we will be
successful in adding technical personnel as needed to meet the staffing
requirements of additional collaborative relationships. Our failure to attract
and retain key personnel could be significantly detrimental to our product
development programs and could harm our business.



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If we do not develop a sufficient sales and marketing force, we may not be able
to successfully commercialize our products.

We have no experience in sales, marketing or distribution. Before we can
market any of our products directly, we must develop a substantial marketing
and sales force with technical expertise and supporting distribution
capability. Alternatively, we may obtain the assistance of one or more
pharmaceutical companies with a large distribution system and a large direct
sales force. Other than our agreement with Takara, we do not have any existing
distribution arrangements with any pharmaceutical company for our products
under development. We cannot be sure that we can establish sales and
distribution capabilities or successfully gain market acceptance for our
products. If we cannot develop sales and distribution capabilities, we may not
be able to successfully commercialize our products.

Adverse determinations concerning product pricing, reimbursement and related
matters could prevent us from successfully commercializing products.

Our ability to successfully commercialize our products may depend in part on
the extent to which reimbursement for the cost of such products and related
treatment will be available from government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and we cannot be certain that adequate third-party
coverage will be available to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in product development. If we
cannot obtain adequate third-party coverage for our products, it could harm our
business.

Product liability risks may expose us to significant liability.

Our business exposes us to potential product liability risks which are inherent
in the testing, manufacturing and marketing of human therapeutic products.
While we currently have product liability insurance, we cannot be sure that we
can maintain such insurance on acceptable terms or that our insurance will
provide adequate coverage against potential liabilities.

Our use of hazardous materials could expose us to significant costs.

Our research and development processes involve the controlled storage, use and
disposal of hazardous materials, chemicals and radioactive compounds. We are
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of these materials and some waste
products. Although we believe that our safety procedures for handling and
disposing of these materials comply with the standards prescribed by these laws
and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of an accident, we
could be held liable for any damages that result, and any liability could
exceed our resources.

Although we believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material capital expenditures for environmental control facilities in the
near term, we cannot be sure that compliance with environmental laws and
regulations in the future will not entail significant costs, or that our
business will not be harmed by current or future environmental laws or
regulations.



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The volatility of the price of our common stock may hurt our stockholders.

The market prices for securities of biotechnology companies, including our
common stock, have historically been highly volatile, and the market from time
to time has experienced significant price and volume fluctuations that are
unrelated to the operating performance of such companies. The following
factors may have a significant effect on the market price of our common stock:



| |  | announcements of technological innovations or new commercial therapeutic products by us or others;  
|- |  | ----------------------------------------------------------------------------------------------------
| 
| |  | governmental regulation that affects the biotechnology and pharmaceutical industries;               
| 
| |  | developments in patent or other proprietary rights;                                                 
| 
| |  | developments in, or terminations of, our relationships with our collaborative partners;             
| 
| |  | public concern as to the clinical results and/or, the safety of drugs developed by us or others; and
| 
| |  | general market conditions.                                                                          

Fluctuations in financial performance from period to period also may have a
significant impact on the market price of our common stock.

The subordination of our common stock to our preferred stock could hurt common
stockholders.

Our common stock is expressly subordinate to our Series S and Series S-1
Preferred Stock in the event of our liquidation, dissolution or winding up. If
we were to cease operations and liquidate our assets, there may not be any
remaining value available for distribution to the holders of common stock after
providing for the Series S and Series S-1 Preferred Stock liquidation
preference.

The effect of anti-takeover provisions could adversely affect our common
stockholders.

Our certificate of incorporation includes a provision that requires the
approval of holders of at least 66 2/3% of our voting stock as a condition to a
merger or certain other business transactions with, or proposed by, a holder of
15% or more of our voting stock. This approval is not required in cases where
certain of our directors approve the transaction or where certain minimum price
criteria and other procedural requirements are met. Our certificate of
incorporation also requires the approvals of holders of at least 66 2/3% of our
voting stock to amend or change the provisions mentioned relating to the
transaction approval. Finally, our certificate of incorporation provides that
any action required or permitted to be taken by our stockholders must be
effected at a duly called annual or special meeting rather than by any consent
in writing.

