Edgar Filing: CYTOGEN CORP

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2001
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OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-14879

CYTOGEN CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)

Delaware 22-2322400
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

600 College Road East, CN5308, Princeton New Jersey 08540-5308
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (609) 750-8200
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Securities registered pursuant to Section 12(b)of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value
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(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

The aggregate market value of the registrant's voting shares of
Common Stock held by non-affiliates of the registrant on March 1, 2002, based on
$2.27 per share, the last reported sale price on the NASDAQ National Market on
that date, was $187 million.

The number of shares of Common Stock, $.01 par value, of the registrant
outstanding as of March 1, 2002 was 82,508,739 shares.

The following documents are incorporated by reference into the Annual Report on
Form 10-K: Portions of the registrant's definitive Proxy Statement for its 2002
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Report.

TABLE OF CONTENTS

Item Page
---- ----

PART I 1. Business.................................................................... 1

2. Properties.................................................................. 36

3. Legal Proceedings........................................................... 36

4. Submission of Matters to a Vote of Security Holders......................... 37

PART II 5. Market for the Company's Common Equity and Related Stockholder Matters...... 38

6. Selected Financial Data..................................................... 39

7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 41

7A. Quantitative and Qualitative Disclosures about Market Risk.................. 48

8. Financial Statements and Supplementary Data................................. 48
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.............................................................. 48
PART III 10. Directors and Executive Officers of the Company............................. 49
11. Executive Compensation...................................................... 49
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters..................................................... 49
13. Certain Relationships and Related Transactions.............................. 49
PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 50
EXHIBIT INDEX................................................................................ 50
SIGNATURES................................................................................... 55
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................................... 57

PART I

Item 1. Business

Business

Overview

Cytogen is an established biopharmaceutical company with a growing product line
in prostate cancer and other areas of oncology, along with functional proteomics
solutions and proprietary signal transduction pathway information through its
AxCell Biosciences subsidiary. We are extending our expertise in antibodies and
molecular recognition to the development of new products and a signal
transduction-driven drug discovery platform. We have established a pipeline of
product candidates based upon our proprietary antibody and our exclusively
licensed prostate specific membrane antigen, or PSMA, technologies. We are also
engaged in the research and development of novel biopharmaceutical products
using our growing portfolio of functional proteomics solutions and collection of
proprietary signal transduction pathway information.

Our portfolio of prostate cancer products and development pipeline reflect
Cytogen's reputation for bringing novelty and innovation to patients and
physicians. FDA-approved products include ProstaScint(R) (a monoclonal
antibody-based imaging agent used to image the extent and spread of prostate
cancer); BrachySeed(TM) I-125 and Pd-103 (uniquely designed, next-generation
radioactive seed implants for the treatment of localized prostate cancer); and
Quadramet(R) (a therapeutic agent marketed for the relief of bone pain in
prostate and other types of cancer).

In August 2000, we expanded our product pipeline by entering into
marketing, license and supply agreements with Advanced Magnetics, Inc. for
Combidex(R) and for Code 7228, which are investigational magnetic resonance
imaging (MRI) contrast agents. We have exclusive U.S. rights to Combidex for
the detection of lymph node metastases and exclusive U.S. rights to Code 7228
for oncology applications. Following a priority review, Combidex received an
approvable letter from the U.S. Food and Drug Administration (FDA) in June 2000.
Cytogen and Advanced Magnetics have established project teams to cooperate on
the development of Combidex.

We have integrated our expertise in molecular and cellular biology,
biochemistry, bioinformatics, pharmacology and clinical development to create
two exciting and distinct technologies:

1) PROSTATE SPECIFIC MEMBRANE ANTIGEN

Prostate specific membrane antigen, or PSMA, is a cell-surface protein that is
abundantly expressed on prostate cancer cells at all stages of disease,
including advanced or metastatic disease. The PSMA gene was first discovered by
scientists at Memorial Sloan-Kettering Cancer Center and is exclusively licensed
to Cytogen. From this technology, we have put one product on the market
(ProstaScint) and built a robust pipeline of products in development, of which
one should enter Phase I clinical trials in 2002. These pipeline products are
focused primarily on novel vaccine and antibody cancer therapy, initially in the
area of prostsate cancer.

PSMA is also present at high levels on the newly formed blood vessels
(neovasculature) needed for the growth and survival of many types of solid
tumors. If PSMA-targeted therapies can destroy or prevent formation of these new
blood vessels, the therapies may prove valuable in treating a broad range of
cancers.

2) SIGNAL TRANSDUCTION INHIBITORS

Our AxCell Biosciences subsidiary is engaged in the research and development of
novel biopharmaceutical products using its growing portfolio of functional
proteomics solutions and collection of proprietary signal transduction pathway
information. Through the systematic and industrialized measurement of
protein-to-protein interactions, AxCell is assembling ProChart(TM), a
proprietary database of signal transduction pathway information that is relevant
in a number of therapeutically important classes of molecules including growth
factors, receptors and other potential protein therapeutics or drug targets. In
early 2001, scientists at AxCell were the first to successfully identify all of
the known domain/ligand interactions in the known WW domain family, which is
believed to play a role in the onset and progression of muscular dystrophy and
Alzheimer's disease. Throughout 2001, AxCell identified approximately half of
the domain/ligand interactions in the known SH3 and PDZ domain families and made
continued progress in mapping the SH2 domain family. AxCell is expanding and
accelerating its research activities to further elucidate the role of novel
proteins and pathways in ProChart, through both external collaborations and
internal data mining.

-1-

AxCell uses its proprietary technology as a tool to provide collaborators with
vital information about signal transduction pathways that these collaborators
are interested in targeting for drug discovery. We provide this information
rapidly and efficiently, using the proprietary methods and systems that we
developed to identify signal transduction inhibitors as drugs. We have
successfully leveraged our technology through collaborations with Mount Sinai
School of Medicine, National Cancer Institute, Kimmel Cancer Center at Thomas
Jefferson University, and Pluvita Corporation. These collaborations increase our
resources, improve our technological strength and establish valuable development
relationships with commercial opportunities.

Signal transduction inhibitors may be marketed as drugs because the inhibitor,
once it binds to the target protein, prevents the activation of a specific
disease-causing pathway, resulting in a therapeutic benefit to the patient. We
believe signal transduction inhibitors are also useful as a tool to understand a
protein's function and its value as a drug target. Understanding the function of
a protein helps prioritize targets for drug discovery. AxCell's map of domain
and ligand interactions is an efficient technology to convert peptide sequence
information into drugs. In addition, because signal transduction inhibitors are
designed to bind specifically to a target, and as a result, do not inhibit
unintended protein products, we believe signal transduction inhibitors are safer
and more effective than traditional drugs. By using medicinal chemistry, we can
design chemical mimetics to our peptide-based signal transduction inhibitors,
which will support methods of dosing drugs that are more convenient for
patients, including methods of oral delivery.

The Company was incorporated in Delaware on March 3, 1980 under the name
Hybridex, Inc. and changed its name to Cytogen Corporation on April 1, 1980. Our
executive offices are located at 600 College Road East, Princeton, New Jersey
08540 and our telephone number is 609-750-8200.

PROSTATE CANCER AND ONCOLOGY

Background

Approximately one in every six men will develop prostate cancer. It is the
second leading cause of cancer death among men in the United States, exceeded
only by lung cancer. The American Cancer Society estimates that nearly 200,000
new cases of prostate cancer will be diagnosed this year in the U.S., and that
31,500 men will die of the disease. Fundamentals of the prostate cancer segment
of the oncology market that are particularly encouraging include:

- accelerated approval procedures adopted by the FDA to shorten the
development process and review time for cancer drugs;

- in-licensing opportunities created by a trend among large
pharmaceutical companies to concentrate on products with larger market
potential than most anticancer drugs;

- favorable pricing and reimbursement for oncology drugs; and

- a highly concentrated population of urology healthcare professionals
which we believe allows a smaller sales force to be effective.

-2-

Our marketed oncology products and pipeline are comprised of the following:

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Product Indication Status Development/Marketing
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ProstaScint Monoclonal antibody Approved and marketed in Cytogen (United States &
diagnostic imaging agent the United States. Canada)
for staging the spread of Regulatory approval in
prostate cancer Canada
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BrachySeed(TM) Treatment of localized Iodine 125 approved and Cytogen (United States)
tumors such as tumors of marketed in the United
the neck, lung, pancreas, States
breast, uterus and prostate

Palladium 103 approved in
the United States and
marketing initiated in the
first half of 2002
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OncoScint CR/OV Monoclonal antibody Approved for sale in eleven Cytogen (United States and
diagnostic imaging agent European countries, Canada Canada)
for spread of colorectal and the United States
and ovarian cancer
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Quadramet Relief of bone pain from Approved in the United Berlex (United States);
cancer spread to the bone States and Canada Cytogen (Canada)
from primary tumor
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Treatment of primary bone Phase I results recently Berlex (United States);
tumors. published Cytogen (Canada)
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PSMA Development In vivo immunotherapeutic Pre-clinical development Progenics/Cytogen LLC
product for cancer vaccine
utilizing gene and
protein-based therapy Phase I clinical
development in 2002
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Prostate cancer Pre-clinical development Progenics/Cytogen LLC
antibody-based therapy
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In vitro diagnostic tests Development of a trial assay Cytogen to market or with
for prostate cancer partner
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Ex vivo dendritic cell Phase III clinical trials Northwest Biotherapeutics,
processing Inc.
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Pipeline--PSMA technology

Prostate specific membrane antigen, or PSMA, is a transmembrane protein that can
be used as an important marker associated with prostate cancer. PSMA has also
been found to be present in new blood vessel formation associated with other
major solid tumors. It is over expressed in primary prostate cancer, but it is
expressed most highly in the more aggressive forms of prostate cancer, including
those that do not express prostate specific antigen, or PSA, and those that do
not respond to hormone therapy. Memorial Sloan-Kettering Cancer Center
identified PSMA using a monoclonal antibody supplied by us. A patent entitled
"Prostate Specific Membrane Antigen" was issued to Sloan-Kettering Institute for
Cancer Research, an affiliate of Memorial Sloan-Kettering Cancer Center, and we
have the exclusive worldwide license covering this technology. Subsequently, the
antibody for PSMA was the basis of our FDA-approved ProstaScint imaging product.
We believe that technology utilizing PSMA can yield novel products for the
treatment and diagnosis of cancer because of the unique characteristics of this
antigen.

-3-

In 1999, Cytogen entered into a joint venture with Progenics Pharmaceuticals,
Inc. ("Progenics") to develop in vivo immunotherapeutic products utilizing PSMA.
The first of these product candidates is a therapeutic prostate cancer vaccine
utilizing the PSMA gene and a vector delivery system and the PSMA protein as a
basis of immune stimulation. We are also developing through this venture an
antibody-based immunotherapy for prostate cancer. We believe that these product
candidates, if successfully developed, could play an important role in the
treatment of prostate cancer. We believe there are significant unmet needs for
treatment and monitoring of this disease. In addition, we intend to evaluate the
utility of these therapies, as an anti-angiogenesis approach, in other cancers
where PSMA is expressed in association with tumor neovasculative e.g., breast,
colon, etc.

The joint venture is owned equally by Progenics Pharmaceuticals, Inc. and us. We
have exclusively licensed to the joint venture certain immunotherapeutic
applications of our PSMA patent rights and know-how. Progenics has funded the
first $3 million of pre-clinical development costs of the program. Beginning in
December 2001, we and Progenics are sharing costs of the program in excess of
the initial $3 million for clinical development. We have certain North American
marketing rights to products developed by the venture and a right of first
negotiation with respect to marketing activities in any territory outside North
America. We anticipate marketing any products developed upon approval by the FDA
or requisite foreign regulatory bodies, as applicable. If approved, we
anticipate marketing these products with our own sales force and will be
reimbursed by the joint venture for these costs. We will split the net profit
equally with Progenics on any products developed by the venture. In connection
with the licensing of the PSMA technology to the joint venture, we received $2
million in payments, of which $1 million was received during 1999, $500,000
during 2000, and $500,000 during 2001. We have exclusively licensed in vivo
immunotherapy rights to PSMA to this joint venture. During 2001, the joint
venture entered into a worldwide exclusive licensing agreement with AlphaVax
Human Vaccines, Inc. to use the AlphaVax Replicon Vector (ArV(TM)) system to
create a therapeutic prostate cancer vaccine incorporating the PSMA antigen.
Also in 2001, the joint venture entered into a collaboration with Abgenix, Inc.
to use the company's XenoMouse(TM) technology for generating fully human
antibodies to PSMA. As a result of such collaboration, the joint venture
successfully created human monoclonal antibodies that target PSMA.

We licensed PSMA through our subsidiary, Prostagen, Inc., to Northwest
Biotherapeutics, Inc., for development of in vitro dendritic cell based
immunotherapy of prostate cancer. Prostagen also licensed exclusive PSMA
manufacturing rights for immunotherapy to Northwest Clinicals, LLC, a
corporation formed and co-owned by Northwest Biotherapeutics and Prostagen. In
2000, we executed a new sublicense agreement with Northwest Biotherapeutics Inc.
clarifying their rights to make and use PSMA for ex vivo prostate cancer
immunotherapy. The license agreement with Northwest Clinicals, LLC was
terminated and the manufacturing rights thereunder returned to Cytogen except
for those granted under the newly-executed license with respect to ex vivo
immunotherapy. Last year we reported that we and Progenics had a dispute
regarding the timely reacquisition of the PSMA manufacturing rights. We have
reached a mutually satisfactory agreement with Progenics with respect to this
matter.

We obtained exclusive, world-wide licenses from Molecular Staging, Inc. for
technology to be used in developing in vitro diagnostic tests using both PSMA
and PSA. Molecular Staging's Rolling Circle Amplification Technology is a novel,
patented process that creates new diagnostic opportunities. Rolling Circle
Amplification Technology is a highly sensitive, quantitative and efficient
amplification method that allows the user to detect the presence of target
molecules in a wide array of testing formats. It offers a practical method that
allows solid phase recognition and detection of target molecules either
directly, on a cell or on a biochip. Our initial goal is to deploy Molecular
Staging's technology in a new diagnostic kit for managing prostate cancer based
on detection of PSA and PSMA. We have established the proof of concept of using
the RCAT technology in a PSA serving assay and are investigating the optional
contribution of reagents (i.e. monoclonal antibody pairs) using a similar
approach for PSMA. We also plan to deploy such assays for diagnosis of other
tumors where PSMA is found in associated neovasculature.

Market potential

Diagnostic Screening Tests

The measurement of prostate specific antigen, or PSA, levels in the circulation
is the only in vitro test approved for the monitoring of prostate cancer in the
United States. The American Cancer Society, American College of Radiology and
American Urologic Association have recommended PSA for use in screening of
asymptomatic men, in combination with a digital rectal examination. However, in
1997, the American College of Physicians concluded that there was no evidence of
benefit from routine screening using PSA and recommended against regular
screening using this test. The American Urologic Association, which supports
screening tests for eligible men over 50 years of age, claims that PSA and
digital rectal examination screening increases the rate of early cancer
diagnosis from 30% to 40% for those not screened to 70% to 85% for those

-4-

screened with PSA. Even though a PSA test combined with a digital rectal exam
increases the chances of detection, the method generates a high number of false
positives that often lead to unnecessary biopsies. We believe new and more
accurate tests based on PSA and PSMA may offer higher specificity and prognostic
information in diagnosing primary and recurrent prostate cancer.

An estimated 23.8 million PSA tests were performed in 1998 yielding a market
value of $286 million. It was expected that this market would reach nearly $400
million in 2001 according to the 1999 Medical Data International Report. Current
estimates of the world-wide market are $400-600 million with approximately 60
million men being screened for PSA levels in the United States. In addition,
over one million biopsies are performed annually in the United States to confirm
the presence of prostate cancer following a screening. Furthermore, the
correlation of PSA values and prostatic biopsy results has failed to achieve a
level of predictability which avoids unnecessary biopsies.

A serum test for PSMA, representing a novel marker associated with more
aggressive disease, may provide more relevant prognostic value and improve the
accuracy of evaluating prostate cancer. We anticipate providing both tests
together to help gain entrance to this important market.

Immunotherapy/Vaccines

We are developing, as part of our collaboration with Progenics,
immunotherapeutics for treatment of prostate cancer. We believe immunotherapy is
a particularly attractive alternative for the treatment of prostate cancer and
for prevention of recurrent disease by eliminating metastases. Because PSMA has
been identified as a unique antigen linked to prostate and other cancers, it may
serve as an excellent immunotherapy target.

As part of our joint venture with Progenics, we are developing both vaccine and
antibody-based immunotherapies directed to PSMA. Additionally, antibody-based
applications may also include radio labeled or toxic-conjugated agents.

We believe that there are approximately one million men annually in the United
States who are at risk for recurrent disease and/or have advanced prostate
cancer. We estimate that the potential market for a vaccine or antibody-based
treatment is greater than $500 million annually in the United States.

Our approved products

We have four marketed products, each of which has been approved by the FDA:
ProstaScint, used as an imaging agent in the diagnosis of the extent and spread
of prostate cancer; BrachySeed, a second generation radioactive implant for
prostate cancer therapy; OncoScint CR/OV, marketed as a diagnostic imaging agent
for colorectal and ovarian cancer; and Quadramet, used for relief of bone pain
from cancer that has spread to the bone from the primary tumor.

Cancer diagnostic imaging products

Our cancer diagnostic products, ProstaScint and OncoScint CR/OV, are
murine-based monoclonal antibody-based imaging agents for prostate, colorectal
and ovarian cancers. These products utilize our proprietary targeted delivery
system, employing whole monoclonal antibodies, which directs the radioisotope
Indium/111/ to malignant tumor sites. A radioisotope is an element which,
because of nuclear instability, undergoes radioactive decay and emits radiation.
The imaging products are supplied to hospitals, diagnostic imaging centers and
radiopharmacies.

During an imaging procedure, the radiolabeled monoclonal antibody product is
administered intravenously into the patient. The antibody travels through the
bloodstream and binds to specific antigens expressed by the tumors being
studied. The radioactivity from the isotope that has been attached to the
antibody can be detected from outside the body by a gamma camera. Gamma cameras
are universally found in all nuclear medicine departments. The image captured by
the camera identifies the existence, location and extent of the radiolabeled
pharmaceutical thus identifying the sites of tumor. Based on clinical studies
conducted to date by physicians on our behalf, the imaging agents may provide
new and useful information not available from other diagnostic modalities
regarding the existence, location and extent of a specific disease throughout
the body. We believe that this information has the potential to affect the way
physicians manage their patients' individual treatments.

ProstaScint

ProstaScint is a diagnostic monoclonal antibody linked to Indium/111/ which
specifically targets PSMA. Due to the selective expression of PSMA, the
ProstaScint imaging procedure can detect the extent and spread of prostate
cancer in the body. ProstaScint is approved by the FDA for marketing in two
clinical settings: as a diagnostic imaging agent in newly diagnosed patients
-5-

with biopsy-proven prostate cancer thought to be clinically localized after
standard diagnostic evaluation and who are at high risk for spread of their
disease to pelvic lymph nodes and for use in post-prostatectomy patients in whom
there is a high suspicion that the cancer has recurred.

According to the American Cancer Society, nearly 200,000 American men were
diagnosed with prostate cancer in 2000, of whom approximately 11% are at high
risk for metastatic spread of their disease. In addition, estimates indicate
that in 2000, 40,000 to 60,000 patients previously treated for prostate cancer
developed symptoms of recurrent cancer which had not yet progressed to the point
of skeletal involvement. We believe that there are approximately 60,000 to
70,000 patients with prostate cancer in the United States who are candidates,
based on current indications, to receive a ProstaScint scan each year.

When deciding on an initial course of therapy for diagnosed prostate cancer,
physicians must first determine the extent of disease in the patient. The
accuracy of this information is vital in deciding upon an appropriate course of
therapy. Prior to the availability of ProstaScint, determining whether newly
diagnosed disease was limited to the prostate or had spread beyond the gland was
based upon statistical inference from the biopsy appearance of the tumor and the
patient's serum level of PSA. Conventional imaging methods such as CT or MRI are
all relatively insensitive because they rely on identifying significant changes
to normal anatomic structure to indicate the presence of disease. The
ProstaScint disease scan images are based upon expression of the PSMA molecule
and, therefore, can identify disease not readily detectable with conventional
procedures.

In the United States, following initial therapy, prostate cancer patients are
monitored to ascertain changes in the level of PSA. In this setting, a rise in
PSA is evidence of recurrence of the patient's prostate cancer. Knowledge of the
extent and location of disease recurrence is important in choosing the most
appropriate form of treatment. The National Comprehensive Cancer Network (NCCN),
a consortium of leading cancer hospitals, in 2000 included ProstaScint in its
Practice Guidelines for Prostate Cancer. These guidelines are published to serve
as the practice standard for the oncology community.

We also believe that ProstaScint may be useful for imaging the extent of
prostate cancer within the prostate gland. ProstaScint guided therapy may be
useful to help guide specific treatments such as prostate brachytherapy or
highly targeted external beam radiation. Brachytherapy is a treatment which
implants radiation sources into the site of the tumor; while external beam
radiation utilizes a beam of radiation directed at the cancer from a source
outside the body. We estimate that approximately half of newly diagnosed
prostate cancer patients will undergo a form of radiation treatment. The current
generation of imaging technologies enables physicians to view ProstaScint scans
incorporated with conventional imaging modalities. We believe these technologies
will create greater acceptance of ProstaScint. We are unaware of any other
agents approved for the imaging and diagnosis of prostate cancer.

OncoScint CR/OV

OncoScint CR/OV is approved by the FDA for sale in the United States with other
appropriate, commercially available diagnostic tests, to locate malignancies
outside the liver in patients with known colorectal or ovarian cancer. OncoScint
CR/OV is also approved for sale in eleven European countries and Canada.
However, this product has not received wide market acceptance by physicians for
patients with these conditions. We market OncoScint CR/OV in the United States
directly through our own sales force. The market for OncoScint CR/OV for
colorectal cancer diagnosis has been negatively affected by positron emission
tomography, or "PET", scans. The sensitivity of the PET scan in colon cancer
appears to be similar or higher than the OncoScint CR/OV scan. Consequently, we
are de-emphasizing the marketing of OncoScint CR/OV.

Cancer therapeutic products

Quadramet

Quadramet, a cancer therapeutic agent, is approved by the FDA for the relief of
pain in patients with metastatic bone lesions that image on conventional bone
scan, a routinely performed nuclear medicine procedure. Quadramet consists of a
radioactive isotope, Samarium/153/, which emits beta radiation, and a chelating
agent, EDTMP, which targets the drug to sites of new bone formation.

Once tumors have metastasized to the skeleton, they continue to grow and cause
destruction of the adjacent bone. This erosion of bone stimulates new bone
formation which encircles the metastatic tumor. By targeting these areas of bone
formation, Quadramet delivers site-specific radiation which may result in
significant pain reduction.

-6-

According to American Cancer Society and National Cancer Institute statistics,
about half of all people with cancer (other than skin cancer) will have bone
metastasis at some point in the course of their disease. Bone metastasis is one
of the most frequent causes of pain in people with cancer. We believe that over
200,000 patients each year will suffer from bone pain that is severe enough to
require intervention. Based on this information, we believe that the potential
market for Quadramet is approximately $50 - $80 million in the United States
based on 20% of this patient population.

Quadramet has many characteristics which we believe are advantageous for the
treatment of cancer bone pain, including early onset of pain relief, lasting up
to four months with a single injection; predictability of recovery from bone
marrow toxicity; ease of administration and length of pain relief. In addition,
due to its pharmacokinetic properties, the radioactive plasma half-life is only
five to six hours. Quadramet is administered as a single intravenous injection
on an outpatient basis and directly targets sites of new bone formation which
include those areas in the skeleton that have been invaded by metastatic tumors.
Quadramet exhibits high and very selective uptake in bone with little or no
detectable accumulation in soft tissue.

A Phase I/II clinical study not sponsored by us was carried out by the Mayo
Clinic to investigate the use of high doses of Quadrament for the treatment of
primary bone tumors. The results of that study have recently been published in
the peer-reviewed literature and suggested that Quadramet may have a beneficial
role in this treatment.

Current competitive treatments for severe bone cancer pain include narcotic
analgesics, external beam radiation therapy, Metastron and Novantrone.

BrachySeed

Of the nearly 200,000 men diagnosed with prostate cancer in 2000, approximately
60% to 70% will have localized disease (cancer confined to the prostate gland).
The most common treatment options for localized disease are prostatectomy, the
surgical removal of the prostate, or brachytherapy, the implantation of small
radioactive pellets or "seeds" into the prostate. Approximately 100 seeds are
implanted during a brachytherapy procedure.

BrachySeed is a unique, second generation radioactive brachytherapy implant
developed by Draxis Health, Inc. and its subsidiary, Draximage, Inc. ("Draxis")
and marketed in the United States by Cytogen. BrachySeed's unique, single-weld
design brings a new level of accuracy, precision and safety to sealed source
implant surgery. Each BrachySeed is robotically manufactured and undergoes six
separate quality control checks to ensure uniformity.

While brachytherapy has been available since the 1970s, it has only started to
gain prominence and greater acceptance within recent years, coinciding with the
development of advanced technologies to aid seed placement. Brachytherapy is the
fastest growing treatment for localized prostate cancer and offers a number of
potential benefits compared to alternative treatments such as prostatectomy,
including rapid patient recovery, lower costs and reduced incidence of
complications such as impotency and incontinence. Given this improved
side-effect profile, the market for brachytherapy seeds has grown substantially
over the last three years. According to the 1999 Medical Data International
Report, by 2003, it is estimated that approximately half of all newly diagnosed
prostate cancer patients will opt for brachytherapy, while radical
prostatectomies will be performed on less than 15% of patients. Independent
estimates place the current brachytherapy market at $220 million in the United
States and growing by approximately $100-200 million in three to four years.

During 2001, we introduced the iodine version of the BrachySeed product and we
are currently seeking to grow our market position in this segment of the
brachytherapy market. We are preparing to launch a palladium version of
BrachySeed during the first half of 2002. Following the palladium launch, we
will be among a select group of companies offering both an iodine and palladium
version of the brachytherapy product.

Oncology Product Sales, Marketing and Distribution

We currently employ a dedicated field sales force targeting approximately 10,000
healthcare professionals. The primary objective of the sales force is to promote
our products to urologists, radiation oncologists and nuclear medicine
physicians. Within this field force are technical specialists who assist in the
training of nuclear medicine technologists and nuclear medicine physicians, and
qualify nuclear imaging centers to conduct ProstaScint imaging. We depend on our
own sales force for the sale and marketing of ProstaScint, BrachySeed and
OncoScint CR/OV products and on Berlex for United States sales, marketing and
distribution of Quadramet. Distribution of ProstaScint and OncoScint CR/OV is
handled by outside contractors and Berlex and DuPont handle the distribution of
Quadramet. We are the exclusive United States distributor for BrachySeed.

