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UNITED STATES

FORM 10-K

For Annual and Transition Reports Pursuant to Sections 13

	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

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-27352

HYBRIDON, INC.

(617) 679-5500

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

     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 the filing requirements for the past 90 days.  Yes x  No o

     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 the 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.  o

     The approximate aggregate market value of the voting stock held by non-affiliates of the registrant was $54.5 million as of March 27, 2002.

     As of March 27, 2002, the registrant had 45,697,637 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

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HYBRIDON, INC.

FORM 10-K

INDEX

      This annual report on Form 10-K references the following U.S. trademarks owned by us: Hybridon®, GEM®, CpR™, Cyclicon™, IMO™, YpG™, and YpR™. This annual report on Form 10-K also contains trademarks of other companies.

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PART I.

Item 1. Business

Overview

      We are a leading company in the discovery and development of novel therapeutics and diagnostics using synthetic DNA. Our activities are based on four technologies:

	•	immunomodulatory oligonucleotide, or IMOTM, technology, which uses synthetic DNA to modulate responses of the immune system;
	•	antisense technology, which uses synthetic DNA to inhibit the production of disease-associated proteins at the cellular level;
	•	cancer therapy potentiation, which uses synthetic DNA to enhance the antitumor activity of certain marketed anticancer drugs; and
	•	CycliconTM technology, which uses novel synthetic DNA structures, which we refer to as Cyclicons, in drug target validation and drug discovery.

      Antisense. We were founded in 1989 to explore the pioneering work of Paul Zamecnik, M.D., a member of our board of directors, who is regarded by many as the father of antisense. We remain a leader in antisense to this day, particularly in the key area of developing the novel chemical structures on which advanced, or second generation, antisense drug candidates are based.

      The advanced antisense chemistries developed by us serve as the basis for second generation antisense drug candidates, which we believe have the following potential advantages over earlier antisense drug candidates:

	•	fewer side effects;
	•	greater stability in the body;
	•	greater potency; and
	•	greater potential for multiple routes of administration, including oral delivery.

We believe that our antisense technology is potentially applicable to a wide variety of therapeutic indications. We are currently focusing our antisense efforts on cancer and infectious diseases.

      IMOs. Our IMO technology has evolved from our clinical experience with antisense oligonucleotides, segments of DNA, in which we learned that some types of oligonucleotides can act as potent immune modulators. Our early insights and those of others showed that oligonucleotides containing specific nucleotide segments, or motifs, mimic in the human body the immune stimulating effects of bacterial DNA. Using our DNA chemistry, we have designed and are developing a new, proprietary class of IMO compounds. We believe these compounds, which we refer to as second generation IMO compounds, may offer a number of potential advantages over earlier immunomodulatory oligonucleotides including:

	•	greater potency;
	•	greater specificity because second generation IMO compounds may be designed to induce different parts of the human immune system;
	•	reduced manufacturing costs; and
	•	the possibility of composition of matter patent protection.

We believe that our IMO compounds may be used as monotherapies in the treatment of conditions such as cancer, asthma/allergy and infectious diseases, as well as in combination therapies with antibodies, vaccines and chemotherapeutics.

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      Cancer Therapy Potentiation. Our cancer therapy potentiation technology is based on our discovery in preclinical studies that when oligonucleotides are administered in combination with certain marketed anticancer drugs, such as irinotecan, the activity of the co-administered anticancer drug is greatly improved. In the case of irinotecan, which is marketed in the United States under the name Camptosar®, we have observed increased antitumor activity in over 10 different animal tumor models. We recently commenced a Phase I/ II clinical trial combining our second generation antisense compound GEM 231 with irinotecan to determine whether the effects observed in animals can be achieved in humans.

      Strategy. We plan to exploit our therapeutic technologies in several ways. In the near term, we intend to seek collaborations with pharmaceutical or biotechnology companies covering some of our product candidates which will allow us to share in the potential success of the product candidates through upfront payments, development milestones and royalties on net sales, without incurring significant additional development costs. Also, in the near term, we plan to advance the balance of our product pipeline by continuing the clinical development of GEM 231 and by bringing our lead IMO preclinical candidate HYB 2055 into the clinic ourselves. Over the longer term, we plan to continue to exploit our technologies through collaborations, but also to increase the number of products we develop and ultimately market on our own.

Our Product Pipeline

      We are developing products based on three of our therapeutic technologies. The table below summarizes these products, the therapeutic use of these products and the development status of these products.