Further, pursuant to the terms of our stockholder rights plan, we have
distributed a dividend of one right for each outstanding share of common stock.
These rights will cause substantial dilution to the ownership of a person or
group that attempts to acquire us on terms not approved by the Board of
Directors and may have the effect of deterring hostile takeover attempts.



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Concentration of ownership among our existing officers, directors and principal
stockholders may prevent other stockholders from influencing significant
corporate decisions and depress our stock price.

Our officers, directors and stockholders with at least 10% of our stock
together control approximately 49% of our outstanding common stock and
preferred stock, on a combined, as-converted basis. If these officers,
directors and principal stockholders act together, they will be able to exert a
significant degree of influence over our management and affairs and over
matters requiring stockholder approval, including the election of directors and
approval of mergers or other business combination transactions. The interests
of this concentration of ownership may not always coincide with our interests
or the interests of other stockholders. For instance, officers, directors and
principal stockholders, acting together, could cause us to enter into
transactions or agreements that we would not otherwise consider. Similarly,
this concentration of ownership may have the effect of delaying or preventing a
change in control of our company otherwise favored by our other stockholders.
This concentration of ownership could depress our stock price.

We have never paid dividends.

We have never paid any cash dividends and do not anticipate paying cash
dividends in the foreseeable future.



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PART II. OTHER INFORMATION







ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

During the period covered by this Form 10-Q, the Company sold and issued the
following securities which were not registered under the Securities Act of
1933, as amended (the Securities Act):



|1. |  | In January 2001, pursuant to the terms of a restricted stock
purchase agreement, we issued 1,056,301 shares of common stock to an
individual accredited investor at a purchase price of $2.50 per
share. In connection with the transaction, we received a promissory
note for $2.6 million secured by the shares.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The sale and issuance of securities in the transaction described above was
deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Regulation D promulgated thereunder.







ITEM 6. EXHIBITS

| |               |  |                                                                                                                                                       
| | ------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 10.79 |  | Letter Agreement between Epimmune and Dr. Emile Loria
regarding employment terms dated January 16, 2001.                                              
|
|
|
|
| | Exhibit 10.80 |  | Form of Restricted Stock Purchase Agreement between
Epimmune and Dr. Emile Loria dated January 16, 2001.                                              
|
|
|
|
| | Exhibit 10.81 |  | Promissory Note of Dr. Emile Loria in favor of
Epimmune dated January 16, 2001.                                                                       
|
|
|
|
| | Exhibit 10.82 |  | Stock Pledge Agreement by Dr. Emile Loria in favor of
Epimmune dated January 16, 2001.                                                                
|
|
|
|
| | Exhibit 10.83 |  | Amendment to Severance Benefits Agreement between
Epimmune and Dr. Alessandro Sette dated March 8, 2001.                                              
|
|
|
|
| | Exhibit 10.84 |  | Amendment to Severance Benefits Agreement between
Epimmune and Dr. Robert W. Chesnut dated March 8, 2001.                                             
|
|
|
|
| | Exhibit 10.85 |  | Amendment to Severance Benefits Agreement between
Epimmune and Dr. Mark Newman dated March 8, 2001.                                                   
|
|
|
|
| | Exhibit 10.86 |  | Amendment to Severance Benefits Agreement between
Epimmune and Robert De Vaere dated March 8, 2001.                                                   
|
|
|
|
| | Exhibit 10.87 |  | Non-exclusive License Agreement between Epimmune and
Nexell Therapeutics, Inc., dated March 28, 2001 (with certain
confidential portions deleted). (1)



|(1) |  | Confidential Treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents



EPIMMUNE INC.







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.

|                   |               |                                                                                                                
|------------------ | ------------- | ---------------------------------------------------------------------------------------------------------------
|                   | EPIMMUNE INC.
|                  
|Date: May 11, 2001 | By:           | /s/ Robert W. Chesnut                                                                                          
|                   |               |                                                                                                                
|                   |               | Robert W. Chesnut, Ph.D.
Executive Vice President, R&D, Secretary, Acting President and Chief Executive Officer

|                   |     |                                                                                                                  
|------------------ | --- | -----------------------------------------------------------------------------------------------------------------
|Date: May 11, 2001 | By: | /s/ Robert De Vaere                                                                                              
|                   |     |                                                                                                                  
|                   |     | Robert De Vaere
Vice President, Finance and Chief Financial Officer, (Principal Financial and Accounting Officer)



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