-7-

During 2000, we terminated our co-marketing arrangement with the Bard Urological
Division of CR Bard Company, Inc. ("Bard"). Historically, ProstaScint has been
marketed under a co-marketing arrangement with the urological division of Bard,
a marketer of a broad range of urology products. In 1999, we reached an
agreement with Bard to phase out the co-marketing agreement so that we could
undertake direct marketing responsibility for the product. We took this step
because of our view that a highly trained and dedicated internal sales force
will be able to market our high technology products most effectively and to
build a marketing capability for possible future products. The transition was
completed by mid-year 2000.

ProstaScint is a technique-dependent product that requires a high degree of
proficiency in nuclear imaging technology in order to interpret the scan. We
have established a network of accredited nuclear medicine imaging centers
through our PIE, or Partners In Excellence Program. Each PIE site receives
rigorous training, undergoes proficiency testing and is subject to ongoing
quality assurance protocols. As of December 31, 2001, there were over 350 PIE
sites, including a majority of the National Cancer Institute-designated
Comprehensive Cancer Centers. ProstaScint may only be used at PIE sites. We plan
to add PIE sites on a selective basis in order to ensure that new sites are
adequately qualified and committed to a minimum number of scans for maintaining
a high level of competence. At the present time, we bear partial expense of the
qualification of each site.

In 1999, we reacquired rights to our ProstaScint and OncoScint CR/OV products in
Canada, which were to be marketed by Faulding (Canada), Inc. We did not pay for
the return of these rights. OncoScint CR/OV is approved by the Canadian Health
Care Branch and ProstaScint was approved for sale in Canada in March of 2002. We
believe these products will be marketed to major cancer centers in Canada and
will not require a significant level of resources. However, we cannot be certain
that these products will be reimbursable under the Canadian health care system
or reimbursed on favorable economic terms, or that they will be accepted by
physicians.

Since May 1994, we have been the sole marketer of OncoScint CR/OV in the United
States. In 1996, we entered into a distribution agreement with CIS
biointernational, granting to CIS biointernational the exclusive right to
distribute and sell OncoScint CR/OV worldwide, except for in the United States
and Canada. This Agreement was terminated effective in March 2001 by mutual
agreement of the parties.

In October 1998, we entered into an exclusive agreement with Berlex
Laboratories, Inc. for the marketing of Quadramet, after terminating our
previous marketing relationship with the DuPont Merck radiopharmaceutical
division. Berlex re-launched Quadramet in March 1999. Berlex maintains a sales
force that targets its sales efforts on the oncological community. Pursuant to
our agreement with Berlex, we are entitled to royalty payments based on net
sales of the Quadramet product and milestone payments based upon sales levels
achieved.

During the first year of launch, Quadramet was marketed principally to the
nuclear medicine community, which administers the treatment to patients.
However, the treatment is more typically prescribed by care giving physicians,
including medical oncologists, radiation oncologists and urologists. We believe
that successful commercialization of Quadramet will depend upon marketing to
these referring physicians.

We plan to market Quadramet in Canada. We paid no costs to obtain these
marketing rights. We are evaluating whether to market Quadramet directly in
Canada or through a marketing partner.

We have no significant foreign revenues. Although we plan to sell our products
internationally, we cannot assure you that the products will be accepted by the
foreign medical community or regulators or that we will be able to sell at
adequate prices. We will incur expenses if we sell our products in foreign
countries, and if our products do not generate adequate revenues we may not be
able to recover these expenses.

Strategic Alliances and License Agreements

Our strategy is to use alliances with other companies to increase our financial
resources, reduce risk and retain an appropriate level of ownership of products
currently in development. In addition, through alliances with other
pharmaceutical and biotechnology companies, we may obtain funding, expand
existing programs, learn of new technologies, and gain additional expertise in
developing and marketing products.

Abgenix, Inc.

During 2001, the PSMA development Company LLC, a joint venture between us and
Progenics Pharmaceuticals, Inc. entered into an Agreement with Abgenix, Inc.
regarding the development of fully human antibodies to PSMA using Abgenix's
XenoMouse(TM) technology.

-8-

Advanced Magnetics, Inc.

In August 2000, Cytogen and Advanced Magnetics, Inc. mutually terminated a
previously negotiated agreement pursuant to which Cytogen was to acquire
Advanced Magnetics. Instead, the two companies entered into marketing, licensing
and supply agreements (the "AVM Agreements"). Under the AVM Agreements, the
Company acquired exclusive United States rights to two product candidates,
Combidex and imaging agent Code 7228 for oncology applications. Combidex, a MRI
contrast agent for the detection of lymph node metastases, received an
approvable letter in June 2000 subject to certain conditions by the FDA,
following a priority review. Code 7228 is being developed for oncology and
magnetic resonance angiography applications and is expected to enter Phase II
clinical development during this year. The Company has rights to Code 7228 for
oncology applications only.

Under the terms of our License and Marketing Agreement with Advanced Magnetics,
we issued to Advanced Magnetics, 2,000,000 shares of common stock. Of such
2,000,000 shares, 500,000 are being held in escrow pending the achievement of
certain milestones relating to Combidex and Code 7228. The remaining 1,500,000
shares were transferred to Advanced Magnetics, subject to certain restrictions,
with such restrictions expiring at a rate of 300,000 shares per month, each
month after the effective date of the agreement.

The License and Marketing Agreement will continue until August 25, 2010, and
shall thereafter automatically renew for successive five year renewal periods,
unless notice of non-renewal or termination is given by us or Advanced Magnetics
90 days prior to the commencement of any renewal period, and unless and until
terminated pursuant to the terms thereof.

There can be no assurance that Advanced Magnetics will receive FDA approval to
market Combidex or Code 7228 in the United States.

AlphaVax

In 2001, the PSMA Development Company, LLC entered into a development and
license agreement with AlphaVax to utilize their proprietary viral vector
technology to deliver the PSMA gene systemically. This agreement contains both
milestone and royalty payments. We believe that this technology, if successfully
deployed, may have important advantages in targeting immune stimulating cells in
vivo which impact on the progression of cancer.

Berlex Laboratories, Inc.

In October 1998, we entered into a License Agreement with Berlex Laboratories,
Inc. regarding the marketing of Quadramet, a radiopharmaceutical product used to
provide pain relief from cancer spreading to the bone. As consideration for the
rights granted, Berlex Laboratories agreed to pay Cytogen royalties based on net
sales, as defined in the Agreement.

This Agreement will expire twenty years from the date of execution or on the
date of expiration of the last to expire, licensed patent, whichever is later.

Draxis Health, Inc.

In December 2000, we entered into a Product Manufacturing and Supply Agreement
and a License and Distribution Agreement with Draxis to, among other things,
market and distribute BrachySeed implants for prostate cancer therapy in the
United States. Under the agreement, Draxis will supply radioactive iodine and
palladium seeds to us in exchange for royalties on sales and certain milestone
payments. The FDA granted marketing approval for BrachySeed in September 2000.
We launched the radioactive iodine BrachySeed in the United States in February
2001. We expect to begin selling the palladium version of BrachySeed in the
United States during the first half of 2002. We cannot be certain, however, of
the market acceptance of these products or whether these products will
significantly increase our revenues.

-9-

We agreed to pay Draxis an aggregate of $2,000,000 in milestone payments, as
follows: (i) $500,000 upon the execution of the License and Distribution and the
product manufacturing and supply agreement, (ii) $500,000 upon the first sale,
as defined therein, of iodine BrachySeed from Draxis to Cytogen, and
(iii)$1,000,000 upon the first sale, as defined therein, of palladium BrachySeed
from Draxis to Cytogen. We have paid the first two milestone payments. The
License and Distribution Agreement will expire on December 31, 2010, unless
earlier terminated pursuant to the provisions thereof.

The Product Manufacturing and Supply Agreement, pursuant to which Draxis has
agreed to manufacture and supply iodine and palladium BrachySeed to us, will
terminate on December 31, 2010. We are currently negotiating a new manufacturing
and supply agreement with Draxis. In the interim both parties are operating
under the terms of the existing agreement.

Elan Corporation, plc

We entered into a license agreement granting Elan worldwide rights to a group of
peptides and associated technology for orally administered drugs that are
transported across the gastrointestinal epithelium, as well as rights to other
orally delivered drugs derived from the research program. Elan is responsible
for the further development and commercialization of this technology. We are
entitled to royalties from sales of any product developed and commercialized
based on this technology.

Memorial Sloan-Kettering Cancer Center

In 1993, we began a development program with Memorial Sloan-Kettering Cancer
Center involving PSMA and our proprietary monoclonal antibody. In November 1996,
we exercised an option for and obtained an exclusive worldwide license to this
technology.

Molecular Staging, Inc.

We obtained an exclusive, world-wide license from privately held Molecular
Staging, Inc. for technology to be used in developing in vitro diagnostic tests
utilizing PSMA and PSA. We anticipate initiating a clinical trial of the PSA
assay and determining proof of concept for the PSMA test during 2003.

Northwest Biotherapeutics, Inc.

We licensed PSMA through our subsidiary, Prostagen, Inc., to Northwest
Biotherapeutics, Inc., for development of in vitro dendritic cell processing
immunotherapy to prostate cancer. Prostagen also licensed exclusive PSMA
manufacturing rights for immunotherapy to Northwest Clinicals, LLC, a
corporation formed and co-owned by Northwest Biotherapeutics and Prostagen. In
2000, we executed a new sublicense agreement with Northwest Biotherapeutics Inc.
clarifying their rights to make and use PSMA for ex vivo prostate cancer
immunotherapy. The license agreement with Northwest Clinicals, LLC was
terminated and the manufacturing rights thereunder returned to Cytogen except
for those granted under the newly-executed license with respect to ex vivo
immunotherapy.

Progenics Pharmaceuticals, Inc.

In 1999, we entered into a joint venture with Progenics Pharmaceuticals, Inc. to
develop products utilizing our PSMA technology. The first of these products,
currently under development, is a therapeutic prostate cancer vaccine utilizing
a PSMA protein/adjuvant approach. Our current plans are that this approach, if
successful in pre-clinical development, should proceed to human clinical trials
in 2002. We are also developing through this venture antibody based
immunotherapy for prostate cancer. We believe that these drugs, if successfully
developed, could play an important role in the treatment or prevention of
advanced prostate cancer and other cancers where PSMA is expressed (e.g. breast,
colon, etc.).

The Dow Chemical Company

In March 1993, we obtained an exclusive license from The Dow Chemical Company to
North American rights to use Quadramet as a therapeutic radiopharmaceutical for
metabolic bone disease or tumor regression for cancer caused by metastatic or
primary cancer in bone in humans, and for the treatment of disease characterized
by osteoblastic response in humans. In November 1998, Dow also extended our
exclusive rights for use of Quadramet in treating advanced rheumatoid arthritis
to Europe, Japan and other countries in addition to North America.

SIGNAL TRANSDUCTION INHIBITORS

Background

The last decade of research has led to an increased understanding of how cells
communicate with each other to coordinate the growth and maintenance of the
multitude of tissues within the human body. A key element of this communication
network is the transmission of a signal from the exterior of a cell to its

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interior, resulting in the activation of specific intracellular processes. Many
such signaling pathways culminate in the nucleus, which results in the
activation or suppression of specific genes. This process is called signal
transduction. An integral part of signal transduction is the interaction of
ligands, receptors and intracellular signal transduction molecules ("downstream
signaling molecules").

In general terms, chemical messengers may be released by one cell to communicate
with a target cell by binding to specific receptors on the target cell's
surface. A receptor generally takes the form of a protein that straddles a
cell's membrane, with its "ligand-binding domain" protruding out of the cell and
its "intracellular domain" anchored inside the cell. When a ligand binds to its
receptor, the newly formed receptor/ligand complex triggers the activation of a
cascade of downstream signaling molecules, thereby transmitting the message from
the exterior of the cell to its interior. The intracellular response may take
the form of various structural or biochemical alterations facilitating a
specific response to the extracellular message. If the intracellular signal
propagates to the nucleus, it dictates the activation or suppression of specific
genes, resulting in the production of proteins that carry out a specific
biological response. Depending on the specific ligand, receptor and downstream
signaling molecules, the resulting signalling cascade controls diverse and
distinct cellular processes. For example, metabolic changes can be effected by a
ligand such as insulin, which, after binding to the insulin receptor, activates
a specific set of downstream signaling molecules within the cell, ultimately
leading to the regulation of glucose uptake and other insulin-associated
functions.

Functional proteomics has proven to be an effective drug-discovery platform and
mapping key signaling molecules in biochemical pathways will be central to
future drug discovery efforts. Because of their link to disease, most major
pharmaceutical and biotechnology companies have active drug discovery programs
based on understanding signal transduction pathways.

The application of functional proteomics in signal transduction-based target
identification and validation is an important area of research and development
at present. Various genomic and proteomic approaches are contributing toward
mapping signal transduction and linking it to disease, and this platform
promises to have a very significant future in drug discovery.

Drug discovery

The traditional drug discovery process involves testing or screening compounds
in disease models. Researchers often engage in the process with little knowledge
of the intracellular processes underlying the disease or the specific drug
target within the cell. Thus, companies must screen a very large number of
arbitrarily selected compounds to obtain a desired change in a disease model.
While this approach sometimes produces drugs successfully, we believe it has the
following limitations:

- inefficiency: it is capital intensive and time consuming in
identifying and validating targets;

- low productivity: it yields relatively few new drug candidates;

- lack of information: it provides little information about the
intracellular processes or targets, to guide target selection and
subsequent drug development; and

- risk of side effects: it often results in drug candidates with a risk
of serious side effects.

In an effort to overcome some of the difficulties associated with traditional
drug discovery, some scientists have turned to genomics as a means of better
understanding the roots of disease. These scientists believe that a
comprehensive knowledge of an organism's genetic makeup may lead to more
efficient drug discovery. While useful, DNA sequence analysis alone does not
lead efficiently to new target identification, because one cannot easily infer
the functions of gene products, or proteins, and protein pathways from DNA
sequence.

Functional proteomic technologies offer significant opportunities to improve the
drug discovery process. By focusing on protein activity levels, or expression
levels, researchers are able to learn more about the role proteins play in
causing and treating disease. Functional proteomics also aids in deciphering the
mechanisms of disease and increasing both the opportunity to develop drugs with
reduced side effects and an increased probability of clinical trial success. We
believe functional proteomics has the potential to increase substantially the
number of drug targets and thereby the number of novel new drugs.

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DRUG DISCOVERY AND DEVELOPMENT PROCESS

Early Discovery.......... Compound Discovery and Development..................

Lead Pre-
Target Target Screen Primary Secondary Compound clinical
Identification Validation Development Screening Screening Optimization Studies

OUR TECHNOLOGY IS AIMED AT ACCELERATING FOUR STEPS
IN THE DRUG DISCOVERY AND DEVELOPMENT PROCESS.

We believe that target identification, validation and optimization may be
facilitated by the use of AxCell's proprietary signal transduction pathway
information and functional proteomics tools. We anticipate that this technology
platform will allow identification of disease-related alterations in protein
pathways by comparing protein pathways in cells and tissues associated with a
disease model with pathways in normal tissue. We believe that this technology
will also enable researchers to more efficiently identify potential drug
targets.

We also develop high-throughput screens for drug development in cases where
targets are proprietary to us. Customers may license these targets and receive
the components necessary for a high-throughput screen.

Finally, we believe that we can accelerate lead compound optimization through
the supply of related protein-component family members, or protein arrays. We
believe that these protein arrays contain the proteins with which a researcher
can test a lead compound for cross-protein interaction. Such cross-protein
interactions may also represent the side effects which the lead compound might
invoke. We believe that modifications of the structure of the lead compound
followed by further testing with the target array will lead to more efficient
lead compound optimization.

Our technology

Our core proteomics technology is based on an understanding of the principles of
the binding, or molecular recognition, of antibodies to antigens. Through a
sponsored research program at the University of North Carolina at Chapel Hill,
coupled with our internal research, we studied the interactions between peptide
ligands and proteins. This research led to a better understanding of
protein-protein interactions, and ultimately to proprietary methods for
identifying and quantifying such interactions. We have a portfolio of patents
and patent applications based on inventions generated both internally and at the
University of North Carolina at Chapel Hill, relating to methods for
identification of proteins which interact in cellular pathways, and the
compositions of such proteins. Certain patents and patent applications filed on
behalf of the University of North Carolina at Chapel Hill are the subject of a
worldwide, exclusive license to us. We established AxCell Biosciences
Corporation as a subsidiary to harness the commercial potential of this
proprietary platform technology in the area of proteomics.

We have developed several integrated, high-throughput technologies designed to
determine protein pathways quickly and cost effectively. The identification of
protein pathways is a critical step in drug discovery.

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[GRAPHIC OF TECHNOLOGY FLOW CHART OMITTED]

As part of functional signaling pathways, protein interaction is mediated
through binding of a ligand sequence on one protein and a domain on another,
similar to the relationship between a lock and a key. Domains are functional
recognition sites on proteins where the actual interaction occurs with another
protein. Ligands are the regions of the other proteins that interact with the
domains. In the human proteome, domains are classified in families such as WW or
PDZ.

As seen in the above illustration, we identify domain-ligand interactions
through the use of proprietary phage display libraries. The process begins with
a domain from a known protein family such as WW. A library of peptides, which
are short sequences of amino acids (the building blocks of proteins), is exposed
to this domain to identify those peptides that act as ligands and have binding
affinity to the domain (Step 1).

We then use these ligands as probes to find other proteins that contain a domain
which exhibits an affinity to the ligands. This technique identifies the
complete family of domains that interacts with a set of ligands (Step 2). Once a
set of ligands and domains are identified, we measure the strength of affinity
between each domain and ligand (Step 3). These steps are repeated with all
signaling domains and their corresponding ligands. This approach allows us to
create the database of ligand-domain binding interactions and thus establish a
functional relationship between the set of ligands and domains (Step 4).

Using this database and computational methods, or bioinformatics, we define the
rules of interaction between domains and ligands. Using bioinformatic analyses,
each interacting protein can be identified, and through ligand-domain pairing
biological pathways can be constructed (Step 5). These biological pathways are
analogous to a circuit diagram of intracellular communication.

Analyses of the aberrations in the interaction of proteins with one another can
then be studied to identify those proteins that play a role in causing or
preventing disease and can be targeted for drug development (Step 6).

Proprietary algorithm development

Through the use of our platform technologies described above and the data
generated with them, we plan to develop proprietary modeling and
characterization algorithms. In addition, we believe that ProChart contains
comprehensive protein interaction and pathway data that we believe will allow
the modeling and characterization of ligands using connections to the
corresponding domains. We also plan to develop pathway models using the data in
ProChart. AxCell's ProChart database content and functional proteomics tools are
available on a non-exclusive basis to biotechnology, pharmaceutical and academic
researchers. AxCell is expanding and accelerating its research activities to
further elucidate the role of novel proteins and pathways in ProChart, through
both external collaborations and internal data mining.

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Our products, technologies and services

ProChart

ProChart is a proprietary database of signal transduction pathway information,
created using AxCell's patented, high-throughput technology, which differs from
the most widely used method for identifying protein interactions, such as yeast
two-hybrid. Using data contained in ProChart, researchers may be better able to
design drugs that target pathways related to a specific disease while avoiding
those pathways associated with unwanted side effects. ProChart allows drug
discovery researchers to evaluate a large number of targets and select a logical
subset for experimentation. ProChart became commercially available in June 2001,
although subscriptions to the database have been limited to one customer that
entered into a three-year, non-exclusive agreement and that will commence a
research program with AxCell. To date, we have not generated any revenues from
ProChart.

Genetic Diversity Library (GDL(TM))

AxCell identifies domain-ligand interactions through the use of patented M13
phage libraries. Although GDL is specifically patented, AxCell maintains a
license from Dyax Corporation for the general technique of phage display
technology conducted in M13 bacteriophage. The difference between AxCell's GDL
libraries and phage display library technology as applied by others is based on
the unusually large inserts in the GDL libraries. While AxCell expresses the
usual linear and cyclic oligopeptides, the Company has also created libraries
containing inserts of 38- and 45mer linear and cyclic peptides. These longer
inserts allow AxCell to study phenomena that depend on longer peptide sequences
and the folded structures they can assume.

Cloning of Ligand Targets (CLT(TM))

AxCell uses ligands in GDL and others identified using bioinformatics as probes
to find other proteins that contain a domain, which exhibits binding affinity to
the ligands. Using cloned DNA (cDNA) libraries, the CLT process identifies the
complete family of domains that interacts with a set of ligands. CLT exploits
the cross-reactive binding inherent in domain-ligand interactions to
systematically identify novel domains. The expression and purification system to
create protein domains at AxCell is the Glutathione-S-Transferase (GST) Gene
Fusion System in E. coli. Occasionally, other expression and purification
systems like Hexa-His or Maltose gene fusion systems are used. Domains range
from about 30-120 amino acids in length. When fused with GST for expression they
are about 22-40kDa in size.

Affinity Screens

Once ligands and domains are identified, synthesized and cloned, they are
screened using a high throughput screening (HTS) assay based on technology
similar to ELISA. In it, domains are adsorbed to microplates, and subsequent
binding of peptide ligands is detected by means of the N-terminal biotin
included in the peptide ligand. After screening in this HTS format, a second
assay is performed to generate a binding saturation curve. This second assay
provides a quantitative measurement of binding strength for individual pairs of
domain-ligand interactions. The GDL and CLT steps are repeated with all
signaling domains and their corresponding ligands. This approach allows AxCell
to create the ProChart database of ligand-domain binding interactions and thus
establish a functional relationship between the set of ligands and domains.
Using this database and computational methods, or bioinformatics, AxCell defines
the rules of interaction between domains and ligands. This key feature of
AxCell's technology allows researchers to evaluate relative binding strength of
interactions in silico.

Bioinformatics

Bioinformatics (BFX) is AxCell's most high throughput discovery technology. We
apply algorithms developed by our BFX group to publicly available human
proteomic data in order to identify previously uncharacterized binding domains
and candidate ligand peptides for our "wet bench" operations, including HTS
assays as well as GDL and CLT discovery technologies. Most of these algorithms
are based on recognition of homology of uncharacterized sequence data to
proteomic and genomic data from the peer-reviewed literature. AxCell searches
public databases for such sequences and catalogs them for synthesis and use in
its HTS assays.

Peptide Synthesis

AxCell currently produces more than 1,000 synthetic peptide ligands per month.
The consensus sequences provided by our BFX algorithms are generally only 1-4
amino acids in length. But in manufacturing our fragments of human proteins, we
include 4 to 6 amino acids on either side of the consensus, in order to achieve
appropriate specificity. Thus the ligands average approximately 12 amino acids.

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With the addition of a spacer sequence and a biotin tag, the peptides achieve an
average length of 17 amino acids total, with a range from 14-29 amino acids in
length. In support of AxCell's high throughput parallel peptide synthesis, a
high throughput method for validation and quantitation of synthetic peptides has
been developed. This method includes automated LC-MS analysis, data processing,
and sample purification steps.

Marketing

We previously established a collaboration with InforMax, Inc., a publicly held
bioinformatics provider. InforMax is a leader in the development of
bioinformatics software for accelerated drug discovery and has a proven track
record in software development. We are jointly designing an interface for
ProChart with InforMax that will be integrated with InforMax's GenoMax (TM)
product. GenoMax is a bioinformatics system that offers high-speed analysis of
both public and proprietary genetic databases within the security of a corporate
firewall. This system is designed to allow the subscriber to evaluate data in
ProChart, while accessing other public and private databases. We have also
developed an application programming interface for ProChart, to permit
integration with other bioinformatics platforms, including those developed by
the customers themselves. By taking advantage of an existing bioinformatic
platform, we plan to concentrate our efforts on the development of tools
specific to protein pathway data. InforMax will also market ProChart. InforMax
has developed a Protein-Protein Interaction (PPI) module for the GenoMax
enterprise bioinformational system, a modular platform of advanced analysis
programs for genomic and proteomic applications, and successfully integrated
ProChart.

We are marketing ProChart as multi-year subscriptions allowing access to
ProChart inside the customers' corporate firewall. This subscription delivery is
facilitated using InforMax's GenoMax product into which ProChart has been
integrated. These subscriptions may include collaborative bioinformatics
research projects to analyze specific pathways as requested by a customer. Such
collaborations may provide additional revenues, and may also include milestone
payments and royalty-based revenues from any products emerging from the
collaborative research and developed by our partner.

RESEARCH COLLABORATIONS

AxCell is currently negotiating a Cooperative Research and Development Agreement
with the National Cancer Institute (NCI) to research two major signal
transduction families and how they impact signaling pathways within cells, which
could lead to the development of new drugs to treat cancer and other diseases.
Under the terms of the agreement, relevant data resulting from this
collaboration will be added to AxCell's ProChart database of protein interaction
information. The research at the NCI will be led by Stephen Shaw, M.D., chief of
the Human Immunology Section at the Experimental Immunology Branch of the NCI.
Dr. Shaw is an immunologist who has been primary or senior author on more than
150 scientific publications and is a recipient of the Institute for Scientific
Information Highly Cited Researchers award.

AxCell entered into a Research Collaboration Agreement with Mount Sinai School
of Medicine to research protein interactions in the WW protein domain family,
which is believed to play a role in the development of muscular dystrophy and
neurodegenerative diseases, such as Alzheimer's disease. The principal goals of
the research program will be to research the binding of ligands to the WW domain
of dystrophin, utrophin, beta-dystroglycan, FE65 and FE65-like proteins, which
could accelerate drug discovery for muscular dystrophy and certain
neurodegenerative diseases. The collaboration will use specific data from
AxCell's ProChart database, which includes the first and only complete map of
the known WW protein domain family. The WW protein domain family is the first of
approximately 60-80 protein domain families involved in signal transduction to
be mapped successfully. The collaboration will be led by Marius Sudol, Ph.D.,
associate professor in the Medicine Department at the Mount Sinai School of
Medicine in New York.

AxCell signed a letter of intent with Kimmel Cancer Center at Thomas Jefferson
University to research protein interactions associated with an undisclosed gene
believed to play a role as a tumor suppressor in multiple cancers. Upon
execution of the final agreement, the research will be led by Kay Huebner,

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Ph.D., professor of microbiology and immunology at Jefferson Medical College and
Carlo Croce, M.D., professor and chair of microbiology and immunology at
Jefferson Medical College of Thomas Jefferson University in Philadelphia and
director of Jefferson's Kimmel Cancer Center. Dr. Huebner's laboratory focuses
on finding and studying genes that are frequently altered in cancers, and whose
alteration, usually leading to loss of expression of the encoded protein,
contributes to development and progression of the cancers.

AxCell signed a binding term sheet with Pluvita Corporation for a pilot program
to research protein interactions associated with a specific protein-based drug
target. Upon execution of the final agreement, the principal goals of the pilot
research program will be to identify the full-length peptides (amino acid
chains) that bind to Pluvita's compound; identify apparent consensus sequences;
and analyze the representation of those sequences within the human proteome.
AxCell will also determine apparent affinities of compound binding observed with
the isolated peptides. Based on current expectations, the research program with
Pluvita will not begin until late 2002. In addition to this research program,
Pluvita Corporation entered into a three-year, non-exclusive agreement to use
AxCell's ProChart in a range of drug discovery initiatives.