1.	Being developed by OriGenix Technologies, a Canadian company which we formed with an investor group. We owned approximately 25% of the capital of OriGenix as of March 15, 2002.

Developments in 2001 and Early 2002

      In 2001 and early 2002, we focused our business activities on obtaining additional cash to fund the continued development of our technologies and product pipeline, reducing our debt, simplifying our capital

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Increased Cash Resources; Debt Reduction

      Through a series of transactions over the course of 2001, we increased our cash resources from $8.5 million at December 31, 2000, which included $5.0 million of restricted cash, to $31.8 million at December 31, 2001 and reduced our debt from $15.3 million at December 31, 2000 to $1.6 million at December 31, 2001.

Collaboration and License Agreement with Isis Pharmaceuticals

      In May 2001, we entered into a collaboration and license agreement with Isis Pharmaceuticals, Inc. Under the agreement, we licensed to Isis our antisense chemistry and delivery patents and patent applications. We retained the right to use these patents and patent applications in our own drug discovery and development efforts and in collaborations with third parties. In consideration of the license, Isis agreed to pay us $15.0 million in cash plus shares of Isis common stock in four installments intended to have an aggregate value of $19.5 million based on the stock price of the Isis common stock on the dates of issuance of the shares. In 2001, Isis paid $15.0 million to us in cash and issued to us 857,143 shares of its common stock having an aggregate fair market value on the dates on which title to the shares was received of $17.3 million. The remaining $4.5 million installment is due in 2003, subject to possible acceleration depending on the price of Isis’ common stock.

      In addition, under the agreement, we licensed from Isis specified antisense patents and patent applications. In return, we agreed to pay Isis a total of $6.0 million in cash or in shares of our common stock in three equal annual installments of $2.0 million beginning in May 2002. The license permits us to use the patents and patent applications licensed to us by Isis in our drug discovery and development efforts and in specified types of collaborations with third parties.

Early Conversion of Convertible Preferred Stock, Warrants and 8% Notes

      In 2001, we significantly simplified our capital structure by exchanging shares of our common stock for all of our Series B preferred stock, several classes of our warrants and substantially all of our 8% notes. As a result of the exchange of our common stock for warrants as part of this program, the number of shares of our common stock underlying our outstanding warrants as a percentage of the number of shares of our common stock outstanding declined from 71% at December 31, 2000 to 13% at December 31, 2001.

New Chief Executive Officer

      In August 2001, Stephen R. Seiler joined us as our Chief Executive Officer. Prior to joining us, Mr. Seiler served as Executive Vice President, Planning Investment & Development for Elan Corporation plc and was based in Elan’s headquarters in Dublin, Ireland. Before joining Elan, Mr. Seiler had served as head of pharmaceutical investment banking at Paribas Capital Markets in London.

Commencement of Clinical Trial Combining GEM 231 with Irinotecan (Camptosar®)

      In January 2002, we commenced a Phase I/ II clinical trial combining our second generation antisense compound GEM 231 with irinotecan. We are conducting the trial at Vanderbilt University Medical Center and the University of Chicago Medical Center.

EpiGenesis Collaboration

      In April 2001, we commenced a collaboration with EpiGenesis Pharmaceuticals, Inc. under which we licensed antisense patents, patent applications and technology to EpiGenesis and agreed to collaborate with EpiGenesis on the development of up to five antisense drugs for the treatment of respiratory diseases. Under the collaboration, EpiGenesis will be responsible for all development and commercialization activities. We

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Immunomodulatory Oligonucleotide (IMO™) Technology

Introduction

      The human body’s immune system protects the body against viruses, bacteria and other infectious agents. It also acts to identify and eliminate abnormal cells, such as cancer cells. The immune system acts through a variety of white blood cells which recognize pathogens and abnormal cells and initiate a series of interactions that activate specific genes to respond to the pathogens or abnormal cells.

      It has been known for over a century that DNA from infectious agents, such as bacteria, is recognized by the immune system and boosts immune protection. In the past few years, scientists have identified the specific sequences in bacterial DNA that are recognized by the immune system. These sequences are recognized by a specific protein receptor called TLR9. Protein receptors are molecules on the surface or inside of cells that are sensitive to foreign entities. Once this recognition occurs, scientists generally believe that TLR9 triggers an immune response against the bacterial DNA through a cascade of cell signals which ultimately leads to the release of cytokines, chemokines, immunoglobulins and additional white blood cells to attack the infection.