Our proteomics patents and proprietary rights position

Overall, our patent strategy has focused on composition and use of the proteins
and peptides which we are discovering, thus avoiding the uncertainty and
controversy associated with the patenting of genes. We believe such composition
and use claims should be important because we believe it is likely that proteins
rather than genes will be the targets for new drugs. This strategy has resulted
in eleven patents.

Among our patents are two issued U.S. patents relating to peptides that bind to
certain molecules expressed on cancer cells. We also co-own with the University
of North Carolina at Chapel Hill an issued U.S. patent covering certain
polypeptides that contain a WW domain U.S. Patent No. 6,309,820 was issued to
AxCell in 2001, entitled "Polypeptides Having a Functional Domain of Interest
and Methods of Identifying and Using Same," for our proprietary Cloning of
Ligand Targets(TM) (CLT) proteomics technology.

We will market our protein targets under arrangements that we anticipate would
include licensing fees, milestone payments and royalty payments as our customers
develop products based on these targets. We plan to market protein arrays under
a license for use and, where possible, obtain commitments for milestone payments
and royalty-based payments if the arrays contain novel protein targets
proprietary to us.

We intend to pursue aggressively patent protection for novel synthetic peptides
and novel naturally occurring polypeptides that we identify as binding to
ligands of interest, as well as for products and methods relating to the use of
these polypeptides and their respective genes as possible drug targets in
screening assays. We also intend to seek patent protection for methods and
products relating to our data analysis procedures.

Competition

We are subject to significant and increasing competition in the field of
proteomics. Many companies compete in the overall effort to understand the
complex flow from gene sequence, to transcription into messenger riboneucleic
acid, to protein expression and finally to biological activity. In addition,
most major pharmaceutical and biotechnology companies have some level of
internal activity and high interest in these areas.

The technology for analyzing the functions of proteins in a disease setting, and
for mapping interactions between proteins, is relatively new. This technology is
evolving rapidly and developments by competitors, including potential customers,
could make our technology obsolete. A number of companies compete with our
approach to analyzing the proteome, and others compete with our technology for
identification of novel proteins and use of proteins for possible drug targets.

Of the several approaches used commercially to analyze the proteome, the main
direct competitor with our technology is the yeast two-hybrid system. Three
companies, Myriad Genetics, Inc. (NASDAQ: MYGN), CuraGen Corporation (NASDAQ:
CRGN) and Hybrigenics Inc. use this method to perform large-scale cataloguing of
protein-protein interactions.

AxCell believes that its in vitro approach to detecting protein pathways is
complimentary to yeast two-hybrid and other functional proteomics technologies.
AxCell's in vitro approach offers the following synergies: simplicity, higher
throughput data generation, quantitative protein interaction affinity
measurement, fewer false positives, the rapid formatting of high-throughput
screening assays, and the identification of specific ligands, which provide a
starting point for rational drug design.

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The marriage of AxCell's high throughput domain-ligand interaction technology
(and the resulting ProChart databse) and yeast two-hybrid technology offers an
opportunity for significant synergy. AxCell's technology rapidly yields maps of
protein-to-protein interactions based upon in vitro measurements. On a selected
basis, key interactions could be validated using yeast two-hybrid methods to
show that these interactions do indeed occur using an in vivo model.

Strategic alliances

InforMax, Inc.

In September 1999, AxCell and InforMax, Inc. concluded an agreement to market
ProChart as part of an enterprise bioinformatics solution to the pharmaceutical
and biotechnology industries. The three year agreement also provides for
technology development by InforMax to link our database to InforMax's GenoMax, a
new generation of molecular biology and genetics software. In February 2001,
AxCell and InforMax announced the development of the Protein-Protein Interaction
(PPI) module for the GenoMax enterprise bioinformatics system and successfully
integrated ProChart, AxCell's growing database of human protein interactions.
AxCell has developed technology that provides both qualitative and quantitative
information about a wide range of protein-protein interactions. The integration
of ProChart with GenoMax was demonstrated publicly for the first time at the CHI
Genome Tri-Conference in San Francisco, CA, in March of 2001.

Compaq Computer Corporation

In December 1999, AxCell entered into a developer partnership with Compaq
Computer Corporation. This development program will be facilitated by Compaq's
proven Alpha architecture, high performance 64-bit systems that deliver speed
and scalability advantages. Under the agreement, Compaq has provided us with
hardware for the development of our proteomics database. In December 2000,
AxCell furthered its strategic relationship with Compaq, adding additional
hardware provided by Compaq to continue the development of ProChart. Due to
increasing laboratory data output, AxCell's computing requirements have more
than doubled and Compaq's AlphaServer cluster technology facilitated the
required expansion.

University of North Carolina

We sponsored research at, and are the exclusive licensee of certain patent and
patent applications and technology owned by the University of North Carolina at
Chapel Hill, covering the creation of long peptides that may fold to form
three-dimensional functional structures, and of libraries composed of these
peptides. The technology covered by this collaboration has been utilized, with
other technology we developed, in our proteomics program.

PRODUCT CONTRIBUTION TO REVENUES

Our currently marketed products and other sources of income constitute a single
business segment. ProstaScint and Quadramet account for a significant percentage
of our product-related revenues. For the years ended December 31, 2001, 2000 and
1999, revenues related to ProstaScint accounted for approximately 65%, 66% and
57%, respectively, of our total revenues while revenues related to Quadramet
accounted for approximately 18%, 19% and 9%, respectively, of our total
revenues.

RESEARCH AND DEVELOPMENT

Our research and development expenditures include payments we made to customer
sponsored research programs, the costs incurred to develop PSMA through our
joint venture with Progenics Pharmaceuticals, payments to DSM Biologics for the
development and manufacture of ProstaScint and the cost to develop the
functional proteomics program at AxCell. Our expenses for research and
development activities were:

- 2001-- $ 10.3 million

- 2000 -- $7.0 million

- 1999 -- $3.8 million

-17-

We intend to pursue research and development activities having commercial
potential and to review all of our programs to determine whether possible market
opportunities, near and longer term, provide an adequate return to justify the
commitment of human and economic resources to their initiation or continuation.
We incurred a significant increase of $3.3 million in our research and
development expenditures during 2001. We expect to incur a significant amount of
expenses in future years for our share of the development of immunotherapies for
prostate and other cancers through our joint venture with Progenics. During
2001, we recognized $332,000 of expenses related to the joint venture with
Progenics, $3.2 million for the DSM development program and $4.9 million for the
proteomics program at AxCell.

COMPETITION

The biotechnology and pharmaceutical industries are subject to intense
competition, including competition from large pharmaceutical companies,
biotechnology companies and other companies, universities and research
institutions. Our existing therapeutic products compete with the products of a
wide variety of other firms, including firms that provide products used in more
traditional treatments or therapies, such as external beam radiation,
chemotherapy agents and narcotic analgesics. In addition, our existing and
potential competitors may be able to develop technologies that are as effective
as, or more effective than those offered by us, which would render our products
noncompetitive or obsolete. Moreover, many of our existing and potential
competitors have substantially greater financial, marketing, sales,
manufacturing, distribution and technological resources than we do. Our existing
and potential competitors may be in the process of seeking FDA or foreign
regulatory approval for their respective products or may also enjoy substantial
advantages over us in terms of research and development expertise, experience in
conducting clinical trials, experience in regulatory matters, manufacturing
efficiency, name recognition, sales and marketing expertise and distribution
channels. We believe that competition for our products is based upon several
factors, including product efficacy, safety, cost-effectiveness, ease of use,
availability, price, patent position and effective product promotion.

We expect competition to intensify in the fields in which we are involved as
technical advances in such fields are made and become more widely known. We
cannot assure you, however, that we or our collaborative partners will be able
to develop our products successfully or that we will obtain patents to provide
protection against competitors. Moreover, we cannot assure you that our
competitors will not succeed in developing therapeutic products that circumvent
our products or that these competitors will not succeed in developing
technologies or products that are more effective than those developed by us.
Notably, Nycomed-Amersham, a company with substantially greater resources than
ours, is dominant in brachytherapy. In addition, many of these companies may
have more experience in establishing third-party reimbursement for their
products. Accordingly, we cannot assure you that we will be able to compete
effectively against existing or potential competitors or that competition will
not have a material adverse effect on our business, financial condition and
results of operations.

MANUFACTURING

Our products must be manufactured in compliance with regulatory requirements and
at commercially acceptable costs. ProstaScint and OncoScint CR/OV were
manufactured at a current good manufacturing practices, or cGMP, compliant
manufacturing facility in Princeton, New Jersey which is operated by Bard
BioPharma L.P., a subsidiary of Purdue BioPharma ("Purdue"). An Establishment
License Application for the facility was approved by the FDA for the manufacture
of ProstaScint in October 1996 and for OncoScint CR/OV in December 1992. Our
manufacturing agreement with Purdue expired in January 2002. In July 2000, we
entered into a Development and Manufacturing Agreement with DSM Biologics
Company B.V. ("DSM"), pursuant to which DSM will conduct certain development
activities with respect to ProstaScint for testing and evaluation purposes. Our
intention is that DSM would replace the arrangement with Purdue, with respect to
the manufacture of ProstaScint. Under the terms of such agreement, and subject
to the regulatory approvals for the manufacturing of ProstaScint, the parties
are obligated to negotiate in good faith a long term supply agreement.
Notwithstanding the parties' obligations to perform under the agreement or to
negotiate a supply agreement in good faith, we cannot be certain that DSM will
satisfactorily perform its obligations thereunder or that the parties will be
able to negotiate a supply agreement on commercially satisfactory terms, if at
all. Our failure to negotiate a supply agreement on commercially reasonable
terms will have a material adverse effect on our business, financial condition
and results of operations. At December 31, 2001 we have sufficient level of
ProstaScint inventory on hand for 2 years while working to secure a supply
arrangement for ProstaScint.

With regard to OncoScint CR/OV, we have a sufficient level of inventory on hand
for the foreseeable future.

-18-

Any new manufacturing arrangement will be subject to FDA oversight, and
qualification of a new manufacturer with the FDA could take a significant amount
of time. Any failure to obtain such regulatory approvals will have a material
adverse effect on our business, financial condition and results of operations.

Raw materials and suppliers

The active raw materials used for the manufacture of our products include
antibodies. We anticipate that our existing supply of OncoScint CR/OV will be
able to meet our needs for commercial quantities of the product for the
foreseeable future. We are de-emphasizing the marketing of this product.

We do not have arrangements with any outside suppliers for the monoclonal
antibody for ProstaScint. This material will be supplied by the same third party
manufacturer that will make ProstaScint. We are currently working to secure such
an arrangement.

Quadramet is manufactured by DuPont pursuant to an agreement with both Berlex
and Cytogen. Some components of Quadramet, particularly Samarium153 and EDTMP,
are provided to DuPont by outside suppliers. DuPont obtains its requirements for
Samarium153 from one supplier. Alternative sources for these components may not
be readily available. If DuPont cannot obtain sufficient quantities of the
components on commercially reasonable terms, or in a timely manner, it would be
unable to manufacture Quadramet on a timely and cost-effective basis which could
have a material adverse effect on our business, financial condition and results
of operations.

Pursuant to the terms of our Product Manufacturing and Supply Agreement with
Draxis, we rely on Draxis as the sole supplier of BrachySeed, a
second-generation radioactive pellet used in the treatment of prostate cancer.
If Draxis fails or is unable to perform under such agreement, we could
experience a material adverse effect on our business, financial condition and
results of operations.

PATENTS AND PROPRIETARY RIGHTS

Consistent with industry practice, we have a policy of using patent and trade
secret protection to preserve our right to exploit the results of our research
and development activities and, to the extent it may be necessary or advisable,
to exclude others from appropriating our proprietary technology.

Our policy is to aggressively protect our proprietary technology by selectively
seeking patent protection in a worldwide program. In addition to the United
States, we file patent applications in Canada, major European countries, Japan
and additional foreign countries on a selective basis to protect inventions
important to the development of our business. We believe that the countries in
which we have obtained and are seeking patent coverage for our proprietary
technology represent the major focus of the pharmaceutical industry in which we
and certain of our licensees will market our respective products.

We hold, or are the licensee of, 41 current United States patents and 45 current
foreign patents. We have filed and currently have pending a number of additional
United States and foreign patent applications, relating to certain aspects of
our technology for diagnostic and therapeutic products, and the methods for
their production and use. We intend to file patent applications with respect to
subsequent developments and improvements, when we believe such protection is in
our best interest.

We are the exclusive licensee of certain patents and patent applications owned
by the University of North Carolina at Chapel Hill, covering parts of the
proteomics technology. These include eight issued United States patents relating
to our phage display libraries, methods of using phage display libraries to
identify peptides that bind to a target molecule of interest, as well as
peptides that bind to certain molecules. We hold an exclusive license under
certain patents and patent applications held by the Memorial Sloan-Kettering
Institute covering PSMA. We are the exclusive licensee of certain United States
patents and applications held by Dow covering Quadramet.

Among our patents are two issued United States patents relating to peptides that
bind to certain molecules expressed on cancer cells. We also co-own with the
University of North Carolina at Chapel Hill an issued United States patent
covering certain polypeptides that contain a WW domain.

We may be entitled under certain circumstances to seek extension of the terms of
our patents.

-19-

We also rely upon, and intend to continue to rely upon, trade secrets,
unpatented proprietary know-how and continuing technological innovation to
develop and maintain our competitive position. We typically enter into
confidentiality agreements with our licensees and any scientific consultants,
and each of our employees has entered into agreements requiring that they
forbear from disclosing confidential information, and in some cases assign to us
all rights in any inventions made while in our employ. We believe that our
valuable proprietary information is protected to the fullest extent practicable;
however, we cannot assure you that:

- additional patents will be issued to us in any or all appropriate
jurisdictions;

- litigation will not be commenced seeking to challenge our patent
protection or that challenges will not be successful;

- our processes or products do not or will not infringe upon the patents
of third parties; or

- the scope of patents issued will successfully prevent third parties
from developing similar and competitive products.

The technology applicable to our products is developing rapidly. A substantial
number of patents have been issued to other biotechnology companies. In
addition, competitors have filed applications for, or have been issued, patents
and may obtain additional patents and proprietary rights relating to products or
processes that are competitive with ours. In addition, others may have filed
patent applications and may have been issued patents to products and to
technologies potentially useful to us or necessary to commercialize our products
or to achieve our business goals. We cannot assure you that we will be able to
obtain licenses of patents on acceptable terms.

We cannot predict how any patent litigation will affect our efforts to develop,
manufacture or market our products.

We are defendants in litigation filed against us in the United States Federal
Court for the District of New Jersey with respect to claims that our ProstaScint
product infringes a third-party patent and we have disclosed certain information
regarding such lawsuit under the caption "Legal Proceedings", herein.

GOVERNMENT REGULATION AND PRODUCT TESTING

The development, manufacture and sale of medical products utilizing our
technology are governed by a variety of statutes and regulations in the United
States and by comparable laws and agency regulations in most foreign countries.

The Food, Drug and Cosmetic Act requires that our products be manufactured in
FDA registered facilities subject to inspection. The manufacturer must be in
compliance with current Good Manufacturing Practice (cGMP) which imposes certain
procedural and documentation requirements upon us and our manufacturing partners
with respect to manufacturing and quality control activities. Noncompliance with
cGMP can result in, among other things, fines, injunctions, civil penalties,
recalls or seizures of products, total or partial suspension of production,
failure of the government to grant premarket clearance or premarket approval for
drugs, withdrawal of marketing approvals and criminal prosecution. Any failure
by us or our manufacturing partners to comply with the requirements of cGMP
could have a material adverse effect on our business, financial condition and
results of operations.

Diagnostic and therapeutic products in the United States are regulated by the
Food Drug and Cosmetic Act and the Public Health Service Act, and by FDA rules
and regulations promulgated thereunder. These laws and regulations require
carefully controlled research and testing of products, government notification,
review and/or approval prior to marketing the products, inspection and/or
licensing of manufacturing and production facilities, adherence to cGMP,
compliance with product specifications, labeling, and other applicable
regulations.

Medical products that we develop or intend to market are subject to substantial
governmental regulation and may be classified as new drugs or biologics under
the Food Drug and Cosmetic Act. The FDA and similar health authorities in most
other countries must approve or license the diagnostic and therapeutic products
before they can be commercially marketed. In order to obtain FDA approval, an
applicant must submit, as relevant for the particular product, proof of safety,
purity, potency and efficacy. In most cases this proof entails extensive
pre-clinical, clinical and laboratory studies. Both the studies and the
preparation and prosecution of those applications by the FDA are expensive and
time consuming, and each may take several years to complete. Difficulties or
unanticipated costs may be encountered by us or our licensees in their
respective efforts to secure necessary governmental approval or licenses, which
could delay or preclude us or our licensees from marketing their products.

-20-

Limited indications for use or other conditions could also be placed on any
approvals that could restrict the commercial applications of products. With
respect to patented products or technologies, delays imposed by the government
approval process may materially reduce the period during which we will have the
exclusive right to exploit them, because patent protection lasts only for a
limited time, beginning on the date the patent is first granted in the case of
United States patent applications filed prior to June 6, 1995, and when the
patent application is first filed in the case of patent applications filed in
the United States after June 6, 1995, and applications filed in the European
Economic Community. We intend to seek to maximize the useful life of our patents
under the Patent Term Restoration Act of 1984 in the United States and under
similar laws if available in other countries.

The majority of our diagnostic and therapeutic products will likely be
classified as new drugs or biologics and will be evaluated in a series of in
vitro, non-clinical and human clinical testing. Typically, clinical testing is
performed in three phases to further evaluate the safety and efficacy of the
drug. In Phase I, a product is tested in a small number of patients primarily
for safety at one or more dosages. Phase II evaluates, in addition to safety,
the efficacy of the product against particular diseases in a patient population
that is generally somewhat larger than Phase I. Clinical trials of certain
diagnostic and cancer therapeutic agents frequently combine Phase I and Phase II
into a single Phase I/II study. In Phase III, the product is evaluated in a
larger patient population sufficient to generate data to support a claim of
safety and efficacy within the meaning of the Food Drug and Cosmetic Act.
Permission by the FDA must be obtained before clinical testing can be initiated
within the United States. This permission is obtained by submission of an
Investigational New Drug application which typically includes the results of in
vitro and non-clinical testing and any previous human testing done elsewhere.
The FDA has 30 days to review the information submitted and makes a final
decision whether to permit clinical testing with the drug or biologic. However,
this process can take longer if the FDA raises questions or asks for additional
information regarding the Investigational New Drug application. A similar
procedure applies to medical device and diagnostic products.

After completion of in vitro, non-clinical and clinical testing, authorization
to market a drug or biologic must be granted by FDA. The FDA grants permission
to market through the review and approval of either a New Drug Application for
drugs or a Biologic License Application for biologics. These applications
provide detailed information on the results of the safety and efficacy of the
drug conducted both in animals and humans. Additionally, information is
submitted describing the facilities and procedures for manufacturing the drug or
biologic.

The Prescription Drug User Fee Act and subsequently, the Food and Drug
Administration Modernization Act of 1997 have established application review
times for both New Drug Applications and Biologic License Applications. For the
majority of new drugs and biologics, FDA is to review and make a recommendation
for approval within 12 months. For drugs and biologics designated as "priority,"
the review time is six months. This review process, however, can and frequently
does exceed these targets.

Once a drug or biologic is approved, we are required to maintain approval status
of the products by providing certain updated safety and efficacy information at
specified intervals. Additionally, we are required to meet other requirements
specified by the Food Drug and Cosmetic Act including but not limited to the
manufacture of products, labeling and promotional materials and the maintenance
of other records and reports. Failure to comply with these requirements or the
occurrence of unanticipated safety effects from the products during commercial
marketing, could lead to the need for product recall, or FDA initiated action,
which could delay further marketing until the products are brought into
compliance. Similar laws and regulations apply in most foreign countries where
these products are likely to be marketed.

Orphan Drug Act

The Orphan Drug Act is intended to provide incentives to manufacturers to
develop and market drugs for rare diseases or conditions affecting fewer than
200,000 persons in the United States at the time of application for orphan drug
designation. A drug that receives orphan drug designation and is the first
product to receive FDA marketing approval for a particular indication is
entitled to orphan drug status, a seven-year exclusive marketing period in the
United States for that indication. Clinical testing requirements for orphan
drugs are the same as those for products that have not received orphan drug
designation. OncoScint CR/OV has received an orphan drug designation for the
detection of ovarian carcinoma. Under the Orphan Drug Act, the FDA cannot
approve any application by another party to market an identical product for
treatment of an identical indication unless the party has a license from the
holder of orphan drug status, or the holder of orphan drug status is unable to
assure an adequate supply of the drug. However, a drug that is considered by FDA
to be different from a particular orphan drug is not barred from sale in the
United States during the seven-year exclusive marketing period even if it
receives marketing approval for the same product claim.

-21-

Fraud and Abuse

Anti-Kickback Laws. Our operations are subject to federal and state
anti-kickback laws. Certain provisions of the Social Security Act, that are
commonly known collectively as the Medicare Fraud and Abuse Statute, prohibit
entities, such as us, from offering, paying, soliciting or receiving any form of
remuneration in return for the referral of Medicare or state health program
patients or patient care opportunities, or in return for the recommendation,
arrangement, purchase, lease or order of items or services that are covered by
Medicare or state health programs. Violation of the Medicare Fraud and Abuse
Statute is a felony, punishable by fines up to $25,000 per violation and
imprisonment for up to five years. In addition, the Department of Health and
Human Services may impose civil penalties of up to $50,000 per act plus three
times the remuneration offered and exclude violators from participation in
Medicare or state health programs. Many states have adopted similar prohibitions
against payments intended to induce referrals to Medicaid and other third party
payor patients.

Physician Self-Referral Laws. We are also subject to federal and state physician
self-referral laws. Federal physician self-referral legislation (known as the
Stark law) prohibits, subject to certain exceptions, a physician or a member of
his immediate family from referring Medicare or Medicaid patients to an entity
providing "designated health services" in which the physician has an ownership
or investment interest, or with which the physician has entered into a
compensation arrangement. The Stark law also prohibits the entity receiving the
referral from billing any good or service furnished pursuant to an unlawful
referral. The penalties for violations include a prohibition on payment by these
government programs and civil penalties of as much as $15,000 for each violative
referral and $100,000 for participation in a circumvention scheme." Various
state laws also contain similar provisions and penalties.

False Claims Laws. Under separate statutes, submission of claims for payment
that are "not provided as claimed" may lead to civil money penalties, criminal
fines and imprisonment, and/or exclusion from participation in Medicare,
Medicaid and other federally funded state health programs. These false claims
statutes include the Federal False Claims Act, which allows any person to bring
suit alleging false or fraudulent Medicare or Medicaid claims or other
violations of the statute and to share in any amounts paid by the entity to the
government in fines or settlement. Such suits, known as qui tam actions, have
increased significantly in recent years causing greater numbers of health care
companies to have to defend a false claim action, pay fines or be excluded from
the Medicare, Medicaid or other federal or state health care programs as a
result of any investigation arising out of such action.

Other regulations

In addition to regulations enforced by FDA, we are also subject to regulation
under the state and local authorities and other federal statutes and agencies
including the Occupational Safety and Health Act, the Environmental Protection
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act and the Nuclear Regulatory Commission.

Foreign regulatory approval

The regulatory approval process in Europe has changed over the past few years.
There are two regulatory approval processes in Europe for products developed by
us. Beginning in 1995, the centralized procedure became mandatory for all
biotechnology products. Under this regulatory scheme, the application is
reviewed by two scientific project leaders referred to as the rapporteur and
co-rapporteur, respectively. Their roles are to prepare assessment reports of
safety and efficacy and for recommending the approval for full European Union
marketing.

The second regulatory scheme, referred to as the Mutual Recognition Procedure,
is a process whereby a product's national registration in one member state
within the European Union may be "mutually recognized" by other member states
within the European Union.

-22-

Substantial requirements, comparable in many respects to those imposed under the
Food Drug and Cosmetic Act, will have to be met before commercial sale is
permissible in most countries. There can be no assurance, however, as to whether
or when governmental approvals, other than those already obtained, will be
obtained or as to the terms or scope of those approvals.

HEALTH CARE REIMBURSEMENT

Our business, financial condition and results of operations will continue to be
affected by the efforts of governments and third-party payors to contain or
reduce the costs of healthcare through various means. There have been, and we
expect that there will continue to be, federal and state proposals to implement
government control of pricing and profitability of therapeutic and diagnostic
imaging agents. In addition, an increasing emphasis on managed care has and will
continue to increase the pressure on pricing of these products. While we cannot
predict whether legislative or regulatory proposals will be adopted or the
effects proposals or managed care efforts may have on our business, the
announcement of proposals and the adoption of proposals or efforts could have a
material adverse effect on our business, financial condition and results of
operations. Further, to the extent proposals or efforts have a material adverse
effect on other companies that are our prospective corporate partners, our
ability to establish strategic alliances may be materially and adversely
affected. In certain foreign markets, the pricing and profitability of our
products generally are subject to government controls.

Sales of our products depend in part on the availability of reimbursement to the
consumer from third-party payors, including Medicare, Medicaid, and private
health insurance plans. Third-party payors are increasingly challenging the
prices charged for medical products and services. To the extent we succeed in
bringing products to market, we cannot assure you that these products will be
considered cost-effective and that reimbursement to consumers will be available
or sufficient to allow us to sell our products on a competitive basis.
Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that our products are clinically useful and
cost-effective, medically necessary and not experimental or investigational.
Since reimbursement approval is required from each payor individually, seeking
approvals can be a time consuming and costly process which could require us to
provide supporting scientific, clinical and cost-effectiveness data for the use
of our products to each payor separately. If we or our collaborators are unable
to secure adequate third party reimbursement for our products, there would be
material adverse effect on its business, financial condition and results of
operations.

CUSTOMERS

During the year ended December 31, 2001, we received 63% of our total revenues
from four customers, Berlex Laboratories, Inc. (20%) and the radiopharmacy
chains of Mallinckrodt Medical, Inc. (20%), Medi-Physics (12%) and Syncor
International Corporation (11%).

EMPLOYEES

As of March 1, 2002, we employed 74 persons, 73 of which are employed full-time
and 1 part-time. Of such 74 persons, 26 were in our proteomics subsidiary,
AxCell, 1 in regulatory, 5 in clinical activities, 15 in administration and
management, and 27 in marketing and sales. We believe that we have been
successful in attracting skilled and experienced employees. None of our
employees is covered by a collective bargaining agreement. All of our employees
have executed confidentiality agreements. We consider relations with our
employees to be excellent.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

Investing in the Company's Common Stock involves a high degree of risk. You
should carefully consider the following risks and uncertainties described below
together with the other information included or incorporated by reference in
this Annual Report on Form 10-K in your decision as to whether to invest in our
Common Stock. If any of the following risks or uncertainties actually occur, our
business, financial condition and operating results could be significantly and
adversely affected. If that happens, the price of our Common Stock could
decline, and you could lose all or part of your investment.

We Have A History Of Operating Losses And An Accumulated Deficit And Expect To
Incur Losses In The Future.

We have a history of operating losses since our inception. We had a net loss of
$12.1 million for the year ended December 31, 2001 We had a net loss of $27.3
million for the year ended December 31, 2000 which included one-time, non-cash
charges of $13.1 million for the acquisition of product candidate rights and
$4.3 million for the cumulative effect of an accounting change following the
adoption of Securities and Exchange Commission Staff Accounting Bulletin No.
101. We had net income of $729,000 for the year ended December 31, 1999 which

-23-

included a $3.3 million non-operating gain. We had an accumulated deficit of
$340.7 million as of December 31, 2001. In order to develop and commercialize
our technologies, particularly our functional proteomics program and our
prostate specific membrane antigen, or PSMA, technology, and expand our oncology
products, we expect to incur significant increases in our expenses over the next
several years. As a result, we may need to generate significant additional
revenue to become profitable.

Our ability to generate and sustain significant additional revenues or achieve
profitability will depend upon the factors discussed elsewhere in this "Risk
Factors" Section, as well as numerous other factors outside of our control,
including:

- development of competing products that are more effective or less
costly than ours;

- our ability to develop and commercialize our own products and
technologies; and

- our ability to achieve increased sales for our existing products and
sales for any new products.

As a result, we may never be able to generate or sustain significant additional
revenue or achieve profitability.

We Are Heavily Dependent On Market Acceptance Of ProstaScint, Quadramet and
BrachySeed For Near-Term Revenues.

We expect ProstaScint and Quadramet to account for a significant percentage of
our product-related revenues in the near future. For the year ended December 31,
2001, revenues from ProstaScint and Quadramet accounted for approximately 89% of
our product related revenues.

Because these products contribute the majority of our product-related revenues,
our business, financial condition and results of operations depend on their
acceptance as safe, effective and cost-efficient alternatives to other available
treatment and diagnostic protocols by the medical community, including:

- health care providers, such as hospitals and physicians; and

- third-party payors, including Medicare, Medicaid, private insurance
carriers and health maintenance organizations.

Our customers, including technologists and physicians, must successfully
complete our Partners in Excellence Program, or PIE Program, a proprietary
training program designed to promote the correct acquisition and interpretation
of ProstaScint images. This product is technique dependent and requires a
learning commitment on the part of users. We cannot assure you that additional
technologist's and physicians will make this commitment or otherwise accept this
product as part of their treatment practices.

Berlex Laboratories, Inc. markets Quadramet in the United States through an
agreement with us entered into in October 1998. We cannot assure you that Berlex
will be able to successfully market Quadramet or that this agreement will result
in significant revenues for us. We recently obtained marketing rights to
Quadramet in Canada, but have not yet implemented a selling program. We cannot
assure you that Quadramet can be marketed effectively in Canada, or that it will
contribute significantly to our revenues.

We cannot assure you that Quadramet will be approved for additional indications,
due to uncertainty as to efficacy or safety for other purposes, regulatory
obstacles and physician preferences for existing or competing practices.

Accordingly, we cannot assure you that ProstaScint, Quadramet or BrachySeed will
achieve market acceptance on a timely basis, or at all. If ProstaScint,
Quadramet or BrachySeed do not achieve broader market acceptance, we may not be
able to generate sufficient revenue to become profitable.

Our Functional Proteomics Program Is At An Early Stage Of Development.

We are developing a functional proteomics program. This technology involves new
approaches to drug research and development and remains commercially unproven.
Our technology and development focus is primarily directed toward offering an
infrastructure to companies for the development of drugs to treat a variety of
complex human diseases. There is limited understanding generally relating to the
role of proteins in diseases, and few products based on protein interaction
discoveries have been developed and commercialized. Even if our proteomics

-24-

program is successful in identifying and validating biological targets, there is
no certainty that we or our customers will be able to develop or commercialize
products to improve human health. We have developed and intend to continue to
develop a proteomics program. This technology involves new approaches to drug
research and development and remains commercially unproven. Our technology and
development focus is primarily directed toward offering an infrastructure to
companies for the development of drugs to treat a variety of complex human
diseases. There is limited understanding generally relating to the role of
proteins in diseases, and few products based on protein interaction discoveries
have been developed and commercialized. Even if our proteomics program is
successful in identifying and validating biological targets, there is no
certainty that we or our customers will be able to develop or commercialize
products to improve human health.

Our technology program for proteomics is still in the early stages of
development. We may not be able to populate our ProChart with information that
is useful to potential customers in a timely manner. Even if we complete and
develop successfully our proteomics technology, the technology may not be
accepted by, or be useful to, our potential customers.

In addition, the success of our proteomics technology will depend upon our
ability to use software tools to generate data that relates protein signaling
pathways to a variety of other bioinformatic data. Because of the complexity of
this data, we may not be able to detect and remedy any design defects or
software errors in our existing or future technologies, including databases.

We may not be successful in addressing or mitigating these risks and
uncertainties, and, if we are not, our business could be significantly and
adversely affected.

There Is A Limited Market For Our Functional Potential Proteomics Products

Due to the specialized nature and anticipated cost of our proteomics technology
and services, there are a limited number of pharmaceutical and biotechnology
companies that are potential customers. In addition, demand for our functional
proteomics technology and services is limited because:

- our potential customers may decide to conduct in-house research rather
than subscribe to our ProChart database;

- our competitors may offer similar services at competitive prices;

- we may not be able to service satisfactorily the needs of our
potential or actual customers;

- others may publicly disclose or patent proprietary information
contained in our ProChart (including information related to protein
signaling pathways or target candidates) or relating to prostate
antigens or antibodies; and

- technological innovations may be discovered that are more advanced
than those used by or available to us.

We may not be successful in addressing or mitigating these risks and
uncertainties, and, if we are not, our business could be significantly and
adversely affected.

We Have Experienced Fluctuating Results Of Operations.

Our results of operations have fluctuated on an annual and quarterly basis and
may fluctuate significantly from period to period in the future, due to, among
other factors:

- variations in revenue from sales of and royalties from our products;

- timing of regulatory approvals and other regulatory announcements
relating to our products;

- variations in our marketing, manufacturing and distribution channels;

- timing of the acquisition and successful integration of complementary
products and technologies;

- timing of new product announcements and introductions by us and our
competitors; and

-25-

- product obsolescence resulting from new product introductions by us or
our competitors.

Many of these factors are outside our control. Due to one or more of these
factors, our results of operations may fall below the expectations of securities
analysts and investors in one or more future quarters. If this happens, the
market price of our Common Stock could decline.

We May Need To Raise Additional Capital Which May Not Be Available.

We have incurred negative cash flows from operations since inception. We
expended, and will need to continue to expend, substantial funds to complete our
planned product development efforts, including our proteomics and PSMA programs.
Our future capital requirements and the adequacy of our available funds depend
on many factors, including:

- successful commercialization of our products;

- acquisition of complementary products and technologies;

- magnitude, scope and results of our product development efforts;

- progress of preclinical studies and clinical trials;

- progress toward regulatory approval for our products;

- costs of filing, prosecuting, defending and enforcing patent claims
and other intellectual property rights;

- competing technological and market developments; and

- expansion of strategic alliances for the sale, marketing and
distribution of our products.

We may raise additional capital through public or private equity offerings, debt
financings or additional collaborations and licensing arrangements. Additional
financing may not be available to us when needed, or, if available, we may not
be able to obtain financing on terms favorable to us or our stockholders. If we
raise additional capital by issuing equity securities, the issuance will result
in ownership dilution to our stockholders. If we raise additional funds through
collaborations and licensing arrangements, we may be required to relinquish
rights to certain of our technologies or product candidates or to grant licenses
on unfavorable terms. If we relinquish rights or grant licenses on unfavorable
terms, we may not be able to develop or market products in a manner that is
profitable to us. If adequate funds are not available, we may not be able to
conduct research activities, preclinical studies, clinical trials or other
activities relating to the successful commercialization of our products on a
timely basis, if at all, with the result that our business could be
significantly and adversely affected.

Our Products, Generally, Are In The Early Stages Of Development And
Commercialization And We May Never Achieve The Revenue Goals Set Forth In Our
Business Plan.

We began operations in 1980 and have been engaged primarily in research directed
toward the development, commercialization and marketing of products to improve
diagnosis and treatment of cancer and other diseases. In December 1992, we
introduced for commercial use our OncoScint imaging agent. In October 1996, we
introduced for commercial use our ProstaScint imaging agent. In March 1997, we
introduced for commercial use our Quadramet therapeutic product. In 2001, we
launched BrachySeed. These products have not yet achieved significant commercial
success. In 1998, we undertook a restructuring to focus on the development of
our PSMA and proteomics technologies as well as the marketing of these existing
products.

Our PSMA and proteomics technologies are still in the early stages of
development. We have only recently begun to incorporate our proteomics
technology into commercialized products. We may be unable to continue to
successfully develop or commercialize these products and technologies.

-26-

Our business is therefore subject to the risks inherent in the development of an
early stage biopharmaceutical business enterprise, such as the need:

- to obtain sufficient capital to support the expenses of developing our
technology and commercializing our products;

- to ensure that our products are safe and effective;

- to obtain regulatory approval for the use and sale of our products;

- to manufacture our products in sufficient quantities and at a
reasonable cost;

- to develop a sufficient market for our products; and

- to attract and retain qualified management, sales, technical and
scientific staff.

The problems frequently encountered using new technologies and operating in a
competitive environment also may affect our business. If we fail to properly
address these risks and attain our business objectives, our business could be
significantly and adversely affected.

Our PSMA Product Development Program Is Novel And, Consequently,
Inherently Risky.

We are subject to the risks of failure inherent in the development of product
candidates based on new technologies, including our PSMA technology. These risks
include the possibility that:

- the technologies we use will not be effective;

- our product candidates will be unsafe;

- our product candidates will fail to receive the necessary regulatory
approvals;

- the product candidates will be hard to manufacture on a large scale or
will be uneconomical to market; and

- we will not successfully overcome technological challenges presented
by our potential new products.

Our objectives include developing our PSMA technology into novel cancer
therapeutics, including a cancer vaccine. To our knowledge, no therapeutic
cancer vaccine has been demonstrated effective or approved for marketing. Our
other research and development programs involve similarly novel approaches to
human therapeutics. Consequently, there is no precedent for the successful
commercialization of therapeutic products based on our PSMA technologies. We
cannot assure you that any products will be successfully developed from our PSMA
technology. If we fail to develop such products for the reasons set forth above
or for any other reason, our business could be significantly and adversely
affected.

All of Our Potential Oncology Products Will Be Subject To The Risks Of Failure
Inherent In The Development Of Diagnostic Or Therapeutic Products Based On New
Technologies.

Product development for cancer treatment involves a high degree of risk. We
cannot assure you that the product candidates we develop, pursue or offer will
prove to be safe and effective, will receive the necessary regulatory approvals,
will not be precluded by proprietary rights of third parties or will ultimately
achieve market acceptance. These product candidates will require substantial
additional investment, laboratory development, clinical testing and regulatory
approvals prior to their commercialization. We cannot assure you that we will
not experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products.

Before we obtain regulatory approvals for the commercial sale of any of our
products under development, we must demonstrate through preclinical studies and
clinical trials that the product is safe and efficacious for use in each target
indication. The results from preclinical studies and early clinical trials may
not be predictive of results that will be obtained in large-scale testing. We
cannot assure you that our clinical trials will demonstrate the safety and
efficacy of any products or will result in marketable products. A number of
companies in the biotechnology industry have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials.
Clinical trials or marketing of any potential diagnostic or therapeutic products

-27-

may expose us to liability claims for the use of these diagnostic or therapeutic
products. We may not be able to maintain product liability insurance or
sufficient coverage may not be available at a reasonable cost. In addition, as
we develop diagnostic or therapeutic products internally, we will have to make
significant investments in diagnostic or therapeutic product development,
marketing, sales and regulatory compliance resources. We will also have to
establish or contract for the manufacture of products, including supplies of
drugs used in clinical trials, under the current Good Manufacturing Practices of
the FDA. We also cannot assure you that product issues will not arise following
successful clinical trials and FDA approval.

The rate of completion of clinical trials also depends on the rate of patient
enrollment. Patient enrollment depends on many factors, including the size of
the patient population, the nature of the protocol, the proximity of patients to
clinical sites and the eligibility criteria for the study. Delays in planned
patient enrollment may result in increased costs and delays, which could have a
harmful effect on our ability to develop the products in our pipeline. If we are
unable to develop and commercialize products on a timely basis or at all, our
business could be significantly and adversely affected.

Competition In Our Field Is Intense And Likely To Increase.

We face, and will continue to face, intense competition from one or more of the
following entities:

- pharmaceutical companies;

- biotechnology companies;

- bioinformatics companies;

- diagnostic companies;

- academic and research institutions; and

- government agencies.

All of our lines of business are subject to significant competition from
organizations that are pursuing technologies and products that are the same as
or similar to our technology and products. Many of the organizations competing
with us have greater capital resources, research and development staffs and
facilities and marketing capabilities.

Before we recover development expenses for our products and technologies, the
products or technologies may become obsolete as a result of technological
developments by us or others. Our products could also be made obsolete by new
technologies which are less expensive or more effective. We may not be able to
make the enhancements to our technology necessary to compete successfully with
newly emerging technologies and failure to do so could significantly and
adversely affect our business.

We Rely Heavily On Our Collaborative Partners.

Our success depends in significant part upon the success of our collaborative
partners. We have entered into the following agreements for the sale, marketing,
distribution and manufacture of our products, product candidates and
technologies:

- license from The Dow Chemical Company relating to the Quadramet
technology;

- sub-license and marketing agreement with Berlex Laboratories, Inc.
relating to the Quadramet technology which we licensed from The Dow
Chemical Company;

- agreement for manufacture of Quadramet by The DuPont Pharmaceuticals
Company (formerly the radiopharmaceuticals division of The DuPont
Merck Company);

- marketing and platform development agreement with InforMax, Inc.
related to our proteomics program;

- joint venture with Progenics Pharmaceuticals for the development of
PSMA for in vivo immunotherapy for prostate and other cancers;

-28-

- licensing agreement with Molecular Staging for technology to be used
in developing in vitro diagnostic tests using PSMA and prostate
specific antigen, or PSA;

- marketing and distribution agreement with Draxis Health, Inc. and its
subsidiary, Draximage, Inc. to market and distribute BrachySeed; and

- marketing, license and supply agreements with Advanced Magnetics, Inc.
related to our oncology product line for products currently subject to
regulatory approval.

Because our collaborative partners are responsible for certain of our sales,
marketing, manufacturing and distribution activities, these activities are
outside our direct control. We cannot assure you that our partners will perform
their obligations under these agreements with us. In the event that our
collaborative partners do not successfully market and sell our products or
breach their obligations under our agreements, our products may not be
commercially successful, any success may be delayed and new product development
could be inhibited with the result that our business could be significantly and
adversely affected.

Our Business Could Be Harmed If Our Collaborative Arrangements Expire Or Are
Terminated Early.

We cannot assure you that we will be able to maintain our existing collaborative
arrangements. If they expire or are terminated, we cannot assure you that they
will be renewed or that new arrangements will be available on acceptable terms,
if at all. In addition, we cannot assure you that any new arrangements or
renewals of existing arrangements will be successful, that the parties to any
new or renewed agreements will perform adequately or that any former or
potential collaborators will not compete with us.

We cannot assure you that our existing or future collaborations will lead to the
development of product candidates or technologies with commercial potential,
that we will be able to obtain proprietary rights or licenses for proprietary
rights for our product candidates or technologies developed in connection with
these arrangements or that we will be able to ensure the confidentiality of
proprietary rights and information developed in such arrangements or prevent the
public disclosure thereof.

The Termination Of One Or More License Agreements That Are Important In The
Manufacture Of Our Current Products And New Product Research And Development
Activities Would Harm Our Business.

We are a party to license agreements under which we have rights to use
technologies owned by other companies in the manufacture of our products and in
our proprietary research, development and testing processes. We are the
exclusive licensee of certain patents and patent applications held by the
University of North Carolina at Chapel Hill covering part of the technology used
in the proteomics program and of certain patents and patent applications held by
the Memorial Sloan-Kettering Institute covering PSMA. We also depend upon the
enforceability of our license with The Dow Chemical Company with respect to
Quadramet. If the licenses were terminated, we may not be able to find suitable
alternatives to this technology on a timely basis or on reasonable terms, if at
all. The loss of the right to use these technologies that we have licensed would
significantly and adversely affect our business.

We Have Limited Sales, Marketing And Distribution Capabilities For Our Products.

We have only recently established a sales force and have limited internal sales,
marketing and distribution capabilities for our products. We depend on Berlex
Laboratories, Inc. for the sale, marketing and distribution of Quadramet in the
United States. In locations outside the United States, we have not established a
selling presence. If we are unable to establish and maintain significant sales,
marketing and distribution efforts, either internally or through arrangements
with third parties, our business may be significantly and adversely affected.

There Are Risks Associated With The Manufacture And Supply Of Our Products.

If we are to be successful, our products will have to be manufactured through
third-party manufacturers in compliance with regulatory requirements and at
costs acceptable to us. We cannot assure you that we will be able to arrange for
the manufacture of our products on commercially reasonable terms. If we are
unable to successfully arrange for the manufacture of our products and product
candidates, we will not be able to successfully commercialize our products and
our business will be significantly and adversely affected.

-29-

ProstaScint and OncoScint CR/OV are manufactured at a cGMP compliant
manufacturing facility operated by Purdue. We have access to the facility for
continued manufacturing of these products until January 2002. We expect that
this facility will allow us to meet our projected production requirements for
ProstaScint and OncoScint CR/OV in the short term. We entered into a Development
and Manufacturing Agreement with DSM which we intend would replace the
arrangement with Purdue with respect to ProtaScint and OncoScint CR/OV prior to
January 2002. Notwithstanding the parties obligations to perform under the
agreement with DSM or to negotiate a supply agreement in good faith, we cannot
be certain that DSM will satisfactorily perform its obligations thereunder or
that the parties will be able to negotiate a supply agreement on commercially
reasonable terms, if at all. Our failure to negotiate a long term supply
agreement on commercially reasonable terms will have a material adverse effect
on our business, financial condition and results of operations.

Quadramet is manufactured by DuPont pursuant to an agreement with both Berlex
and Cytogen. Some components of Quadramet, particularly Samarium153 and EDTMP,
are provided to DuPont by outside suppliers. Due to radioactive decay,
Samarium153 must be produced on a weekly basis. DuPont obtains its requirements
for Samarium153 from one supplier. Alternative sources for these components may
not be readily available. If DuPont cannot obtain sufficient quantities of the
components on commercially reasonable terms, or in a timely manner, it would be
unable to manufacture Quadramet on a timely and cost-effective basis which could
have a material adverse effect on our business, financial condition and results
of operations.

We rely on Draxis as the sole supplier of BrachySeed. If Draxis fails to or is
unable to timely supply BrachySeed, we could experience a material adverse
effect on our business, financial condition and results of operations.

We and our third-party manufacturers are required to adhere to United States
Food & Drug Administration regulations setting forth requirements for current
Good Manufacturing Practices, or cGMP, and similar regulations in other
countries, which include extensive testing, control and documentation
requirements. Ongoing compliance with cGMP, labeling and other applicable
regulatory requirements are monitored through periodic inspections and market
surveillance by state and federal agencies, including the FDA, and by comparable
agencies in other countries. Failure of our third-party manufacturers or us to
comply with applicable regulations could result in sanctions being imposed on
us, including fines, injunctions, civil penalties, failure of the government to
grant premarket clearance or premarket approval of drugs, delays, suspension or
withdrawal of approvals, seizures or recalls of products, operating restrictions
and criminal prosecutions any of which could significantly and adversely affect
our business.

Failure Of Consumers To Obtain Adequate Reimbursement From Third-Party Payors
Could Limit Market Acceptance And Affect Pricing Of Our Products.

Our business, financial condition and results of operations will continue to be
affected by the efforts of governments and other third-party payors to contain
or reduce the costs of healthcare. There have been, and we expect that there
will continue to be, a number of federal and state proposals to implement
government control of pricing and profitability of therapeutic and diagnostic
imaging agents such as our products. In addition, an emphasis on managed care
increases possible pressure on pricing of these products. While we cannot
predict whether these legislative or regulatory proposals will be adopted, or
the effects these proposals or managed care efforts may have on our business,
the announcement of these proposals and the adoption of these proposals or
efforts could affect our stock price or our business. Further, to the extent
these proposals or efforts have an adverse effect on other companies that are
our prospective corporate partners, our ability to establish necessary strategic
alliances may be harmed.

Sales of our products depend in part on reimbursement to the consumer from
third-party payors, including Medicare, Medicaid and private health insurance
plans. Third-party payors are increasingly challenging the prices charged for
medical products and services. We cannot assure you that our products will be
considered cost-effective and that reimbursement to consumers will continue to
be available, or will be sufficient to allow us to sell our products on a
competitive basis. Approval of our products for reimbursement by a third-party
payor may depend on a number of factors, including the payor's determination
that our products are clinically useful and cost-effective, medically necessary
and not experimental or investigational. Reimbursement is determined by each
payor individually and in specific cases. The reimbursement process can be time
consuming. If we cannot secure adequate third-party reimbursement for our
products, our business could be significantly and adversely affected.

-30-

If We Are Unable To Comply With Applicable Governmental Regulations, We May Not
Be Able To Continue Our Operations.

Any products tested, manufactured or distributed by us or on our behalf pursuant
to FDA clearances or approvals are subject to pervasive and continuing
regulation by numerous regulatory authorities, including primarily the FDA. We
may be slow to adapt, or we may never adapt to changes in existing requirements
or adoption of new requirements or policies. Our failure to comply with
regulatory requirements could subject us to enforcement action, including
product seizures, recalls, withdrawal of clearances or approvals, restrictions
on or injunctions against marketing our products based on our technology, and
civil and criminal penalties. We cannot assure you that we will not be required
to incur significant costs to comply with laws and regulations in the future or
that laws or regulations will not create an unsustainable burden on our
business.

Numerous federal, state and local governmental authorities, principally the FDA,
and similar regulatory agencies in other countries, regulate the preclinical
testing, clinical trials, manufacture and promotion of any compounds or agents
we or our collaborative partners develop, and the manufacturing and marketing of
any resulting drugs. The drug development and regulatory approval process is
lengthy, expensive, uncertain and subject to delays.

The regulatory risks we face also include the following:

- any compound or agent we or our collaborative partners develop must
receive regulatory agency approval before it may be marketed as a drug
in a particular country;

- the regulatory process, which includes preclinical testing and
clinical trials of each compound or agent in order to establish its
safety and efficacy, varies from country to country, can take many
years and requires the expenditure of substantial resources;

- in all circumstances, approval of the use of previously unapproved
radioisotopes in certain of our products requires approval of either
the Nuclear Regulatory Commission or equivalent state regulatory
agencies. A radioisotope is an unstable form of an element which
undergoes radioactive decay, thereby emitting radiation which may be
used, for example, to image or destroy harmful growths or tissue. We
cannot assure you that such approvals will be obtained on a timely
basis, or at all;

- data obtained from preclinical and clinical activities are susceptible
to varying interpretations which could delay, limit or prevent
regulatory agency approval; and

- delays or rejections may be encountered based upon changes in
regulatory agency policy during the period of drug development and/or
the period of review of any application for regulatory agency
approval. These delays could adversely affect the marketing of any
products we or our collaborative partners develop, impose costly
procedures upon our activities, diminish any competitive advantages we
or our collaborative partners may attain and adversely affect our
ability to receive royalties.

We cannot assure you that, even after this time and expenditure, regulatory
agency approvals will be obtained for any compound or agent developed by or in
collaboration with us. Moreover, regulatory agency approval for a drug or agent
may entail limitations on the indicated uses that could limit the potential
market for any such drug. Furthermore, if and when such approval is obtained,
the marketing, manufacture, labeling, storage and record keeping related to our
products would remain subject to extensive regulatory requirements. Discovery of
previously unknown problems with a drug, its manufacture or its manufacturer may
result in restrictions on such drug, manufacture or manufacturer, including
withdrawal of the drug from the market. Failure to comply with regulatory
requirements could result in fines, suspension of regulatory approvals,
operating restrictions and criminal prosecution.

The United States Food, Drug and Cosmetics Act requires (i) that our products be
manufactured in FDA registered facilities subject to inspection, and (ii) that
we comply with cGMP, which imposes certain procedural and documentation
requirements upon us and our manufacturing partners with respect to
manufacturing and quality assurance activities. If we or our manufacturing
partners do not comply with cGMP we may be subject to sanctions, including
fines, injunctions, civil penalties, recalls or seizures of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for drugs, withdrawal of marketing approvals and
criminal prosecution.

-31-

We Could Be Negatively Impacted By Future Interpretation Or Implementation Of
Federal And State Fraud And Abuse Laws, Including Anti-kickback Laws, The
Federal Stark Law And Other Federal And State Anti-referral Laws.

We are subject to various federal and state laws pertaining to health care fraud
and abuse, including anti-kickback laws and physician self-referral laws.
Violations of these laws are punishable by criminal and/or civil sanctions,
including, in some instances, imprisonment and exclusion from participation in
federal and state health care programs, including Medicare, Medicaid and
Veterans Administration health programs. We have not been challenged by a
governmental authority under any of these laws and believe that our operations
are in compliance with such laws. However, because of the far-reaching nature of
these laws, we may be required to alter one or more of our practices to be in
compliance with these laws. Health care fraud and abuse regulations are complex
and even minor, inadvertent irregularities in submissions can potentially give
rise to claims that the statute has been violated. Any violations of these laws
could result in a material adverse effect on our business, financial condition
and results of operations. If there is a change in law, regulation or
administrative or judicial interpretations, we may have to change our business
practices or our existing business practices could be challenged as unlawful,
which could have a material adverse effect on our business, financial condition
and results of operations.

We could become subject to false claims litigation under federal statutes, which
can lead to civil money penalties, criminal fines and imprisonment, and/or
exclusion from participation in Medicare, Medicaid and other federal and state
health care programs. These false claims statutes include the False Claims Act,
which allows any person to bring suit alleging false or fraudulent Medicare or
Medicaid claims or other violations of the statute and to share in any amounts
paid by the entity to the government in fines or settlement. Such suits, known
as qui tam actions, have increased significantly in recent years and have
increased the risk that a health care company will have to defend a false claim
action, pay fines or be excluded from the Medicare program, Medicaid programs or
other federal and state health care programs as a result of an investigation
arising out of such action. We cannot assure you that we will not become subject
to such litigation or, if we are not successful in defending against such
actions, that such actions will not have a material adverse effect on our
business, financial condition and results of operations.

We Depend On Attracting And Retaining Key Personnel.

We are highly dependent on the principal members of our management and
scientific staff. The loss of their services might significantly delay or
prevent the achievement of development or strategic objectives. Our success
depends on our ability to retain key employees and to attract additional
qualified employees. Competition for personnel is intense, and we cannot assure
you that we will be able to retain existing personnel or attract and retain
additional highly qualified employees in the future.

We have an employee retention agreement with our President and Chief Executive
Officer, H. Joseph Reiser, Ph.D., which provides for vesting of stock options
for the purchase of shares of our Common Stock based on continued employment and
on the achievement of performance objectives defined by the board of directors.
We do not have similar retention agreements with its other key personnel. If we
are unable to hire and retain personnel in key positions, our business could be
significantly and adversely affected unless qualified replacements can be found.

Our Business Exposes Us To Potential Liability Claims That May Exceed Our
Financial Resources, Including Our Insurance Coverage, And May Lead To The
Curtailment Or Termination Of Our Operations.

Our business is subject to product liability risks inherent in the testing,
manufacturing and marketing of our products. We cannot assure you that product
liability claims will not be asserted against us, our collaborators or our
licensees. While we currently maintain product liability insurance in amounts we
believe are adequate, we cannot assure you that such coverage will be adequate
to protect us against future product liability claims or that product liability
insurance will be available to us in the future on commercially reasonable
terms, if at all. Furthermore, we cannot assure you that we will be able to
avoid significant product liability claims and adverse publicity. If liability
claims against us exceed our financial resources we may have to curtail or
terminate our operations.

Our Business Involves Environmental Risks That May Result In Liability.

We are subject to a variety of local, state, federal and foreign government
regulations relating to storage, discharge, handling, emission, generation,
manufacture and disposal of toxic, infectious or other hazardous substances used
to manufacture our products. If we fail to comply with these regulations, we
could be liable for damages, penalties or other forms of censure and our
business could be significantly and adversely affected.

-32-

Our Intellectual Property Is Difficult To Protect.

Our business and competitive positions are dependent upon our ability to protect
our proprietary technology. Because of the substantial length of time and
expense associated with development of new products, we, like the rest of the
biopharmaceutical industry, place considerable importance on obtaining and
maintaining patent and trade secret protection for new technologies, products
and processes. We have filed patent applications for our technology for
diagnostic and therapeutic products and the methods for its production and use.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including us, are generally uncertain and involve complex legal and
factual questions. Our patent applications may not protect our technologies and
products because, among other things:

- there is no guarantee that any of our pending patent applications will
result in issued patents;

- we may develop additional proprietary technologies that are not
patentable;

- there is no guarantee that any patents issued to us, our collaborators
or our licensors will provide a basis for a commercially viable
product;

- there is no guarantee that any patents issued to us or our
collaborators will provide us with any competitive advantage;

- there is no guarantee that any patents issued to us or our
collaborators will not be challenged, circumvented or invalidated by
third parties; and

- there is no guarantee that any patents previously issued to others or
issued in the future will not have an adverse effect on our ability to
do business.

In addition, patent law in the technology fields in which we operate is
uncertain and still evolving, and we cannot assure you as to the degree of
protection that will be afforded any patents we are issued or license from
others. Furthermore, we cannot assure you that others will not independently
develop similar or alternative technologies, duplicate any of our technologies,
or, if patents are issued to us, design around the patented technologies
developed by us. In addition, we could incur substantial costs in litigation if
we are required to defend ourselves in patent suits by third parties or if we
initiate such suits. We cannot assure you that, if challenged by others in
litigation, the patents we have been issued, or which have been assigned or have
been licensed from others will not be found invalid. We cannot assure you that
our activities would not infringe patents owned by others. Defense and
prosecution of patent matters can be expensive and time-consuming and,
regardless of whether the outcome is favorable to us, can result in the
diversion of substantial financial, managerial and other resources. An adverse
outcome could:

- subject us to significant liability to third parties;

- require us to cease any related research and development activities
and product sales; or

- require us to obtain licenses from third parties.

We cannot assure you that any licenses required under any such third-party
patents or proprietary rights would be made available on commercially reasonable
terms, if at all. Moreover, the laws of certain countries may not protect our
proprietary rights to the same extent as the laws of the United States. We
cannot predict whether us or our competitors' pending patent applications will
result in the issuance of valid patents which may significantly and adversely
affect our business.

We Cannot Be Certain That Our Security Measures Protect Our Unpatented
Proprietary Technology.

We also rely upon trade secret protection for some of our confidential and
proprietary information that is not subject matter for which patent protection
is available. To help protect our rights, we require all employees, consultants,
advisors and collaborators to enter into confidentiality agreements that require
disclosure, and in most cases, assignment to us, of their ideas, developments,
discoveries and inventions, and that prohibit the disclosure of confidential

-33-

information to anyone outside Cytogen or our subsidiaries. We cannot assure you,
however, that these agreements will provide adequate protection for our trade
secrets, know-how or other proprietary information or prevent any unauthorized
use or disclosure.

We Are Currently Subject To Patent Litigation.

We are a defendant in a lawsuit filed against us in the United States Federal
Court for the District of New Jersey by M. David Goldenberg and Immunomedics,
Inc. This lawsuit was filed on March 16, 2000. The litigation claims that our
ProstaScint product infringes a patent purportedly owned by Dr. Goldenberg and
licensed to Immunomedics. The patent sought to be enforced in the litigation has
now expired. As a result, the claim, even if successful, would not result in a
bar of the continued sale of ProstaScint or affect any other of our products or
technology. However, given the uncertainty associated with litigation, we cannot
give any assurance that the litigation will not result in a material expenditure
to us.

If We Make Any Acquisitions, We Will Incur A Variety Of Costs And May Never
Realize The Anticipated Benefits.

If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any acquisitions. If, however, we do undertake any transaction of
this sort, the process of integrating an acquired business, technology, service
or product may result in operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business. Moreover, we may never realize the anticipated
benefits of any acquisition. Future acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt, contingent
liabilities and amortization expenses related to intangible assets. These
factors could adversely affect our results of operations and financial
condition, which could cause a decline in the market price of our Common Stock.

Our Stock Price Has Been And May Continue To Be Volatile, And Your Investment In
Our Stock Could Decline In Value.

The market prices for securities of biotechnology and pharmaceutical companies
have historically been highly volatile, and the market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. The market price of our Common
Stock has fluctuated over a wide range and may continue to fluctuate for various
reasons, including, but not limited to, announcements concerning our competitors
or us regarding:

- results of clinical trials;

- technological innovations or new commercial products;

- changes in governmental regulation or the status of our regulatory
approvals or applications;

- changes in earnings;

- changes in health care policies and practices;

- developments or disputes concerning proprietary rights;

- litigation or public concern as to safety of the our potential
products; and

- changes in general market conditions.

We Have Adopted Various Anti-Takeover Provisions Which May Affect The Market
Price Of Our Common Stock.

Our Board of Directors has the authority, without further action by the holders
of Common Stock, to issue from time to time, up to 5,400,000 shares of preferred
stock in one or more classes or series, and to fix the rights and preferences of
the preferred stock. Pursuant to these provisions, we have implemented a
stockholder rights plan by which one preferred stock purchase right is attached
to each share of Common Stock, as a means to deter coercive takeover tactics and
to prevent an acquirer from gaining control of us without some mechanism to
secure a fair price for all of our stockholders if an acquisition was completed.
These rights will be exercisable if a person or group acquires beneficial
ownership of 20% or more of our Common Stock and can be made exercisable by
action of our board of directors if a person or group commences a tender offer
which would result in such person or group beneficially owning 20% or more of

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our Common Stock. Each right will entitle the holder to buy one one-thousandth
of a share of a new series of our junior participating preferred stock for $20.
If any person or group becomes the beneficial owner of 20% or more of our Common
Stock (with certain limited exceptions), then each right not owned by the 20%
stockholder will entitle its holder to purchase, at the right's then current
exercise price, common shares having a market value of twice the exercise price.
In addition, if after any person has become a 20% stockholder, we are involved
in a merger or other business combination transaction with another person, each
right will entitle its holder (other than the 20% stockholder) to purchase, at
the right's then current exercise price, common shares of the acquiring company
having a value of twice the right's then current exercise price.

We are subject to provisions of Delaware corporate law which, subject to certain
exceptions, will prohibit us from engaging in any "business combination" with a
person who, together with affiliates and associates, owns 15% or more of our
Common Stock for a period of three years following the date that the person came
to own 15% or more of our Common Stock unless the business combination is
approved in a prescribed manner.

These provisions of the stockholder rights plan, our certificate of
incorporation, and of Delaware law may have the effect of delaying, deterring or
preventing a change in control of Cytogen, may discourage bids for our Common
Stock at a premium over market price and may adversely affect the market price,
and the voting and other rights of the holders, of our Common Stock.

A Large Number Of Our Shares Are Eligible For Future Sale Which May Adversely
Impact The Market Price Of Our Common Stock.

A large number of shares of our common stock are already outstanding, issuable
upon exercise of options and warrants, or the achievement of certain milestones
under previously completed acquisitions and may be eligible for resale, which
may adversely affect the market price of our common stock. As of March 1, 2002
we had 82,011,156 shares of common stock outstanding, which number of shares:
(i) incudes an aggregate of 2,417 shares of common stock to be issued to prior
holders of securities of CytoRad Incorporated and Cellcor, Inc., which we
acquired in 1995, upon each such holders respective exchange of such securities;
(ii) excludes 500,000 shares of common stock previously issued by us and
currently held in escrow pending release, upon certain conditions, to Advanced
Magnetics, who currently maintains voting control of such securities; and (iii)
excludes 355,497 shares previously issued by us and currently held for issuance
by the custodian of our Employee Stock Purchase Plan to the participants
thereunder, in the event they elect to purchase such shares. An additional
4,855,929 shares of common stock are issuable upon the exercise of outstanding
stock options and an additional 393,630 shares of common stock are issuable upon
the exercise of outstanding warrants. Substantially all of such shares subject
to outstanding options and warrants will, when issued upon exercise thereof, be
available for immediate resale in the public market pursuant to either a
currently effective registration statement under the Securities Act of 1933 (the
"Securities Act"), as amended, or pursuant to Rule 144 or Rule 701 promulgated
thereunder. In addition, there are 1,091,827 additional shares of common stock
reserved for future issuance under our current stock options plans, 154,363
additional shares of common stock reserved for issuance under our 401(k) Plan
and 227,518 additional shares of common stock reserved for the future issuance
under our employee bonus plan. All such reserved shares have been registered
with the Securities and Exchange Commission pursuant to currently effective
Registration Statements. In addition, there are 929,757 additional shares of
common stock, subject to certain adjustments, reserved for future issuance in
connection with the issuance of a convertible promissory note, having a seven
(7) year maturity, to ELAN Corporation, plc in August 1998.

In connection with our acquisition of Prostagen, Inc. in June 1999, we issued
2,050,000 unregistered shares of our common stock to the then stockholders of
Prostagen, which shares may be sold from time to time pursuant to Rule 144 under
the Securities Act. Such stockholders also have certain piggyback registration
rights with respect to these shares of common stock. An additional 950,000
shares may be issued as contingent payment upon the happening of certain events
and up to $4.0 million worth of Cytogen common stock may be issued if certain
milestones are achieved in the dendritic cell therapy and PSMA development
programs.

In addition, on March 28, 2000, we filed with the Securities and Exchange
Commission a shelf registration statement on Form S-3 covering six million
(6,000,000) shares of our common stock. 1,500,000 of such registred shares were
issued to Advanced Magnetics, Inc. in connection with the parties entering into
a License and Marketing Agreement in August 2000. An additional 500,000 of the
shares registered on that Form S-3 are currently being held in escrow and may be
released to Advanced Magnetics in the future in accordance with the terms of
such License and Marketing Agreement. An additional 902,601 of the shares
registered on that form S-3 were issued to Acqua Wellington North American
Equities Fund, Ltd. on September 29, 2000 in a private placement transaction. An
additional 1,276,557 of the shares registered on that Form S-3 were issued to
Acqua Wellington on February 5, 2001 pursuant to an equity financing facility

-35-

with Acqua Wellington that was subsequently terminated. An additional 1,820,000
of the shares registered on that Form S-3 were issued to the State of Wisconsin
Investment Board on June 19, 2001 in a private placement transaction. We are
contractually obligated to maintain the effectiveness of such registration
statement.

On October 25, 2001, we filed with the Securities and Exchange Commission a
shelf registration statement on Form S-3 covering ten million (10,000,000)
shares of our common stock. 2,970,665 of such registered shares were issued to
the State of Wisconsin Investment Board in another private placement transaction
in January 2002.

Availability of a significant number of additional shares of our common stock
could depress the price of our common stock.

Because We Do Not Intend to Pay Any Cash Dividends On Our Shares of Common
Stock, Our Stockholders Will Not Be Able to Receive a Return on Their Shares
Unless They Sell Them.

We have never paid or declared any cash dividends on our Common Stock or other
securities and intend to retain any future earnings to finance the development
and expansion of our business. We do not anticipate paying any cash dividends on
our Common Stock in the foreseeable future. Unless we pay dividends, our
stockholders will not be able to receive a return on their shares unless they
sell them.

Our Stock Price Is Highly Volatile, And Therefore The Value Of Your Investment
May Fluctuate Significantly.

The market price of our Common Stock has fluctuated and may continue to
fluctuate as a result of variations in our business and our quarterly operating
results. These fluctuations may be exaggerated if the trading volume of our
Common Stock is low. In addition, the stock market in general has experienced
dramatic price and volume fluctuations from time to time. These fluctuations may
or may not be based upon any business or operating results. Our Common Stock may
experience similar or even more dramatic price and volume fluctuations which may
continue indefinitely. Please see Item 5 herein, Market for the Company's Common
Equity and Related Stockholder Matters, for additional information on the
volatility of our Common Stock.

Item 2. Properties

We currently lease approximately 20,000 square feet of administrative space in
Princeton, New Jersey. The lease on this space expires in August 2002. We intend
to remain in Princeton, New Jersey for the foreseeable future and are reviewing
our lease situation.

We also lease approximately 9,000 square feet of laboratory and office space in
Newtown, Pennsylvania, which is occupied by our AxCell Biosciences subsidiary,
under a lease expiring in 2004. In February 2001, we expanded the AxCell
facility by amending the lease to include approximately an additional 5,000
square feet, which additional lease space will expire in July 2006.
We own substantially all of the equipment used in our laboratories and offices.
We believe our facilities are adequate for our operations at present.

Item 3. Legal Proceedings

On March 17, 2000, we were served with a complaint filed against us in the
United States Federal Court for the District of New Jersey by M. David
Goldenberg ("Goldenberg") and Immunomedics, Inc. (collectively "Plaintiffs") The
litigation claims that our ProstaScint product infringes a patent purportedly
owned by Goldenberg and licensed to Immunomedics. We believe that ProstaScint
does not infringe this patent, and that the patent is invalid and unenforceable.
In addition, we have certain rights to indemnification against litigation and
litigation expenses from the inventor of technology used in ProstaScint, which
may be offset against royalty payments on sales of ProstaScint. In addition, the
patent sought to be enforced in the litigation has now expired; as a result, the
claim even if successful would not result in an injunction barring the continued
sale of ProstaScint or affect any other of our products or technology. However,
given the uncertainty associated with litigation, we cannot give any assurance
that the litigation could not result in a material expenditure to us. On
December 17, 2001, we filed a motion for summary judgment of non-infringement of
the asserted claims of the patent-in-suit. The Plaintiffs have indicated that
they will file a cross-motion for summary judgment with their opposition to our
motion. A hearing on these motions is likely to take place in the Spring of
2002.

-36-

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

None.

-37-

PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters

Our Common Stock is traded on the NASDAQ National Market (the "NNM") under the
trading symbol "CYTO."

The table below sets forth the high and low bid information for our Common Stock
for each of the calendar quarters indicated, as reported on the NNM. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

2000 High Low
---- ---- ---
First Quarter............................................ $ 21.69 $ 2.63
Second Quarter........................................... 10.56 2.00
Third Quarter............................................ 11.31 5.50
Fourth Quarter........................................... 7.13 1.00

2001
----
First Quarter............................................ 6.53 2.31
Second Quarter........................................... 6.09 2.19
Third Quarter............................................ 5.38 1.90
Fourth Quarter........................................... 4.46 2.05

As of March 1, 2002, there were approximately 4,357 holders of record of the
Common Stock and there were approximately 51,346 beneficial holders of the
Common Stock.

We have never paid any cash dividends on our Common Stock and we do not
anticipate paying any cash dividends on our Common Stock in the foreseeable
future. We intend to retain any future earnings to fund the development and
growth of our business. Any future determination to pay dividends will be at the
discretion of the board of directors.

On January 17, 2001, we granted 10,000 options to purchase shares of our Common
Stock at an exercise price of $6.13, to Kevin G. LoKay, upon his appointment to
our Board of Directors. Such options were granted outside of any of our stock
option plans, and will vest in full upon the one year anniversary of the date of
grant. We granted such option to Mr. LoKay in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, as a
transaction by an issuer not involving any public offering under Section 4(2)
thereof.

On November 1 and December 1 of 2001, we issued two warrants to purchase 7,000
and 7,000 shares of our Common Stock, respectively, at an exercise price per
share of $3.12 and $4.98, respectively, to SCO Financial Group LLC ("SCO"). Such
warrants, which vest immediately, were issued in consideration of SCO providing
certain financial consultancy and advisory services to us. Such warrants have a
term of three (3) years. We granted such warrants to purchase shares of our
Common Stock in a transaction exempt from registration under the Securities Act
of 1933, as amended, as a transaction by an issuer not involving a public
offering under Section 4(2) thereof.

-38-

Item 6. Selected Financial Data

The following selected financial information has been derived from the
consolidated financial statements of the Company for each of the five years in
the period ended December 31, 2001, which have been audited by Arthur Andersen
LLP, our independent public accountants. The selected financial data set forth
below should be read in conjunction with the consolidated financial statements,
including the notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other information provided elsewhere in
this report.

Year Ended December 31,
-----------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----

Statements of Operations Data: (All amounts in thousands, except per share data)
Revenues:
Product sales ........................................ $ 8,692 $ 7,424 $ 6,971 $ 8,976 $ 5,252
Royalties ............................................ 2,063 2,004 1,060 1,664 3,282
License and contract ................................. 912 1,024 3,171 9,239 5,886
-------- -------- -------- -------- --------

Total revenues ..................................... 11,667 10,452 11,202 19,879 14,420
-------- -------- -------- -------- --------

Operating Expenses:
Cost of product and contract
manufacturing revenues .............................. 4,126 4,414 4,111 12,284 5,939
Research and development .............................. 10,340 6,957 3,849 9,967 17,913
Acquisition of marketing and technology rights (1) .... - 13,241 1,214 - -
Selling and marketing ................................. 6,314 6,126 4,210 5,103 5,492
General and administrative ............................ 4,947 4,934 3,501 7,420 6,871
Equity loss in Targon subsidiary ...................... - - - 1,020 9,232
-------- -------- -------- -------- --------

Total operating expenses ........................... 25,727 35,672 16,885 35,794 45,447
-------- -------- -------- -------- --------

Operating loss ..................................... (14,060) (25,220) (5,683) (15,915) (31,027)

Gain on sale of laboratory and manufacturing facilities.. - - 3,298 - -
Gain on sale of Targon subsidiary ....................... - - - 2,833 -
Other income (expense) .................................. 857 611 412 (70) 315
-------- -------- -------- -------- --------

Loss before income taxes and cumulative effect of
accounting change ................................. (13,203) (24,609) (1,973) (13,152) (30,712)
Income tax benefit ...................................... (1,103) (1,625) (2,702) - -
-------- -------- -------- -------- --------

Income (loss) before cumulative effect of
accounting change ................................. (12,100) (22,984) 729 (13,152) (30,712)
Cumulative effect of accounting change .................. - (4,314) - - -
-------- -------- -------- -------- --------

Net income (loss) ....................................... (12,100) $(27,298) 729 (13,152) (30,712)
Dividends, including deemed
dividends on preferred stock ........................... - - - (119) (1,352)
-------- -------- -------- -------- --------

Net income (loss) to common stockholders ................ $(12,100) $(27,298) $ 729 $(13,271) $(32,064)
======== ======== ======== ======== ========

Net income (loss) per common share:
Basic and diluted net income (loss) before
cumulative effect of accounting change ........... $ (0.16) $ (0.31) $ 0.01 $ (0.24) $ (0.63)
Cumulative effect of accounting change (2) ......... - (0.06) - - -
-------- -------- -------- -------- --------
Basic and diluted net income (loss) ................ $ (0.16) $ (0.37) $ 0.01 $ (0.24) $ (0.63)
======== ======== ======== ======== ========

Weighted average common shares outstanding:
Basic .............................................. 77,783 73,337 67,179 56,419 51,134
======== ======== ======== ======== ========

Diluted ............................................ 77,783 73,337 68,187 56,419 51,134
======== ======== ======== ======== ========

Pro forma amounts assuming accounting
change is applied retroactively:
Net loss to common stockholders ...................... $(22,984) $ (484) $(16,373) $(32,064)
======== ======== ======== ========
Basic and diluted net loss per common share .......... $ (0.31) $ (0.01) $ (0.29) $ (0.63)
======== ======== ======== ========

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December 31,
------------
Consolidated Balance Sheet Data: 2001 2000 1999 1998 1997
---------------------------------------------------------------------
(in thousands)

Cash, short-term investments and restricted cash... $ 11,309 $ 11,993 $ 12,394 $ 3,015 $ 7,401
Total assets....................................... 21,492 20,416 18,605 10,900 27,555
Long-term debt..................................... 2,291 2,374 2,416 2,223 10,171
Accumulated deficit................................ (340,681) (328,581) (301,283) (302,012) (288,741)
Stockholders' equity............................... 11,214 7,218 10,549 443 9,983

(1) In August 2000, the Company licensed product rights from Advanced
Magnetics, Inc. In June 1999, the Company acquired Prostagen, Inc.
(2) In 2000, the Company recorded a non-cash charge for the cumulative effect
related to the adoption of SEC Staff Accounting Bulletin No. 101. See Note
1 of the Consolidated Financial Statements.

-40-

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion contains historical information as well as forward
looking statements that involve a number of risks and uncertainties. Statements
contained or incorporated by reference in this Annual Report on Form 10-K that
are not based on historical facts are "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Generally, forward looking statements can be identified by the use of phrases
like "believe", "expect", "anticipate", "plan", "may", "will", "could",
"estimate", "potential", "opportunity" and "project" and similar terms. The
Company's actual results could differ materially from the Company's historical
results of operations and those discussed in the forward looking statements.
Factors that could cause actual results to differ materially, include, but are
not limited to those identified under the caption "Additional Factors That May
Affect Future Results", provided elsewhere in this report. Investors are
cautioned not to put undue reliance on any forward looking statement.

Cautionary Statement

In addition to the risks discussed under the caption referred to above, among
other factors that could cause actual results to differ materially from expected
results are the following: (i) the Company's ability to access the capital
markets in the near term and in the future for continued funding its operations
including existing projects and for the pursuit of new projects; (ii) the
ability to attract and retain personnel needed for business operations and
strategic plans; (iii) the timing and results of clinical studies, and
regulatory approvals; (iv) market acceptance of the Company's products,
including programs designed to facilitate use of the products, such as the
Partners in Excellence or PIE Program; (v) demonstration over time of the
efficacy and safety of the Company's products; (vi) the degree of competition
from existing or new products; (vii) the decision by the majority of public and
private insurance carriers on whether to reimburse patients for the Company's
products; (viii) the ability of the Company and its partners to comply with
applicable governmental regulations and changes thereto; (ix) the profitability
of its products; (x) the ability to attract, and the ultimate success of,
strategic partnering arrangements, collaborations, and acquisition candidates;
(xi) the ability of the Company and its partners to identify new products as a
result of those collaborations that are capable of achieving FDA approval, that
are cost-effective alternatives to existing products and that are ultimately
accepted by the key users of the product; (xii) the success of the Company in
obtaining marketing approvals for its products in Canada and Europe; (xiii) the
ability of the Company to protect its proprietary technology, trade secrets or
know-how under the patent and other intellectual property laws of the United
States and other countries; and (xiv) the ability of Advanced Magnetics to
satisfy the conditions specified by the FDA regarding approval to market
Combidex in the United States.

The following discussion and analysis should be read in conjunction with the
Financial Statements and related notes thereto contained elsewhere herein, as
well as from time to time the Company's other filings with the Securities and
Exchange Commission.

Significant Events in 2001

In 2001, the Company launched BrachySeed I-125 (iodine version), a second
generation radioactive implant for treatment of localized prostate cancer, which
was in-licensed by the Company from Draximage Inc. Since the launch, the Company
has increased its market penetration resulting in a positive sales trend and
consistent quarter-over-quarter growth. The Company expects to begin selling
BrachySeed Pd-103 (palladium version) in the first half of 2002, a uniquely
designed next generation radioactive implant. BrachySeed Pd-103 recently
received marketing clearance from the U.S. Food and Drug Administration. The
Company expects to utilize its existing oncology sales force to market the
BrachySeed products. There can be no assurance, however, as to the market
acceptance of these products or whether these products will significantly
increase the revenues of the Company.

Also in 2001, AxCell Biosciences Corporation, a subsidiary of the Company, began
marketing the ProChart database with its marketing partner InforMax. ProChart is
a proprietary protein pathway database which measures protein domain-ligand
interactions in a high-through put manner. ProChart is being marketed by
InforMax using its Protein-Protein Interaction module, a new addition to its
GenoMax(TM) enterprise software package. There can be no assurance, however, as
to the market acceptance of this product or whether this product will
significantly increase the revenues for the Company.

In December 2001, Progenics Pharmaceuticals, our partner in the PSMA LLC, filed
a Biological Master File with the FDA for recombinant subunit PSMA vaccine,
which is preparing to enter Phase I clinical trials in patients with recurrent
prostate cancer in the first half of 2002. The Company expects to incur
significant costs going forward to fund its share of developing the PSMA LLC
pipeline (see Note 6 to the Consolidated Financial Statements).

-41-

RESULTS OF OPERATIONS

Years ended December 31, 2001, 2000 and 1999

Revenues
Total revenues were $11.7 million in 2001, $10.5 million in 2000 and $11.2
million in 1999. The increase in 2001 from 2000 and 1999 was primarily due to
higher product related revenues, partially offset by lower license and contract
revenues. Product related revenues, including product sales and royalty
revenues, accounted for 92%, 90% and 72% of revenues in 2001, 2000 and 1999,
respectively. License and contract revenues accounted for the remainder of
revenues.

Product related revenues were $10.8 million, $9.4 million and $8.0 million in
2001, 2000 and 1999, respectively. The increase in 2001 from 2000 and 1999 was
due to a price increase for ProstaScint at the beginning of the year and the
market introduction and commercial launch of BrachySeed I-125 during 2001,
partially offset by a slight decrease in sales volume for ProstaScint. Sales
from ProstaScint were $7.6 million, $6.9 million and $6.4 million in 2001, 2000
and 1999, respectively, and accounted for 70%, 73% and 79% of the product
related revenues, respectively. Beginning in July 2000, the Company assumed sole
responsibility for selling and marketing ProstaScint from Bard Urological
Division of C.R. Bard Inc. ("Bard"), its former co-marketing partner. Future
growth of ProstaScint is dependent upon increased marketing and sales
initiatives by Cytogen's in-house sales force, entry into additional markets and
the implementation of new product applications, such as using ProstaScint scans
to guide the placement of brachytherapy seeds and/or external beam radiation.
There can be no assurance, however, that the Company's internal sales force or
any of its new marketing strategy will be able to significantly increase the
sale of ProstaScint. The Company plans to utilize Cytogen's sales and marketing
organization for the launch of BrachySeed Pd-103 during the first half of 2002
and later Combidex, subject to the receipt of final marketing approval of
Combidex by FDA.

Sales from BrachySeed were $773,000 for 2001 and accounted for 7% of the product
related revenues. Since the market introduction of BrachySeed I-125 in February
2001, the Company has increased its market penetration of the brachytherapy
iodine market which has contributed to the quarter-over-quarter growth. The
Company plans to begin selling BrachySeed Pd-103 during 2002. There can be no
assurance, however as to the market acceptance of the BrachySeed products or
whether these new products will significantly increase the revenues of the
Company.

Royalties from Quadramet were $2.1 million, $2.0 million and $1.1 million in
2001, 2000 and 1999, respectively, and accounted for 19%, 21% and 13% of product
related revenues. Quadramet is currently marketed by the Company's marketing
partner, Berlex Laboratories Inc. Although Cytogen believes that Berlex is an
advantageous marketing partner, there can be no assurance that Quadramet will
achieve greater market penetration on a timely basis or result in significant
revenues for Cytogen.

Sales from OncoScint CR/OV were $358,000, $512,000 and $620,000 in 2001, 2000
and 1999, respectively. The market for OncoScint CR/OV for colorectal cancer
diagnostic has been negatively affected by positron emission tomography or "PET"
scans which have shown the same or higher sensitivity than OncoScint CR/OV.
Consequently, the Company is decreasing its emphasis on OncoScint in order to
focus on its prostate cancer products.

Effective January 1, 2000, the Company adopted U.S. Securities and Exchange
Commission Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial
Statements" ("SAB 101") which requires up-front, non-refundable license fees to
be deferred and recognized over the performance period. The cumulative effect of
adopting SAB 101 resulted in a one-time, non-cash charge of $4.3 million or
$0.06 per share in 2000, which reflects the deferral of an up-front license fee
received from Berlelx, net of associated costs, related to the licensing of
Quadramet recognized in 1998 and a license fee for certain applications of PSMA
to a joint venture formed by Cytogen and Progenics recognized in 1999.
Previously, the Company had recognized up-front license fees when the Company
had no obligations to return the fees under any circumstances. Under SAB 101
these payments are recorded as deferred revenue to be recognized over the
remaining term of the related agreements. In 2001 and 2000, the Company
recognized $860,000 and $859,000, respectively, of license revenue that was
included in the cumulative effect adjustment as of January 1, 2000. The
Company's 1999 results have not been restated to apply SAB 101 retroactively.

-42-

License revenues for 2001, 2000 and 1999 were $869,000, $859,000 and $2.0
million, respectively. License revenues have fluctuated in the past and may
fluctuate in the future. In 1999, the Company recorded $1.8 million for the
licensing of certain applications of PSMA to a joint venture formed by Cytogen
and Progenics Pharmaceuticals Inc. Had the Company been subject to SAB 101 prior
to 2000, license revenue would have been $834,000 in 1999.

Revenues from contract manufacturing and research services were $43,000,
$165,000 and $1.2 million in 2001, 2000 and 1999, respectively. Revenues from
contract manufacturing were $604,000 in 1999. The Company discontinued its
contract manufacturing services business in 2000 as a result of the sale of its
laboratory and manufacturing facilities.

Operating Expenses
Total operating expenses were $25.7 million, $35.7 million and $16.9 million in
2001, 2000 and 1999, respectively. The current year operating expenses reflect
costs associated with the proteomics research program at AxCell, the development
of new manufacturing and purification processes for ProstaScint, the
pre-clinical development of the PSMA technologies, and the 2001 launch of
BrachySeed. The decrease in 2001 from 2000 was due primarily to charges in 2000
for the acquisition of marketing and technology rights to Combidex and Code 7228
from Advanced Magnetics, partially offset by increased development efforts in
2001 for the proteomics programs and the new manufacturing and purification
processes for ProstaScint and the 2001 launch of BrachySeed. The increase in
2000 from 1999 was due to the acquisition of Combidex and Code 7228, increased
development efforts for the proteomics programs and the expansion of our
in-house sales force. The 2000 operating expenditures included a $13.2 million
charge related to the acquisition of the marketing and technology rights to
Combidex and Code 7228, of which $13.1 million was non-cash as the Company
issued its Common Stock as consideration. The 1999 operating expenditures
included a $1.2 million non-cash charge for the acquisition of exclusive
technology rights for immunotherapy to PSMA from Prostagen Inc. ("Prostagen").

Costs of product and contract manufacturing revenues were $4.1 million, $4.4
million and $4.1 million in 2001, 2000 and 1999, respectively. The decrease in
2001 from 2000 was due to lower manufacturing costs resulted from better
manufacturing yields for ProstaScint, partially offset by costs associated with
the purchase of BrachySeeds, which became commercially available in 2001. The
increase in 2000 from 1999 was due to increased product manufacturing costs.

Research and development expenses were $10.3 million in 2001, $7.0 million in
2000 and $3.8 million in 1999. The increase in 2001 from 2000 and 1999 was due
to increased funding for the proteomics programs at AxCell, costs associated
with the development of new manufacturing and purification processes by DSM
Biologics Company B.V. ("DSM") with respect to ProstaScint (see Note 2 to the
Consolidated Financial Statements) and the product development efforts related
to the PSMA technologies. In 2001, 2000 and 1999 the Company invested $4.9
million, $3.4 million and $1.1 million, respectively, in the proteomics research
programs and $3.2 million, $559,000 and $0, respectively, in the manufacturing
process development. The Company anticipates to incur comparable amounts of
expenses for both programs in 2002. During 2001, the Company recognized $332,000
of expenses related to its share of losses for The PSMA Development Company LLC.
The Company expects to incur significant costs going forward to fund its share
of development costs from this joint venture (see Note 6 to the Consolidated
Financial Statements).

Acquisition of marketing and technology rights of $13.2 million in 2000
represents a non-cash charge of $13.1 million related to the acquisition of
certain rights to product candidates Combidex and Code 7228 from AVM (see Note 3
to the Consolidated Financial Statements). In 1999, the acquisition of
technology rights was $1.2 million and represents a non-cash charge related to
the acquisition of Prostagen (see Note 5 to the Consolidated Financial
Statements).

Selling and marketing expenses were $6.3 million, $6.1 million and $4.2 million
in 2001, 2000 and 1999, respectively. The increase in 2001 from 2000 and 1999
was due to the expansion of the Company's in-house sales force and costs
associated with the 2001 launch of BrachySeed I-125. Cytogen assumed sole
responsibility for the selling and marketing of ProstaScint in July 2000. The
1999 marketing expenses reflect efforts to develop and maintain the Partners in
Excellence ("PIE") program which established a network of qualified nuclear
medicine sites and physicians which are trained and certified for acquiring,
processing and interpreting antibody-derived images.

General and administrative expenses were $4.9 million, $4.9 million and $3.5
million in 2001, 2000 and 1999, respectively. The increase in 2000 from 1999 was
due to expenses related to the termination of the proposed merger with Advanced
Magnetics, stock based compensation for a key employee, additional staffing and
related costs.

-43-

Gain on sale of laboratory and manufacturing facilities--
The Company recorded a gain of $3.3 million during 1999 resulting from a sale of
certain of the Company's laboratory and manufacturing facilities to Purdue Bio
Pharma for net proceeds of $3.6 million in January 1999.

Insurance Reimbursement--
During 2001, the Company received a one-time payment of $402,000 from an
insurance claim filed by the Company in 2000 to recover the loss of product
resulting from the rupture of a tube during the manufacture of a batch of
ProstaScint.

Interest Income/Expense--
Interest income was $635,000, $774,000 and $441,000 for 2001, 2000 and 1999,
respectively. The decrease in 2001 from 2000 was due to a lower average yield on
investments, partially offset by increased income resulting from a higher than
average cash balance in 2001. The increase in 2000 from 1999 was due to higher
average cash balances during 2000.

Interest expense was $180,000, $163,000 and $29,000 in 2001, 2000 and 1999,
respectively. The increase in 2001 from 2000 and 1999 was due to finance changes
related to various equipment leases.

Income tax benefit--
During 2001, 2000 and 1999, the Company sold New Jersey State net operating loss
carryforwards and research and development credits which resulted in the
recognition of a $1.1 million, $1.6 million and $2.7 million income tax benefit,
respectively. Under the current legislation, the Company may be able to sell a
minimum $634,000 of the remaining approved $2.4 million of tax benefits in 2002,
assuming the State of New Jersey continues to fund this program, which is
uncertain. The actual amount of net operating losses and tax credits the Company
may sell will also depend upon the allocation among qualifying companies of an
annual pool established by the State of New Jersey.

Net Income/Loss--
Net loss was $12.1 million in 2001 and $27.3 million in 2000 compared to a net
income of $729,000 in 1999. Net loss per share in 2001 and 2000 was $0.16 and
$0.37 based on weighted average common shares outstanding of 77.8 million and
73.3 million, respectively. The 2000 net loss included $4.3 million or $0.06 per
share for the cumulative effect of accounting change as a result of the adoption
of SAB 101. The basic and diluted net income per common share in 1999 was $0.01
based on weighted average common shares outstanding of 67.2 million for basic
and 68.2 million for diluted.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents were $11.3 million as of December 31,
2001, compared to $12.0 million as of December 31, 2000. The cash used for
operating activities in 2001 was $13.4 million compared to $9.0 million in the
same period of 2000. The increase in cash used for operating activities in 2001
was primarily due to increased development efforts in the proteomics programs,
expenses relating to the manufacturing and purification processes for
ProstaScint and the PSMA technologies, as well as to marketing costs associated
with the 2001 launch of BrachySeed iodine prostate cancer product.

Historically, the Company's primary sources of cash have been proceeds from the
issuance and sale of its stock through public offerings and private placements,
product related revenues, revenues from contract manufacturing and research
services, fees paid under license agreements and interest earned on cash and
short-term investments. In October 2000, the Company entered into an equity
financing facility with Acqua Wellington for up to $70 million of Common Stock.
Under the terms of the agreement, Cytogen could, at its discretion, sell shares
of its Common Stock to Acqua Wellington at a small discount to the market price.
Pursuant to this Equity Financing Facility, in February 2001, the Company sold
to Acqua Wellington 1,276,557 shares of its Common Stock at an aggregate price
of $6.5 million or $5.092 per share. The Equity Financing Facility was
terminated in June 2001.

In June 2001, the Company entered into a Share Purchase Agreement (the
"Agreement") with the State of Wisconsin Investment Board ("SWIB"), pursuant to
which the Company sold 1,820,000 shares of Cytogen common stock to SWIB for an
aggregate purchase price of $8.2 million, before transaction costs, or $4.50 per
share. In connection with the Agreement, the Company was required to discontinue
the use of the Equity Financing Facility with Acqua Wellington and such
agreement was terminated.

-44-

In October 2001, the Company filed a shelf Registration Statement on Form S-3 to
register 10,000,000 shares of its common stock. Such Registration Statement was
declared effective by the Securities and Exchange Commission in November 2001.
The Company may issue such registered shares of common stock from time to time
and may use the proceeds thereof for general corporate purposes, including, but
not limited to, continued development and commercialization of its proteomics
technologies, research and development of additional products and expansion of
its sales and marketing capabilities.

In January 2002, the Company sold 2,970,665 shares of Cytogen common stock to
SWIB for an aggregate purchase price of $8.0 million or $2.69 per share.

In connection with our stock issuances to SWIB, we agreed not to enter into
equity line arrangements in the future, issue certain securities at less than
fair market value or undertake certain other securities issuances without
requisite stockholder approval.

In January 2002, the Company received cash of $1.1 million relating to the
December 2001 sale of New Jersey State net operating losses and research and
development credits. Under the current legislation, the Company may be able to
sell a minimum $634,000 of the remaining approved $2.4 million of tax benefits
in 2002 assuming the State of New Jersey continues to fund for this program. The
actual amount of net operating losses and tax credits the Company may sell will
also depend upon the allocation among qualifying companies of an annual pool
established by the State of New Jersey.

The Company's capital and operating requirements may change depending upon
various factors, including: (i) whether the Company and its strategic partners
achieve success in manufacturing, marketing and commercialization of its
products; (ii) the amount of resources which the Company devotes to clinical
evaluations and the expansion of marketing and sales capabilities; (iii) results
of clinical trials and research and development activities; and (iv) competitive
and technological developments, in particular, the Company expects to incur
significant costs for the development of its proteomics and PSMA technologies.

The Company's financial objectives are to meet its capital and operating
requirements through revenues from existing products and licensing arrangements.
To achieve its strategic objectives, the Company may enter into research and
development partnerships and acquire, in-license and develop other technologies,
products or services. Certain of these strategies may require payments by the
Company in either cash or stock in addition to the costs associated with
developing and marketing a product or technology. However, Management believes
that, if successful, such strategies may increase long-term revenues. There can
be no assurance as to the success of such strategies or that resulting funds
will be sufficient to meet cash requirements until product revenues are
sufficient to cover operating expenses, if ever. To fund these strategic and
operating activities, the Company may sell equity or debt securities as market
conditions permit or enter into credit facilities.

The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to implement its planned product development efforts,
including acquisition of products and complementary technologies, research and
development, clinical studies and regulatory activities, and to further its
marketing and sales programs. The Company expects that its existing capital
resources should be adequate to fund the Company's operations for the
foreseeable future. The Company cannot assure you that its business or
operations will not change in a manner that would consume available resources
more rapidly than anticipated. The Company expects that it will have additional
requirements for debt or equity capital, irrespective of whether and when it
reaches profitability, for further product development costs, product and
technology acquisition costs, and working capital.

The Company's future capital requirements and the adequacy of available funds
will depend on numerous factors, including the successful commercialization of
its products, the costs associated with the acquisition of complementary
products and technologies, progress in its product development efforts, the
magnitude and scope of such efforts, progress with clinical trials, progress
with regulatory affairs activities, the cost of filing, prosecuting, defending
and enforcing patent claims and other intellectual property rights, competing
technological and market developments, and the expansion of strategic alliances
for the sales, marketing, manufacturing and distribution of its products. To the
extent that the currently available funds and revenues are insufficient to meet
current or planned operating requirements, the Company will be required to
obtain additional funds through equity or debt financing, strategic alliances
with corporate partners and others, or through other sources. There can be no
assurance that the financial sources described above will be available when
needed or at terms commercially acceptable to the Company. If adequate funds are
not available, the Company may be required to delay, further scale back or
eliminate certain aspects of its operations or attempt to obtain funds through
arrangements with collaborative partners or others that may require the Company

-45-

to relinquish rights to certain of its technologies, product candidates,
products or potential markets. If adequate funds are not available, the
Company's business, financial condition and results of operations will be
materially and adversely affected.

CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the Notes to our Consolidated Financial
Statements includes a summary of our significant accounting policies and methods
used in the preparation of our Consolidated Financial Statements. The following
is a brief discussion of the more significant accounting policies and methods
used by us. The preparation of our Consolidated Financial Statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Our actual results could differ from those
estimates. In addition, Financial Reporting Release No. 61 was recently released
by the Securities and Exchange Commission to require all companies to include a
discussion to address, among other things, liquidity, off-balance sheet
arrangements, contractual obligations and commercial commitments.

Revenue Recognition

We recognize revenue from the sale of our products upon shipment. We do not
grant price protection to customers. Quadramet royalties are recognized when
earned. The Securities and Exchange Commission has issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition", which provides guidance on the
recognition of up-front, non-refundable license fees. Accordingly, we defer
up-front license fees and recognize them over the estimated performance period
of the related agreement. Since the term of the performance periods is subject
to management's estimates, future revenues to be recognized could be affected by
changes in such estimates.

Accounts Receivable

Our accounts receivable balances are net of an estimated allowance for
uncollectible accounts. We continuously monitor collections and payments from
our customers and maintain an allowance for uncollectibe accounts based upon our
historical experience and any specific customer collection issues that we have
identified. While we believe our reserve estimate to be appropriate, we may find
it necessary to adjust our allowance for doubtful accounts if our future bad
debt expense exceeds our estimated reserve. We are subject to concentration
risks as a limited number of our customers provide a high percent of total
revenues, and corresponding receivables.

Inventories

Inventories are stated at the lower of cost or market, as determined using the
first-in, first-out method, which most closely reflects the physical flow of our
inventories. Our products and raw materials are subject to expiration dating. We
regularly review quantities on hand to determine the need for reserves for
excess and obsolete inventories based primarily on our estimated forecast of our
product sales. Our estimate of future product demand may prove to be inaccurate,
in which case we may have understated or overstated our reserve for excess and
obsolete inventories.

Carrying Value of Fixed and Intangible Assets

Our fixed assets and certain of our acquired rights to market our products have
been recorded at cost and are being amortized on a straight-line basis over the
estimated useful life those assets. In accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," if indicators of impairment exist, we assess the recoverability of the
affected long-lived assets by determining whether the carrying value of such
assets can be recovered through undiscounted future operating cash flows. If
impairment is indicated, we measure the amount of such impairment by comparing
the carrying value of the assets to the present value of the expected future
cash flows associated with the use of the asset. Adverse changes regarding
future cash flows to be received from long-lived assets could indicate that an
impairment exists, and would require the write down of the carrying value of the
impaired asset at that time.

-46-

COMMITMENTS

As outlined in Note 7, 10 and 16 of the Notes to our Consolidated Financial
Statements, we have entered into various contractual obligations and commercial
commitments. The following table summarizes our contractual obligations as of
December 31, 2001:

------------------------------------------------------------------------------------------------------
Less than 1 to 3 4 to 5 After 5
Contractual Obligation 1 year years years years Total
------------------------------------------------------------------------------------------------------

Long-term debt $ 160,000 $2,700,000 - - 2,860,000
------------------------------------------------------------------------------------------------------
Capital lease obligations 85,000 13,000 - - 98,000
------------------------------------------------------------------------------------------------------
Facility leases 624,000 825,000 104,000 - 1,553,000
------------------------------------------------------------------------------------------------------
Other operating leases 124,000 64,000 - - 188,000
------------------------------------------------------------------------------------------------------
Research and development contracts 559,000 515,000 260,000 515,000 1,849,000
------------------------------------------------------------------------------------------------------
Minimum royalty payments 1,000,000 3,000,000 2,000,000 5,000,000 11,000,000
------------------------------------------------------------------------------------------------------

In addition to the above, we are obligated to make certain royalty payments
based on sales of the related product. We also are obligated to make certain
milestone payments if our collaborative partners achieved specific development
milestones or commercial milestones as outlined in Note 4 of the Notes to our
Consolidated Financial Statements.

In connection with the acquisition of Prostagen, Inc. (see Note 5 to the
Consolidated Financial Statements), the Company may issue up to $4.0 million
worth of Cytogen Common Stock if certain milestones are achieved in the
dendritic cell therapy and PSMA development programs. The Company is currently
determinining whether the initial $2.0 million milestone has been met in the
first quarter of 2002 based on the progress of the dendritic cell prostate
cancer clinical trials being conducted by Northwest Biotherapeutics Inc. (NWBT,
NASDAQ).

-47-

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The Company does not have operations subject to risks of foreign currency
fluctuations, nor does it use derivative financial instruments in its operations
or investment portfolio. The Company does not have exposure to market risks
associated with changes in interest rates, as it has no variable interest rate
debt outstanding. The Company does not believe it has any other material
exposure to market risks associated with interest rates.

Item 8. Financial Statements and Supplementary Data

The response to Item 8 is submitted as a separate section of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

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PART 111

Item 10. Directors and Executive Officers of the Company.

The information relating to the Company's directors, nominees for election as
directors and executive officers under the headings "Election of Directors",
"Executive Officers" and "Compliance with Section 16(a) of the Exchange Act" in
the Company's definitive proxy statement for the 2002 Annual Meeting of
Stockholders is incorporated herein by reference to such proxy statement.

Item 11. Executive Compensation.

The discussion under the heading "Executive Compensation" in the Company's
definitive proxy statement for the 2002 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters" in the Company's
definitive proxy statement for the 2002 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.

Item 13. Certain Relationships and Related Transactions.

The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 2002 Annual
Meeting of Stockholders is incorporated herein by reference to such proxy
statement.

-49-

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Documents filed as a part of the Report:

(1) and (2)

The response to this portion of Item 14 is submitted as a separate section of
this Form 10-K.

(3) Exhibits -

Exhibit No.
-----------

3.1 - Certificate of Incorporation of Cytogen Corporation, as amended.
Filed as an exhibit to Form 10-Q Quarterly Report for the quarter
ended June 30, 1996, and incorporated herein by reference.

3.2 - Certificate of Amendment to the Restated Certificate of
Incorporation of Cytogen Corporation, as amended. Filed as an exhibit
to Form 10-Q Quarterly Report for the quarter ended June 30, 2000, and
incorporated herein by reference.

3.3 - By-Laws of Cytogen Corporation, as amended. Filed as an exhibit to
Form 10-Q Quarterly Report for the quarter ended September 30, 2001,
and incorporated herein by reference.

4.1 - Amended and Restated Rights Agreement, dated as of October 19, 1998
between Cytogen Corporation and Chase Mellon Shareholder Services,
L.L.C., as Rights Agent. The Amended and Restated Rights Agreement
includes the Form of Certificate of Designations of Series C Junior
Participating Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights as Exhibit C. Filed
as an exhibit to Form 10-Q Quarterly Report for the quarter ended
September 30, 1998, and incorporated herein by reference.

4.2 - Certificate of Designations of Series C Junior Participating
Preferred Stock of Cytogen Corporation. Filed as an exhibit to the
Company's Registration Statement on Form S-8 (File No. 333-59718),
filed with the Commission on April 27, 2001, and incorporated herein
by reference.

10.1 - Lease Agreement, dated as of March 16, 1987, by and between
Peregrine Investment Partners I, as lessor, and Cytogen Corporation,
as lessee. Filed as an exhibit to Form 10-K Annual Report for Year
Ended January 2, 1988, and incorporated herein by reference.

10.2. - Amendment, dated as of October 16, 1987, to Lease Agreement between
Peregrine Investment Partners I and Cytogen Corporation. Filed as an
exhibit to Form S-8 Registration Statement (No. 33-30595), and
incorporated herein by reference.

10.3 - 1989 Employee Stock Option Plan. Filed as an exhibit to Form S-8
Registration Statement (No. 33-30595), and incorporated herein by
reference. +

10.4.1 - 1988 Stock Option Plan for Non-Employee Directors. Filed as an
exhibit to Form S-8 Registration Statement (No. 33-30595), and
incorporated herein by reference. +

10.4.2 - Amendment to the Cytogen Corporation 1988 Stock Option Plan for
Non-Employee Directors dated May 22, 1996. Filed as an exhibit to Form
10-Q Quarterly Report for the quarter ended June 30, 1996, and
incorporated herein by reference. +

-50-

10.5 - Standard Form of Indemnification Agreement entered into between
Cytogen Corporation and its officers, directors, and consultants.
Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (No. 33-31280), and incorporated herein by reference. +

10.6 - 1989 Stock Option Policy for Outside Consultants. Filed as an exhibit
to Amendment No. 1 to Form S-1 Registration Statement (No. 33-31280),
and incorporated herein by reference. +

10.7.1 - License Agreement dated as of March 31, 1993 between Cytogen
Corporation and The Dow Chemical Company. Filed as an exhibit to Form
10-Q/A-1 Amendment to Quarterly Report for the quarter ended July 3,
1993, and incorporated herein by reference.*

10.7.2 - Amendment of the License Agreement between Cytogen Corporation and
The Dow Chemical Company dated September 5, 1995. Filed as an exhibit
to Form 10-Q Quarterly Report for the quarter ended March 31, 1996,
and incorporated herein by reference.*

10.7.3 - Second Amendment to the License Agreement between Cytogen
Corporation and The Dow Chemical Company dated May 20, 1996. Filed as
an exhibit to Form 10-Q/A-1 Amendment to Quarterly Report for the
quarter ended June 30, 1996, and incorporated herein by reference.*

10.8 - 1992 Cytogen Corporation Employee Stock Option Plan II, as amended.
Filed as an exhibit to Form S-4 Registration Statement (No. 33-88612),
and incorporated herein by reference. +

10.9 - License Agreement, dated March 10, 1993, between Cytogen Corporation
and The University of North Carolina at Chapel Hill, as amended. Filed
as an exhibit to Form 10-K Annual Report for the year ended December
31, 1994, and incorporated herein by reference.*

10.10 - Option and License Agreement, dated July 1, 1993, between Cytogen
Corporation and Sloan-Kettering Institute for Cancer Research. Filed
as an exhibit to Form 10-K Annual Report for the year ended December
31, 1994, and incorporated herein by reference.*

10.11 - Cytogen Corporation Amended and Restated 1995 Stock Option Plan.
Filed as an exhibit to Form 10-Q Quarterly Report for the quarter
ended September 30, 2001, and incorporated herein by reference. +

10.12 - Horosziewicz - Cytogen Agreement, dated April 20, 1989, between
Cytogen Corporation and Julius S. Horosziewicz, M.D., DMSe. Filed as
an exhibit to Form 10-K Annual Report for the year ended December 31,
1995, and incorporated herein by reference.*

10.13 - Marketing and Co-Promotion Agreement between Cytogen Corporation
and C.R. Bard, Inc. effective August 1, 1996. Filed as an exhibit to
Form 10-Q Quarterly Report for the quarter ended September 30, 1996,
and incorporated herein by reference.*

10.14 - Severance Agreement effective as of March 26, 1996 between Cytogen
Corporation and John D. Rodwell, Ph.D. Filed as an exhibit to Form
10-K Annual Report for the year ended December 31, 1996, and
incorporated herein by reference. +

10.15 - Cytogen Corporation Employee Stock Purchase Plan, as amended. Filed
as an exhibit to Form 10-Q Quarterly Report for the quarter ended
September 30, 2001, and incorporated herein by reference. +

10.16 - License Agreement between Targon Corporation and Elan Corporation,
plc dated July 21, 1997. Filed as an exhibit to Form 10-Q Quarterly
Report for the quarter ended June 30, 1997, and incorporated herein by
reference.*

-51-

10.17 - Employment Agreement effective as of December 23, 1996 between
Cytogen Corporation and Dr. Graham S. May. Filed as an exhibit to Form
10-K/A-1 Amendment to Annual Report for the Year Ended December 31,
1997, and incorporated herein by reference. +

10.18 - Convertible Promissory Note dated as of August 12, 1998 between
Cytogen Corporation and Elan International Services, Ltd. Filed as an
exhibit to Form 10-Q Quarterly Report for the quarter ended June 30,
1998, and incorporated herein by reference.

10.19 - Employment agreement effective as of August 20, 1998 between
Cytogen Corporation and H. Joseph Reiser. Filed as an exhibit to Form
10-Q Quarterly Report for the quarter ended September 30, 1998, and
incorporated herein by reference. +

10.20 - License Agreement by and between Berlex Laboratories, Inc. and
Cytogen Corporation dated as of October 28, 1998. Filed as an exhibit
to Form 10-Q/A-1 Amendment to Quarterly Report for the quarter ended
September 30, 1998, and incorporated herein by reference.

10.21 - Manufacturing Space Agreement between Bard BioPharma L.P. and
Cytogen Corporation dated as of January 7, 1999. Filed as an exhibit
to Form S-1/A-1 Amendment to Registration Statement, filed with the
Commission on January 27, 1999, and incorporated herein by reference.

10.22 - Employment Agreement effective as of June 10, 1997 between Cytogen
Corporation and Donald F. Crane, Jr. Filed as an exhibit to Form 10-K
Annual Report for the year ended December 31, 1999, and incorporated
herein by reference. +

10.23 - Amended and Restated 1999 Stock Option Plan for Non-Employee
Directors. Filed as an exhibit to Form 10-Q Quarterly Report for the
quarter ended September 30, 2001, and incorporated herein by
reference. +

10.24 - Strategic Alliance Agreement between AxCell Biosciences Corporation
and InforMax, Inc. dated as of September 15, 1999. Filed as an exhibit
to Form 10-K Annual Report for the year ended December 31, 1999, and
incorporated herein by reference.*

10.25 - AxCell Biosciences Corporation Employee Stock Option Plan. Filed as
an exhibit to Form 10-K Annual Report for the year ended December 31,
1999, and incorporated herein by reference. +

10.26 - Master Loan and Security Agreement No. S7600 among Cytogen
Corporation, AxCell Biosciences Corporation and Finova Capital
Corporation dated December 30, 1999. Filed as an exhibit to Form 10-K
Annual Report for the year ended December 31, 1999, and incorporated
herein by reference.

10.27 - Amendment No. 1 to Marketing and Co-Promotion Agreement effective
as of January 1, 2000 by and between Cytogen Corporation and C.R.
Bard, Inc. Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, and incorporated herein
by reference.

10.28 - License and Marketing Agreement by and between Cytogen Corporation
and Advanced Magnetics, Inc. dated August 25, 2000. Filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, and incorporated herein by reference.*

10.29 - Development and Manufacturing Agreement by and between Cytogen
Corporation and DSM Biologics Company B.V. dated July 12, 2000. Filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000, and incorporated herein by
reference.*

-52-

10.30 - Common Stock Purchase Agreement, dated September 29, 2000, by and
between Cytogen Corporation and Acqua Wellington North American
Equities Fund, Ltd. Filed as an exhibit to the Company's Current
Report on Form 8-K, filed with the Commission on October 5, 2000, and
incorporated herein by reference.

10.31 - Common Stock Purchase Agreement, dated October 4, 2000, by and
between Cytogen Corporation and Acqua Wellington North American
Equities Fund, Ltd. Filed as an exhibit to the Company's Current
Report on Form 8-K, filed with the Commission on October 12, 2000, and
incorporated herein by reference.

10.32 - Written Compensatory Agreement by and between Cytogen Corporation
and H. Joseph Reiser dated August 24, 1998, as revised on July 11,
2000. Filed as an exhibit to the Company's Registration Statement on
Form S-8 (File No. 333-48454), filed with the Commission on October
23, 2000, and incorporated herein by reference. +

10.33 - Written Compensatory Agreement by and between Cytogen Corporation
and Lawrence Hoffman dated July 10, 2000. Filed as an exhibit to the
Company's Registration Statement on Form S-8 (File No. 333-48454),
filed with the Commission on October 23, 2000, and incorporated herein
by reference. +

10.34 - Product Manufacturing and Supply Agreement by and between Cytogen
Corporation and Draximage Inc. dated December 5, 2000. Filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. *

10.35 - License and Distribution Agreement by and between Cytogen
Corporation and Draximage Inc. dated December 5, 2000. Filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. *

10.36 - Form of Executive Change of Control Severance Agreement by and
between the Company and each of its Executive Officers. Filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. Filed herewith. +

10.37.1- Lease Agreement by and between Newtown Associates, L.P. and
AxCell Biosciences Corporation dated as of July 23, 1999. Filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. Filed herewith.

10.37.2- First Amendment to the Lease Agreement by and between 826 Newtown
Associates, L.P. and AxCell Biosciences Corporation dated as of March
16, 2001. Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001, and incorporated
herein by reference.

10.38 - Cytogen Corporation Stock Payment Bonus Plan Program. Filed as an
exhibit to the Company's Registration Statement on Form S-8 (File No.
333-58384), filed with the Commission on April 6, 2001, and
incorporated herein by reference. +

10.39 - MFS Fund Distributors, Inc. 401(K) Profit Sharing Plan and Trust.
Filed as an exhibit to the Company's Registration Statement on Form
S-8 (File No. 333-59718), filed with the Commission on April 27, 2001,
and incorporated herein by reference. +

10.40 - Adoption Agreement for MFS Fund Distributors, Inc. Non-Standardized
401(K) Profit Sharing Plan and Trust, with amendments. Filed as an
exhibit to the Company's Registration Statement on Form S-8 (File No.
333-59718), filed with the Commission on April 27, 2001, and
incorporated herein by reference.

10.41 - Cytogen Corporation Performance Bonus Plan with Stock Payment
Program. Filed as an exhibit to Company's Registration Statement on
Form S-8 (File No. 333-75304), filed with the Commission on December
17, 2001, and incorporated herein by reference. +

-53-

10.42 - Share Purchase Agreement by and between Cytogen Corporation and the
State of Wisconsin Investment Board dated as of June 18, 2001. Filed
as an exhibit to the Company's Current Report on Form 8-K, filed with
the Commission on June 19, 2001, and incorporated herein by reference.

10.43 - Share Purchase Agreement by and between Cytogen Corporation and the
State of Wisconsin Investment Board dated as of January 18, 2002.
Filed as an exhibit to the Company's Current Report on Form 8-K, filed
with the Commission on January 24, 2002, and incorporated herein by
reference.

21 - Subsidiaries of Cytogen Corporation. Filed herewith.

23 - Consent of Arthur Andersen LLP. Filed herewith.

99.1 - Letter regarding certain representation of Arthur Andersen LLP,
dated as of March 28, 2002. Filed as an exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 2001. Filed
herewith.

+ Management contract or compensatory plan or arrangement.

* We have received confidential treatment of certain provisions contained in
this exhibit pursuant to an order issued by the Securities and Exchange
Commission. The copy filed as an exhibit omits the information subject to the
confidentiality grant.

(b) Reports on Form 8-K:

We did not file any Current Reports on Form 8-K during the quarter
ended December 31, 2001.

On January 24, 2002, we filed a Current Report on Form 8-K relating to
the issuance and sale of 2,970,665 shares of our Common Stock to the State of
Wisconsin Investment Board for an aggregate purchase price of approximately $8.0
million pursuant to a share purchase agreement dated January 18, 2002.

The Exhibits filed with this Form 10-K are listed above in response to
Item 14(a)(3).

(d) Financial Statement Schedules:

None.

-54-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 28th day of March
2002.

Cytogen Corporation

By: /s/ H. Joseph Reiser
------------------------------------------------------
H. Joseph Reiser, President and Chief Executive Officer

-55-

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

Signature Title Date
------------------------------ -------------------------------------------- --------------

/s/ H. Joseph Reiser Chief Executive Officer and President March 28, 2002
------------------------------ (Principal Executive Officer), and Director
H. Joseph Reiser

/s/ Lawrence R. Hoffman Vice President & Chief Financial Officer March 28, 2002
------------------------------ Treasurer and Secretary
Lawrence R. Hoffman (Principal Financial and Accounting Officer)

/s/ John E. Bagalay, Jr. Director March 28, 2002
------------------------------
John E. Bagalay, Jr.

/s/ Stephen K. Carter Director March 28, 2002
------------------------------
Stephen K. Carter

/s/ James A. Grigsby Director and Chairman of the Board March 28, 2002
------------------------------
James A. Grigsby

/s/ Robert F. Hendrickson Director March 28, 2002
------------------------------
Robert F. Hendrickson

/s/ Kevin G. Lokay Director March 28, 2002
------------------------------
Kevin G. Lokay

-56-

Form 10-K Item 14(a)(1) and (2)

CYTOGEN CORPORATION AND SUBSIDIARIES

(1) Index to Consolidated Financial Statements
-------------------------------------------

The following consolidated financial statements of Cytogen Corporation and
Subsidiaries together with the related notes and report of Arthur Andersen LLP,
independent public accountants.

Page in
Form 10-K

Report of Independent Public Accountants......................................................... 58

Consolidated Balance Sheets as of December 31, 2001 and 2000..................................... 59

Consolidated Statements of Operations--Years Ended December 31, 2001, 2000 and 1999 ............. 60

Consolidated Statements of Stockholders' Equity--Years Ended December 31, 2001, 2000 and 1999.... 61

Consolidated Statements of Cash Flows--Years Ended December 31, 2001, 2000 and 1999.............. 62

Notes to Consolidated Financial Statements....................................................... 63

-57-

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Cytogen Corporation:

We have audited the accompanying consolidated balance sheets of Cytogen
Corporation (a Delaware Corporation) and Subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cytogen
Corporation and Subsidiaries as of December 31, 2001 and 2000 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

As explained in Note 1 to the consolidated financial statements, effective
January 1, 2000, the Company changed its method of accounting for revenue
recognition.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
February 5, 2002

-58-

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)

December 31,
-----------------------
2001 2000
--------- ---------

ASSETS:
Current Assets:
Cash and cash equivalents ........................................... $ 11,309 $ 11,993
Marketable securities ............................................... 1,376 -
Receivable on income tax benefit sold ............................... 1,103 1,625
Accounts receivable, net ............................................ 1,621 1,841
Inventories ......................................................... 1,889 883
Other current assets ................................................ 508 377
--------- ---------

Total current assets ............................................ 17,806 16,719

Property and Equipment, net .............................................. 1,831 2,193

Other Assets ............................................................. 1,855 1,504
--------- ---------

$ 21,492 20,416
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term debt ................................... $ 77 $ 151
Accounts payable and accrued liabilities ............................ 5,315 7,218
Deferred revenue .................................................... 534 859
--------- ---------

Total current liabilities ....................................... 5,926 8,228
--------- ---------

Long-Term Debt ........................................................... 2,291 2,374
--------- ---------

Deferred Revenue ......................................................... 2,061 2,596
--------- ---------

Commitments and Contingencies (Note 16)

Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares authorized -
Series C Junior Participating Preferred Stock, $.01 par value,
200,000 shares authorized, none issued and outstanding .......... - -

Common stock, $.01 par value, 250,000,000 shares authorized,
78,937,000 and 75,594,000 shares issued and outstanding
at December 31, 2001 and 2000, respectively ..................... 789 756
Additional paid-in capital .......................................... 350,867 335,938
Deferred compensation ............................................... (621) (895)
Accumulated other comprehensive income .............................. 860 -
Accumulated deficit ................................................. (340,681) (328,581)
--------- ---------

Total stockholders' equity ...................................... 11,214 7,218
--------- ---------

$ 21,492 $ 20,416
========= =========

The accompanying notes are an integral part of these statements.

-59-

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)

Year Ended December 31,
-------------------------------------
2001 2000 1999
--------- --------- ---------

Revenues:
Product related:
ProstaScint ............................................ $ 7,561 $ 6,912 $ 6,351
BrachySeed ............................................. 773 - -
OncoScint .............................................. 358 512 620
-------- -------- --------
Total product sales ................................. 8,692 7,424 6,971

Quadramet royalties .................................... 2,063 2,004 1,060
-------- -------- --------
Total product related ............................... 10,755 9,428 8,031

License and contract ....................................... 912 1,024 3,171
-------- -------- --------

Total revenues ...................................... 11,667 10,452 11,202
-------- -------- --------

Operating Expenses:
Cost of product and contract manufacturing revenues ........ 4,126 4,414 4,111
Research and development ................................... 10,340 6,957 3,849
Acquisition of marketing and technology rights ............. - 13,241 1,214
Selling and marketing ...................................... 6,314 6,126 4,210
General and administrative ................................. 4,947 4,934 3,501
-------- -------- --------

Total operating expenses ............................ 25,727 35,672 16,885
-------- -------- --------

Operating loss ...................................... (14,060) (25,220) (5,683)

Insurance reimbursement ...................................... 402 - -
Gain on sale of laboratory and manufacturing facilities ...... - - 3,298
Interest income .............................................. 635 774 441
Interest expense ............................................. (180) (163) (29)
-------- -------- --------

Loss before income taxes and cumulative effect
of accounting change ............................... (13,203) (24,609) (1,973)
Income tax benefit ........................................... (1,103) (1,625) (2,702)
-------- -------- --------

Income (loss) before cumulative effect of
accounting change .................................. (12,100) (22,984) 729
Cumulative effect of accounting change (Note 1) .............. - (4,314) -
-------- -------- --------

Net income (loss) ............................................ $(12,100) $(27,298) $ 729
======== ======== ========

Net income (loss) per share:
Basic and diluted net income (loss) before cumulative
effect of accounting change ........................ $ (0.16) $ (0.31) $ 0.01
Cumulative effect of accounting change .............. - (0.06) -
-------- -------- --------
Basic and diluted net income (loss) ................. $ (0.16) $ (0.37) $ 0.01
======== ======== ========
Weighted average common shares outstanding:
Basic ............................................... 77,783 73,337 67,179
======== ======== ========
Diluted ............................................. 77,783 73,337 68,187
======== ======== ========

The accompanying notes are an integral part of these statements.

-60-

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(All amounts in thousands, except share data)

Accumulated
Other
Additional Deferred Compre- Accu- Total
Common Paid-in Compen- hensive mulated Stockholders'
Stock Capital sation Income Deficit Equity
--------- ------------ --------- ----------- ---------- -------------

Balance, December 31, 1998 $ 619 $ 301,836 $ - $ - $(302,012) $ 443

Issuance of 2,050,000 shares of common stock
in connection with the acquisition of
Prostagen Inc. ................................... 21 1,824 - - - 1,845
Sale of 6,527,002 shares of common stock ............ 65 7,244 - - - 7,309
Issuance of options and warrants to purchase
shares of common stock ........................... - 221 - - - 221
Deferred compensation related to
stock options .................................... - 84 (84) - - -
Amortization of deferred compensation ............... - - 2 - - 2
Net income .......................................... - - - - 729 729
--------- --------- ----- ----- --------- ---------

Balance, December 31, 1999 .......................... 705 311,209 (82) - (301,283) 10,549

Sale of 3,567,771 shares of
common stock ..................................... 36 10,342 - - - 10,378
Issuance of 1,500,000 shares of common stock
in connection with the acquisition of
product candidates marketing rights .............. 15 13,064 - - - 13,079
Issuance of options to purchase
shares of common stock ........................... - 261 - - - 261
Deferred compensation related to
stock options .................................... - 1,062 (1,062) - - -
Amortization of deferred compensation ............... - - 249 - - 249
Net loss ............................................ - - - - (27,298) (27,298)
-------- --------- ------ ----- --------- ---------

Balance, December 31, 2000 .......................... 756 335,938 (895) - (328,581) 7,218

Sale of 3,241,485 shares of
common stock ..................................... 32 14,206 - - - 14,238
Issuance of stock and stock options related
to compensation .................................. 1 281 - - - 282
Issuance of options and warrants to purchase
shares of common stock ........................... - 201 - - - 201
Deferred compensation related to
stock options .................................... - 241 (241) - - -
Amortization of deferred compensation ............... - - 515 - - 515
---------
Comprehensive loss:
Net loss ......................................... - - - - (12,100) (12,100)
Unrealized gain on marketable securities ......... - - - 860 - 860
---------
Total comprehensive loss .................... (11,240)
-------- --------- ------ ----- --------- ---------

Balance, December 31, 2001 .......................... $ 789 $ 350,867 $ (621) $ 860 $(340,681) $ 11,214
======== ========= ====== ===== ========= =========

The accompanying notes are an integral part of these statements.

-61-

CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)

Year Ended December 31,
---------------------------------------
2001 2000 1999
---------- ---------- ---------

Cash Flows From Operating Activities:
Net income (loss)................................................... $ (12,100) $ (27,298) $ 729
--------- --------- ---------
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization ................................. 1,186 1,027 1,051
Imputed interest (income) expense ............................. (43) 29 87
Warrant, stock and stock option grants ........................ 201 261 221
Stock based compensation expenses ............................. 608 249 2
Amortization of deferred revenue .............................. (860) (859) -
Acquisition of marketing and technology rights ................ - 13,079 1,214
Cumulative effect of accounting change ........................ - 4,314 -
Write down of property and equipment .......................... - - 79
Gain on sale of laboratory and manufacturing facilities ....... - - (3,298)
Gain on sale of other property and equipment .................. - (148) (54)
Changes in assets and liabilities:
Accounts receivable, net .................................. 263 397 (715)
Inventories ............................................... (1,006) (198) (435)
Other assets .............................................. 24 (1,631) (97)
Accounts payable and accrued liabilities .................. (1,714) 1,740 (2,661)
--------- --------- ---------

Total adjustments ............................... (1,341) 18,260 (4,606)
--------- --------- ---------

Net cash used in operating activities ..................... (13,441) (9,038) (3,877)
--------- --------- ---------

Cash Flows From Investing Activities:
Purchases of property and equipment ................................ (813) (1,209) (523)
Purchase of product rights ......................................... (500) (500) -
Net cash acquired from Prostagen, Inc. ............................. - - 550
Net proceeds from sale of laboratory and manufacturing facilities... - - 3,584
Net proceeds from sale of other property and equipment ............. - 148 714
(Increase) decrease in short-term investments ...................... - 1,593 (1,593)
--------- --------- ---------
Net cash provided by (used in) investing activities ....... (1,313) 32 2,732
--------- --------- ---------

Cash Flows From Financing Activities:
Proceeds from sale of common stock ................................. 14,238 10,378 9,809
Payments of long-term liabilities .................................. (168) (180) (878)
--------- --------- ---------
Net cash provided by financing activities ................. 14,070 10,198 8,931
--------- --------- ---------

Net increase (decrease) in cash and cash equivalents ............... (684) 1,192 7,786
Cash and cash equivalents, beginning of year ....................... 11,993 10,801 3,015
--------- --------- ---------
Cash and cash equivalents, end of year ............................. $ 11,309 $ 11,993 $ 10,801
========= ========= =========

The accompanying notes are an integral part of these statements.

-62-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Cytogen Corporation ("Cytogen" or the "Company") is a biopharmaceutical company
with an established and growing product line in prostate cancer and other areas
of oncology. FDA-approved products include ProstaScint(R) (a monoclonal
antibody-based imaging agent used to image the extent and spread of prostate
cancer); BrachySeed(TM) I-125 and Pd-103, (uniquely designed, next-generation
radioactive seed implants for the treatment of localized prostate cancer); and
Quadramet(R) (a therapeutic agent marketed for the relief of bone pain in
prostate and other types of cancer). Cytogen is evolving a pipeline of oncology
product candidates by developing its prostate specific membrane antigen, or PSMA
technologies, which are exclusively licensed from Memorial Sloan-Kettering
Cancer Center.

AxCell, a subsidiary of Cytogen Corporation, is engaged in the research and
development of novel biopharmaceutical products using its growing portfolio of
functional proteomics solutions and collection of proprietary signal
transduction pathway information. Through the systematic and industrialized
measurement of protein-to-protein interactions, AxCell is assembling
ProChart(TM), a proprietary database of signal transduction pathway information
that is relevant in a number of therapeutically important classes of molecules
including growth factors, receptors and other potential protein therapeutics or
drug targets. AxCell's database content and functional proteomics tools are
available on a non-exclusive basis to biotechnology, pharmaceutical and academic
researchers. AxCell is expanding and accelerating its research activities to
further elucidate the role of novel proteins and pathways in ProChart(TM),
through both external collaborations and internal data mining.

Basis of Consolidation

The consolidated financial statements include the accounts of Cytogen and its
wholly-owned subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation.

Use of Estimates

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

Statements of Cash Flows

Cash and cash equivalents include cash on hand, cash in banks and all highly
liquid investments with maturity of three months or less at the time of
purchase. Cash paid for interest expense was $180,000, $99,000 and $44,000 in
2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the Company
purchased $11,000, $49,000 and $223,000, respectively, of equipment under
various capital leases.

Marketable Securities

In connection with the acquisition of Prostagen Inc. in June 1999 (see Note 5),
the Company received 275,350 shares of Northwest Biotherapeutics, Inc. common
stock. The Company has classified this investment as available-for-sale
securities in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Available-for-sale securities are carried at fair value, based on
quoted market prices, with unrealized gains or losses reported as a separate
component of stockholders' equity. As of December 31, 2001, the Company had an
unrealized gain of $860,000 related to this investment. There is no assurance,
however that the Company can sell these securities within a reasonable amount of
time without negatively effecting the price of the stock since the daily trading
volume has been low.

-63-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Receivables

At December 31, 2001 and 2000, accounts receivable were net of an allowance for
doubtful accounts of $30,000 and $35,000, respectively. The Company charged to
expense $0, $0 and $10,000 as a provision for doubtful accounts and wrote off
$5,000, $47,000 and $0 of uncollectible accounts in 2001, 2000 and 1999,
respectively. At December 31, 2001 and 2000, the Company had a $1.1 million and
$1.6 million receivable, respectively, due from Public Service Electric and Gas
Company relating to the sales of New Jersey state operating loss carryforwards
and research and development credits. The Company received the proceeds from
these receivables in January 2002 and 2001, respectively.

Inventories

The Company's inventories are primarily related to ProstaScint and OncoScint
CR/OV. Inventories are stated at the lower of cost or market using the first-in,
first-out method and consisted of the following:

December 31,
------------
2001 2000
---- ----

Raw materials................................... $ 506,000 $718,000
Work-in process................................. 1,371,000 59,000
Finished goods.................................. 12,000 106,000
---------- --------
$1,889,000 $883,000
========== ========

Property and Equipment

Property and equipment are stated at cost, net of depreciation. Leasehold
improvements are amortized on a straight-line basis over the lease period or the
estimated useful life, whichever is shorter. Equipment and furniture are
depreciated on a straight-line basis over three to five years. Expenditures for
repairs and maintenance are charged to expense as incurred. Property and
equipment consisted of the following:

December 31,
------------
2001 2000
---- ----

Leasehold improvements........................... $3,425,000 $ 3,211,000
Equipment and furniture.......................... 6,224,000 5,668,000
---------- -----------

9,649,000 8,879,000
Less - accumulated depreciation and amortization (7,818,000) (6,686,000)
---------- -----------
$1,831,000 $ 2,193,000
========== ===========

In 1999, the Company sold certain of its laboratory and manufacturing facilities
to Bard BioPharma L.P., a subsidiary of Purdue Pharma L.P. ("Purdue"), for $3.6
million, net of approximately $300,000 of transaction costs. As a result of the
sale, the Company recognized a gain of approximately $3.3 million during 1999.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable,
accrued expenses and long-term debt. The Company believes the carrying value of
these assets and liabilities are considered to be representative of their fair
market value.

Impairment of Long-Lived Assets

In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," if indicators of impairment
exist, Management assesses the recoverability of the affected long-lived assets
by determining whether the carrying value of such assets can be recovered
through undiscounted future operating cash flows. If impairment is indicated

-64-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Management measures the amount of such impairment by comparing the carrying
value of the assets to the present value of the expected future cash flows
associated with the use of the asset. Management believes the future cash flows
to be received from the long-lived assets will exceed the assets' carrying
value, and, accordingly, the Company has not recognized any impairment losses
through December 31, 2001.

Other Assets

Other assets consists of the following:

December 31,
------------
2001 2000
---- ----

Investment in Northwest Biotherapeutics, Inc......... $ - $ 516,000
BrachySeed Marketing Rights (Note 4)................. 903,000 496,000
Investment in PSMA Development Co. LLC (Note 6)...... 588,000 20,000
Other ............................................... 364,000 472,000
---------- ----------
$1,855,000 $1,504,000
========== ==========

Revenue Recognition

Product related revenues include product sales by Cytogen to its customers and
Quadramet royalties. Product sales are recognized upon shipment of the finished
goods. The Company does not grant price protection to its customers. Royalties
are recognized as revenue when earned.

License and contract revenues include milestone payments and fees under
collaborative agreements with third parties, revenues from contract
manufacturing and research services, and revenues from other miscellaneous
sources. In 2000, the Company discontinued contract manufacturing services,
concurrent with the sale of the manufacturing and laboratory facilities (see
Property and Equipment above) and therefore received no revenue from this source
since 2000.

Effective January 1, 2000, the Company adopted U.S. Securities and Exchange
Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), which, as applied to the Company, requires up-front,
non-refundable license fees to be deferred and recognized over the performance
period. The cumulative effect of adopting SAB 101 resulted in a one-time,
non-cash charge of $4.3 million or $0.06 per share, which reflects the deferral
of an up-front license fee received from Berlex Laboratories, Inc. ("Berlex"),
net of associated costs, related to the licensing of Quadramet recognized in
October 1998 and a license fee for certain applications of PSMA to a joint
venture formed by Cytogen and Progenics Pharmaceuticals Inc. ("Progenics")
recognized in June 1999 (see Note 6). Previously, the Company had recognized
up-front license fees when the Company had no obligations to return the fees
under any circumstances. Under SAB 101, these payments are recorded as deferred
revenue to be recognized over the remaining term of the related agreements. For
the years ended December 31, 2001 and 2000, the Company recognized $860,000 and
$859,000 in revenues, respectively, that were included in the cumulative effect
adjustment as of January 1, 2000.

Prior year financial statements have not been restated to apply SAB 101
retroactively; however, the following pro forma amounts present the net loss to
common stockholders and net loss per share assuming the Company had
retroactively applied SAB 101.

Year Ended December 31,
--------------------------------
2000 1999
------------- --------------

Net income (loss), as reported.............. $(27,298,000) $ 729,000
============= ==============

Net income (loss) per share, as reported.... $ (0.37) $ 0.01
============= ==============

Pro forma net loss ......................... $(22,984,000) $ (484,000)
============= ==============

Pro forma net loss per share................ $ (0.31) $ (0.01)
============= ==============

-65-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Research and Development

Research and development expenditures consist of projects conducted by the
Company and payments made to sponsored research programs and consultants. All
research and development costs are charged to expense as incurred. Research and
development expenditures for customer sponsored programs were $17,000, $45,000
and $194,000 in 2001, 2000 and 1999, respectively.

Patent Costs

Patent costs are charged to expense as incurred.

Net Income (Loss) Per Share

Basic net income (loss) per common share is based upon the weighted average
common shares outstanding during each period. Diluted net income per common
share in 1999 is based upon the weighted average common shares outstanding and
common stock equivalents, which represent the incremental common shares that
would have been outstanding under certain employee stock options and warrants,
upon assumed exercise of dilutive stock options and warrants. Diluted net loss
per share for 2001 and 2000 is the same as basic net loss per share, as the
inclusion of common stock equivalents would be antidilutive (see Note 12).

Other Comprehensive Income

The Company follows SFAS No. 130, "Reporting Comprehensive Income." This
statement requires the classification of items of other comprehensive income by
their nature and disclose of the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet.

2. DSM BIOLOGICS COMPANY B.V.

In July 2000, the Company entered into a Development and Manufacturing Agreement
with DSM Biologics Company B.V. ("DSM"), pursuant to which DSM will conduct
certain development activities with respect to ProstaScint, including the
delivery of a limited number of batches of ProstaScint for testing and
evaluation purposes. Under the terms of such agreement, and subject to the
satisfactory performance thereof by DSM and the achievement of certain
regulatory approvals for the manufacturing of ProstaScint, the parties are
obligated to negotiate in good faith a long term supply agreement.
Notwithstanding the parties' obligations to perform under the agreement or to
negotiate a supply agreement in good faith, the Company cannot be certain that
DSM will satisfactorily perform its obligations thereunder or that the parties
will be able to negotiate a supply agreement on commercially satisfactory terms,
if at all. Alternatively, the Company has the option, but not the obligation, to
enter into certain licensing arrangements with DSM for the technology developed
on terms and conditions to be agreed upon by the parties. In 2001 and 2000, the
Company recorded $3.2 million and $559,000, respectively, of development
expenses related to this agreement.

3. ADVANCED MAGNETICS, INC.

In August 2000, the Company and Advanced Magnetics, Inc. ("Advanced Magnetics"),
a developer of novel diagnostic pharmaceuticals for use in magnetic resonance
imaging (MRI), entered into marketing, license and supply agreements ("AVM
Agreements"). Under the AVM Agreements, Cytogen acquired certain rights to
Advanced Magnetics' product candidates: Combidex(R), MRI contrast agent for the
detection of lymph node metastases and imaging agent Code 7228 for oncology
applications. Advanced Magnetics will be responsible for all costs associated
with the clinical development, supply and manufacture of Combidex and Code 7228
and will receive royalties based upon product sales.

In exchange for the future marketing rights to Combidex and Code 7228, Cytogen
issued 1.5 million shares of its Common Stock to Advanced Magnetics at closing
and may issue an additional 500,000 shares, which are currently in escrow,
subject to the achievement of certain milestones. Since the Advanced Magnetics'
product candidates have not yet received FDA approval, the Company recorded a
$13.2 million charge in the December 31, 2000 consolidated statement of
operations for the acquisition of marketing and technology rights, of which
$13.1 million was non-cash and represented the fair value of the 1.5 million
shares of Common Stock issued. There can be no assurance that Advanced Magnetics
will receive FDA approval to market Combidex or Code 7228 in the United States.

4. DRAXIMAGE INC.

In December 2000, the Company entered into a Product Manufacturing and Supply
Agreement with Draximage, Inc. ("Draximage") to market and distribute BrachySeed
implants for prostate cancer therapy in the U.S. Under the terms of the
agreement, Draximage will supply radioactive iodine and palladium seeds to
Cytogen in exchange for product transfer payments, royalties on sales and
certain milestone payments. Cytogen paid Draximage $500,000 upon execution of

-66-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the contract in 2000 and $500,000 upon the first sale of the Iodine-125
BrachySeeds in 2001. These payments have been recorded as other assets in the
accompanying consolidated balance sheet (see Note 1) and are being amortized
over the ten year term of the Draximage agreement. Amortization of these rights
was $93,000 and $4,000 in 2001 and 2000, respectively. Pursuant to the
agreement, Cytogen will pay Draximage $1.0 million upon the first sale of the
palladium-103 BrachySeeds. The Company launched the radioactive iodine
BrachySeed in the U.S. in the first half of 2001.

5. ACQUISITION OF PROSTAGEN, INC.

In June 1999, Cytogen reacquired the rights for immunotherapy to its PSMA
technology by acquiring 100% of the outstanding capital stock of Prostagen, Inc.
("Prostagen") for 2,050,000 shares of Cytogen Common Stock, plus transaction
costs. The acquisition was accounted for using the purchase method of
accounting, whereby the purchase price was allocated to the assets acquired and
liabilities assumed from Prostagen based on the respective estimated fair values
at the acquisition date. The excess of the purchase price over the fair value of
the net tangible assets of approximately $1.2 million was assigned to acquired
technology rights and has been recorded as a non-cash charge to operations in
the accompanying financial statements. Acquired technology rights reflects the
value of the PSMA technology development projects underway at the time of the
Prostagen acquisition. The Company may issue up to an additional 450,000 shares
of Cytogen Common Stock upon the satisfactory termination of lease obligations
assumed in the Prostagen acquisition.

The Company had sublicensed PSMA to Prostagen for prostate cancer immunotherapy
in 1996. In connection with the acquisition, Cytogen acquired approximately
$550,000 in cash, a minority ownership in Northwest Biotherapeutics, Inc., which
is developing PSMA for dendritic cell therapy, and a contract with Velos, Inc.
for marketing a cancer patient software management program for hospitals and
health care payors. In addition, the Company may issue up to an additional $4.0
million worth of Cytogen Common Stock if certain milestones are achieved in the
dendritic cell therapy and PSMA development programs. The Company may also issue
up to 500,000 shares of Cytogen Common Stock upon beneficial resolution of other
contractual arrangements entered into by Prostagen.

6. PROGENICS PHARMACEUTICALS, INC. JOINT VENTURE

In June 1999, Cytogen entered into a joint venture with Progenics, PSMA
Development Co. LLC (the "Joint Venture"), to develop vaccine and antibody-based
immunotherapeutic products utilizing Cytogen's proprietary PSMA technology. The
Joint Venture is owned equally by Cytogen and Progenics. Through November 2001,
Progenics funded the first $3.0 million of development costs of the Joint
Venture. Beginning in December 2001, the Company and Progenics began to equally
share the future costs of the Joint Venture. Cytogen has the exclusive North
American marketing rights on products developed by the Joint Venture.

The Company accounts for the Joint Venture using the equity method of
accounting. As discussed above, through November 2001, Progenics was obligated
to fund the initial $3.0 million of the development costs. Beginning in December
2001, Cytogen began to recognize 50% of the Joint Venture's operating results,
expected to be losses, in its consolidated statement of operations. For the year
ended December 31, 2001, Cytogen recognized $332,000 of these losses. As of
December 31, 2001, the carrying value of the Company's investment in the Joint
Venture was $588,000 which represents Cytogen's investment to date in the Joint
Venture, less its cumulative share of losses, which net investment is recorded
in other assets (see Note 1).

In connection with the licensing of the PSMA technology to the Joint Venture in
June 1999, Cytogen recognized approximately $1.8 million in license fee revenue.
In connection with the adoption of SAB 101, effective January 1, 2000 (see Note
1), the Company deferred approximately $1.5 million of this previously
recognized license fee and recognized $599,000 of the deferred revenue as
license and contract revenue in each of the years in 2001 and 2000. The
remaining $275,000 of deferred revenue will be recognized on a straight-line
basis through June 2002, the estimated term of the development program.

7. THE DOW CHEMICAL COMPANY

In 1993, Cytogen acquired from The Dow Chemical Company ("Dow") an exclusive
license for the treatment of osteoblastic bone metastases in the U.S. for
Quadramet. This license was amended in 1995 and 1998 to expand the territory to
include Canada, Latin America, Europe and Japan, in 1996 to expand the field to
include all osteoblastic diseases, and in 1998 to include rheumatoid arthritis.
The agreement also requires the Company to pay Dow royalties based on a
percentage of net sales of Quadramet, or a guaranteed contractual minimum
payments, whichever is greater, and future payments upon achievement of certain
milestones. The Company recorded $824,000, $802,000 and $500,000, in royalty
expense for 2001, 2000 and 1999, respectively. Future annual minimum royalties
due to Dow are $1.0 million per year in 2002 through 2012.

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CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

8. REVENUES FROM MAJOR CUSTOMERS

Revenues from major customers (greater than 10%) as a percentage of total
revenues were as follows:

Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Berlex Laboratories Inc............................... 20% 22% 9%
Progenics Pharmaceuticals, Inc. (see Note 6).......... 5 6 16
Mallinckrodt Medical Inc.............................. 20 19 16
Medi-Physics.......................................... 12 7 15
Syncor International Corporation...................... 11 11 10

Mallinckrodt Medical Inc., Medi-Physics and Syncor International Corporation are
chains of radiopharmacies, which distribute ProstaScint and OncoScint CR/OV
kits.

Revenues from Berlex and Progenics in 2001 and 2000 include the recognition of
deferred revenue following the adoption of SAB 101.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

December 31,
------------
2001 2000
---- ----
Accounts payable.................................... $1,166,000 $2,700,000
Accrued payroll and related expenses................ 989,000 1,791,000
Accrued research contracts and materials............ 831,000 218,000
Accrued commission and royalties.................... 250,000 205,000
Accrued professional and legal...................... 1,061,000 755,000
Facility payable.................................... 462,000 1,125,000
Other accruals...................................... 556,000 424,000
---------- ----------

$5,315,000 $7,218,000
========== ==========
10. LONG-TERM DEBT

December 31,
------------
2001 2000
---- ----

Due to Elan Corporation, plc........................ $2,280,000 $2,280,000
Capital lease obligations........................... 88,000 245,000
---------- ----------
2,368,000 2,525,000
Less: Current portion............................. (77,000) (151,000)
---------- ----------

$2,291,000 $2,374,000
========== ==========

In August 1998, Cytogen received $2.0 million from Elan Corporation, plc
("Elan") in exchange for a convertible promissory note. The note is convertible
into shares of Cytogen Common Stock at $2.80 per share, subject to adjustments,
and matures in August 2005. The note bears annual interest of 7%, compounded
semi-annually, however, such interest is not payable in cash but is added to the
principal for the first 24 months; thereafter, interest is payable in cash. In
2001, 2000 and 1999, the Company recorded $160,000 and $141,000 and $146,000,
respectively, in interest expense on this note.

-68-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company leases certain equipment under capital lease obligations, which will
expire on various dates through 2004. Property and equipment leased under
non-cancellable capital leases have a net book value of $210,000 at December 31,
2001. Payments to be made under capital lease obligations (including total
interest of $11,000) are $85,000 in 2002, $9,000 in 2003 and $4,000 in 2004.

11. COMMON STOCK

In January 1999, the Company sold 2,666,667 shares of Cytogen Common Stock to a
subsidiary of The Hillman Company for an aggregate price of $2.0 million, or
$0.75 per share. Also in January, the Company exercised a put right granted to
Cytogen under a $12.0 million equity line agreement with an institutional
investor, for the sale of 475,342 shares of Common Stock at an aggregate price
of $500,000 or $1.0519 per share.

In August 1999, the Company sold to the State of Wisconsin Investment Board
("SWIB") 3,105,590 shares of Cytogen Common Stock at an aggregate price of $5.0
million, or $1.61 per share.

In 2000, the Company sold 1.0 million shares of Cytogen Common Stock to Berlex
for $1.0 million or $1.00 per share upon an exercise of a warrant and
approximately 1.7 million additional shares of Cytogen Common Stock for total
proceeds of $3.5 million at an average price of $2.12 per share upon the
exercises of employee stock options and other warrants.

In September 2000, the Company sold to Acqua Wellington North American Equities
Fund, Ltd. ("Acqua Wellington") 902,601 registered shares of Cytogen Common
Stock at an aggregate price of $6.0 million or $6.647 per share. In October
2000, the Company entered into an equity financing facility with Acqua
Wellington for up to $70 million of Common Stock. Under the terms of the
agreement, Cytogen could, at its discretion, sell shares of its Common Stock to
Acqua Wellington at a small discount to the market price. Pursuant to this
Equity Financing Facility, in February 2001, the Company sold to Acqua
Wellington 1,276,557 shares of its Common Stock at an aggregate price of $6.5
million or $5.092 per share. The Equity Financing Facility was terminated in
June 2001.

In June 2001, the Company entered into a Share Purchase Agreement (the
"Agreement") with SWIB, pursuant to which the Company sold 1,820,000 shares of
Cytogen Common Stock to SWIB for an aggregate purchase price of $8.2 million,
before transaction costs, or $4.50 per share. In connection with the Agreement,
the Company was required to discontinue the use of the Equity Financing Facility
and such agreement was terminated.

In January 2002, the Company sold 2,970,665 shares of Cytogen Common Stock to
SWIB for an aggregate purchase price of $8.0 million or $2.69 per share pursuant
to a January 2002 Share Purchase Agreement between SWIB and the Company. In
connection with our stock issuances to SWIB, the Company agreed not to enter
into equity line arrangements in the future, issue certain securities at less
than fair market value or undertake certain other securities issuances without
requisite stockholder approval.

12. STOCK OPTIONS

The Company has various stock option plans that provide for the issuance of
incentive and non-qualified stock options to purchase Cytogen Common Stock
("Cytogen Options") to employees, non-employee directors and outside
consultants, for which an aggregate of 6,078,888 shares of Common Stock have
been reserved. The persons to whom Cytogen Options may be granted and the
number, type, and terms of the Cytogen Options vary among the plans. Cytogen
Options are granted with an exercise term of 10 years and generally become
exercisable in installments over periods of up to 5 years at an exercise price
determined either by the plan or equal to the fair market value of the Cytogen
Common Stock at the date of grant. Under certain circumstances, vesting may
accelerate. Activity under these plans was as follows:

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CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Aggregate
Number of Price Range Exercise
Cytogen Options Per Share Price
--------------- -------------- -----------

Balance at December 31, 1998 6,042,295 $ 0.70 - 16.63 $15,449,915
Granted 536,155 0.95 - 2.67 1,068,223
Exercised (231,842) 0.81 - 2.69 (306,507)
Cancelled (1,266,609) 0.80 - 8.06 (5,963,368)
---------- -----------

Balance at December 31, 1999 5,079,999 0.70 - 16.63 10,248,263
Granted 1,340,500 2.47 - 16.94 8,530,540
Exercised (1,343,439) 0.83 - 16.63 (3,210,282)
Cancelled (380,766) 0.95 - 16.94 (1,024,568)
--------- -----------

Balance at December 31, 2000 4,696,294 0.70 - 16.94 14,543,953
Granted 747,360 2.56 - 6.13 2,845,773
Exercised (130,904) 0.70 - 2.84 (217,478)
Cancelled (370,269) 0.83 - 16.94 (1,627,480)
---------- -----------
Balance at December 31, 2001 4,942,481 $ 0.70 - 16.94 $15,544,768
========== ===========

The following table summarizes information about Cytogen stock options at
December 31, 2001:

Outstanding Cytogen Stock Options Exercisable Cytogen Stock Options
------------------------------------------------ ----------------------------------------------------

Weighted-Average
Remaining Weighted-Average
Range of Outstanding Contractual Weighted-Average Exercisable Exercise
Exercise Prices Shares Life Exercise Price Shares Price
--------------- ---------- ----------- -------------- ----------- --------

$ 0.70 - 1.83 2,348,452 6.6 $ 1.09 1,510,052 $ 1.09
1.84 - 3.67 1,363,896 8.1 2.76 657,845 2.30
3.68 - 5.50 418,300 7.0 4.86 190,300 5.03
5.51 - 7.33 251,333 5.9 5.98 184,567 5.94
7.34 - 9.17 45,500 4.8 7.80 43,100 7.74
9.18 -11.00 501,000 8.5 10.14 167,067 10.14
16.50 -16.94 14,000 1.9 16.56 12,800 16.53
--------- ---------
$ 0.70 -16.94 4,942,481 7.2 $ 3.35 2,765,731 $ 2.70
========= =========

At December 31, 2001, Cytogen Options to purchase 2,765,731 shares of Cytogen
Common Stock were exercisable and 1,136,407 shares of Cytogen Common Stock were
available for issuance under approved plans of additional options that may be
granted under the plans.

Included in the above tables is a Cytogen Option granted to a key employee in
1998 to purchase 2,250,000 shares of Cytogen Common Stock at an exercise price
of $1.0937 per share, of which, the vesting of 1,350,000 shares ("Performance
Options") are subject to the completion of certain performance based milestones
as determined by the Board of Directors (the "Board"). During 2000 and 1999, the
Board approved the commencement of vesting for 225,000 and 675,000 of the
Performance Options, respectively, upon the achievement of certain milestones.
In 2000 and 1999, the Company recorded $1.1 million and $84,000, respectively,
of deferred compensation related to the vesting of the Performance Options,
which represents the fair market value of Cytogen's Common Stock in excess of
the exercise price of the option on the date, which the Board determined the
performance milestones had been met. Deferred compensation is being amortized
over the three-year vesting period of the Performance Options.

AxCell, a subsidiary of Cytogen Corporation, also has a stock option plan that
provides for the issuance of incentive and non-qualified stock options to
purchase AxCell Common Stock ("AxCell Options") to employees, for which
2,000,000 shares of AxCell common stock have been reserved. As of December 31,
2001, 8,000,000 shares of AxCell Common Stock are outstanding; all of which are
held by Cytogen. AxCell Options are granted with an exercise term of 10 years
and generally become exercisable in installments over periods of up to 5 years
at an exercise price determined either by the plan or equal to the fair market

-70-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

value of AxCell Common Stock at the date of grant. The Company granted AxCell
Options to purchase 438,365 and 229,028 shares of AxCell Common Stock during
2001 and 1999, respectively. The exercise prices range from $0.63 to $4.63
(weighted average of $3.69) in 2001 and $0.63 to $0.80 (weighted average of
$0.68) in 1999. As of December 31, 2001, options to purchase 578,602 shares of
AxCell Common Stock were outstanding, of which 349,208 shares were exercisable
and 1,421,398 shares were available for future grant. During 2001, in connection
with the grant of AxCell Options, the Company recorded deferred compensation of
$241,000, representing the estimated fair value of AxCell Common Stock in excess
of the exercise price of the options on the date such options were granted. The
deferred compensation is being amortized over the vesting period of the options.

The Company adopted an employee stock purchase plan under which eligible
employees may elect to purchase shares of Cytogen Common Stock at the lower of
85% of fair market value as of the first trading day of each quarterly
participation period, or as of the last trading day of each quarterly
participation period. In 2001, 2000 and 1999, employees purchased 12,869, 32,385
and 29,209 shares, respectively, for aggregate proceeds of $28,000, $80,000 and
$29,000, respectively. The Company has reserved 355,497 shares for future
issuance under its employee stock purchase plan.

The Company applies Accounting Principle Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and the related interpretations in accounting for
its stock options to employees. The Company follows the disclosure requirement
of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". Had compensation cost of the Company's stock options
to employees been determined under SFAS No. 123, the Company's net loss would
have been increased to the following pro forma amounts:

Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----

Net income (loss), as reported $(12,100,000) $(27,298,000) $729,000
Pro forma net loss $(17,423,000) $(30,689,000) $(1,103,000)

Basic and diluted net income (loss) per share, as reported $(0.16) $(0.37) $0.01
Basic and diluted pro forma net loss per share $(0.22) $(0.42) $(0.02)

The weighted average fair value of the options granted under the Cytogen stock
option plans during 2001, 2000 and 1999 is estimated as $3.07, $5.40 and $1.29
per option, respectively, on the date of grant using the Black-Scholes pricing
model with the following assumptions for 2001, 2000 and 1999: dividend yield of
zero, volatility of 124.95%, 120.39% and 87.99%, respectively, risk-free
interest rate of 4.55%, 5.98% and 5.85%, respectively, and an expected life
ranging from 4 to 5 years. The average fair value per option ascribed to the
employee stock purchase plan during 2001, 2000 and 1999 is estimated at $1.47,
$1.35 and $0.40, respectively, on the date of grant using the Black-Scholes
option pricing model with the following assumptions for 2001, 2000 and 1999:
dividend yield of zero, volatility of 125.41%, 109.83% and 111.48%,
respectively, risk free interest rate of 4.12%, 5.52% and 4.46%, respectively,
and expected life of three months. The weighted average fair value of AxCell
Options granted during 2001 and 1999 is estimated at $4.06 and $0.49,
respectively, on the date of grant using the Black-Scholes pricing model with
the following assumptions for 2001 and 1999: dividend yield of zero, volatility
of 124.91% and 88.61%, respectively, risk-free interest rate of 4.59% and 5.81%,
respectively, and an expected life of 5 years.

13. RELATED PARTY TRANSACTION

Consulting services have been provided to the Company under an agreement with
the Chairman of the Board of Directors related to time spent in that function on
Company matters. Fees and expenses under this agreement were $53,000, $54,000
and $136,000 in 2001, 2000 and 1999, respectively.

14. RETIREMENT SAVINGS PLAN

The Company maintains a defined contribution plan for its employees. The
contribution is determined by the Board of Directors each year and is based upon
a percentage of gross wages of eligible employees. The plan provides for vesting
over four years, with credit given for prior service. The Company also makes
contributions under a 401(k) plan in amounts, which match up to 50% of the
salary deferred by the participants. Matching is capped at 6% of deferred
salaries. Total expense was $140,000, $95,000 and $182,000 for 2001, 2000 and
1999, respectively.

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CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

15. INCOME TAXES

As of December 31, 2001, Cytogen had federal net operating loss carryforwards of
approximately $241 million. The Company also had federal and state research and
development tax credit carryforwards of approximately $6.8 million. These net
operating loss and credit carryforwards will expire through 2021. In addition,
certain operating loss and credit carryforwards began to expire in 1995.

The Tax Reform Act of 1986 contains provisions that limit the utilization of net
operating loss and tax credit carryforwards if there has been an "ownership
change". Such an "ownership change", as described in Section 382 of the Internal
Revenue Code may limit the Company's utilization of its net operating loss and
tax credit carryforwards.

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Based upon the Company's
loss history, a valuation allowance for deferred tax assets has been provided:

2001 2000
---- ----

Deferred tax assets:
Net operating loss carryforwards $ 81,860,000 $ 74,800,000
Capitalized research and development expenses 11,808,000 15,800,000
Research and development credit 6,800,000 6,800,000
Acquisition of in-process technology 720,000 800,000
Other, net 9,738,000 5,800,000
------------- ------------
Total deferred tax assets 110,926,000 104,000,000
Valuation allowance for deferred tax assets (110,926,000) (104,000,000)
------------- ------------
Net deferred tax assets $ - $ -
============= ============

In 1995, Cytogen acquired CytoRad and Cellcor, both of which had net operating
loss carryforwards. Due to Section 382 limitations, approximately $10 million of
CytoRad and $12.0 million of Cellcor carryforwards may be available to offset
future taxable income. A full valuation allowance was established on the
acquisition dates as realization of these tax assets is uncertain.

During 2001 and 2000, the Company sold New Jersey state operating loss
carryforwards and research and development credits, resulting in the recognition
of a $1.1 million and $1.6 million tax benefit, respectively.

16. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under non-cancellable
operating leases that expire at various times through 2006. Rent expense on
these leases was $1.6 million, $1.3 million and $998,000 in 2001, 2000 and 1999,
respectively. Minimum future obligations under the operating leases are $1.7
million as of December 31, 2001 and will be paid as follows: $748,000 in 2002,
$408,000 in 2003, $344,000 in 2004, $137,000 in 2005 and $104,000 in 2006.

The Company is obligated to make minimum future payments under research and
development contracts that expire at various times. As of December 31, 2001, the
minimum future payments under contracts are $559,000 in 2002, $213,000 in 2003,
$172,000 in 2004 and $130,000 each year from 2005 and thereafter. In addition,
the Company is obligated to pay royalties on revenues from commercial product
sales including certain guaranteed minimum payments.

-72-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

17. CONSOLIDATED QUARTERLY FINANCIAL DATA - UNAUDITED

The following table provides quarterly data for the years ended December 31,
2001 and 2000.

Three Months Ended
------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
2001 2001 2001 2001
---------- ------- --------- --------

(amounts in thousands except per share data)

Total revenues.................................... $ 2,991 $ 2,834 $ 2,800 $ 3,042

Total operating expenses ......................... 5,817 6,031 6,697 7,182
-------- -------- -------- --------

Operating loss .......................... (2,826) (3,197) (3,897) (4,140)

Other income, net ................................ 172 112 118 455
-------- -------- -------- --------

Loss before income taxes ................ (2,654) (3,085) (3,779) (3,685)
Income tax benefit ............................... - - - (1,103)
--------- -------- -------- --------

Net loss ..................................... $ (2,654) $ (3,085) $ (3,779) $ (2,582)
========= ======== ======== ========

Basic and diluted net loss per share ........ $ (0.03) $ (0.04) $ (0.05) $ (0.03)
======== ======== ======== ========

Weighted average common share outstanding.... 76,244 77,444 78,866 78,901
======== ======== ======== ========

-73-

CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended
---------------------------------------------------

March 31, June 30, Sept. 30, Dec. 31,
2000 2000 2000 2000
-------- -------- --------- --------

(amounts in thousands except per share data)

Total revenues..................................... $ 2,643 $ 2,435 $ 2,733 $ 2,641

Total operating expenses .......................... 4,500 4,951 19,340 6,881
-------- -------- -------- --------

Operating loss .......................... (1,857) (2,516) (16,607) (4,240)

Other income, net.................................. 111 144 158 198
-------- -------- -------- --------

Loss before income taxes and cumulative
effect of accounting change........... (1,746) (2,372) (16,449) (4,042)

Income tax benefit ................................ - - - (1,625)
-------- -------- -------- --------
Loss before cumulative effect of
accounting change..................... (1,746) (2,372) (16,449) (2,417)
Cumulative effect of accounting change ............ (4,314) - - -
-------- -------- -------- --------

Net loss .......................................... $ (6,060) $ (2,372) $(16,449) $ (2,417)
======== ======== ======== ========

Net loss per share:
Basic and diluted net loss before cumulative
effect of accounting change ............... $ (0.02) $ (0.03) $ (0.22) $ (0.03)
Cumulative effect of accounting change ....... (0.06) - - -
-------- -------- -------- --------

Basic and diluted net loss ................... $ (0.08) $ (0.03) $ (0.22) $ (0.03)
======== ======== ======== ========

Weighted average common shares outstanding ........ 71,630 72,779 73,632 75,593
======== ======= ======== ========

-74-