      IMOs are synthetic DNA that contain the specific sequences recognized by TLR9 alone or with other receptors and mimic bacterial DNA. As such, IMOs are recognized as bacterial DNA by the receptor TLR9, alone or with other receptors. As a result of this recognition by the receptors, IMOs can trigger an immune response similar to the immune response triggered by bacterial DNA.

Therapeutic Potential of IMO™s

      Because IMOs generate immune responses in a variety of ways, they may provide therapeutic benefits in a number of areas:

	•	Cancer. Cancer cells are recognized as abnormal cells and trigger an immune response. However, this response is notoriously weak. The benefits of immunostimulation by bacterial DNA in cancer patients have been long recognized. For example, bacterial DNA is currently used to treat bladder cancer. IMOs may strengthen the immune response to cancer cells because they trigger a strong cellular immune response that targets and kills cancerous cells.
	•	Vaccines and Antibody Therapies. IMOs have the potential to be used in combination with vaccines or antibody therapies because the immune response initiated by IMOs increases the production of specific antibodies.
	•	Asthma/ Allergies. Certain white blood cells called cytokines are produced as a result of the activation of immune cells by IMOs. Cytokines suppress immune responses that result from asthmatic and allergic conditions while simultaneously promoting an immune response that further alleviates asthmatic and allergic conditions. As a result, IMOs have potential for use in the treatment of asthma, allergies and other diseases which result from an overreaction by the immune system.
	•	Infection. IMOs activate an immune defense against pathogens that is of a general nature and not directed at any specific microorganism. As a result, IMOs have the potential to be used prophylactically to ward off the danger of infection or to boost the immune response to an early-stage or ongoing infection.

IMO™ Chemistry

      IMOs increase the expression of many proteins and affect the behavior of several kinds of cells. The profile of changes produced by IMOs is complex and varies somewhat from one oligonucleotide to another. Effects depend on the sequence and structure of the IMO.

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      Based on our extensive experience with DNA chemistry, we are developing a portfolio of second generation IMOs which have improved immunomodulatory properties compared with first generation IMOs. Our second generation IMOs contain specific sequences which have different effects on the immune system. These specific sequences contain synthetic motifs referred to as YpG and CpR. Studies in cell culture and in mice involving our YpG and CpR IMOs have revealed that certain modifications in the chemical make-up of the IMO can result in increased or decreased immunostimulatory activity. With the knowledge from these DNA medicinal-chemistry studies, we are designing second generation IMOs that induce specific cytokines to target specific disease indications. We are creating a portfolio of these second generation IMOs that can provide custom-designed IMOs as drug candidates for a variety of therapeutic or prophylactic uses.

IMO™ Drug Discovery and Development

      As part of our strategy to commercialize our IMOs, we plan to enter into collaborations with other biotechnology and pharmaceutical companies that can use our IMOs, either in combination with other drugs or drug candidates owned by the potential collaborator, or as monotherapies. As a first step in the commercialization process, we have entered into a number of material transfer agreements with potential collaborators. These potential collaborators range in size from small biotechnology companies to global pharmaceutical companies.

      Under the material transfer agreements, these companies are allowed to use our IMOs in their own experimental disease models. Once the experiments are complete, these companies share the results with us. Based on the results achieved to date by these third parties in in vitro and in vivo animal models, we believe our IMO compounds are effective in inducing immune responses. We are working on converting these relationships into collaborations.

      In 2002, we selected HYB 2055 as the lead preclinical candidate in our IMO program. We are designing and conducting the preclinical studies necessary to submit an investigational new drug application, or IND, for HYB 2055, and expect to submit the IND by the end of 2002. We selected HYB 2055 because of the potency it demonstrated in in vitro and in vivo models. We anticipate that the first clinical program for HYB 2055, will be for use as a monotherapy in the treatment of cancer and in combination with vaccines and antibodies. We believe HYB 2055 also may have use as a monotherapy for other therapeutic indications, such as asthma and allergies and infectious diseases, and in combination therapies with chemotherapeutics.

Antisense Technology

Introduction

      The heart, brain, liver and other organs in the human body function together to support life. Each microscopic cell within these organs produces proteins that affect how that cell functions within the organ, and ultimately how efficiently each organ functions within the body.

      A normal cell produces a given set of normal proteins in the right amount for the body to function properly. A diseased cell produces inappropriate or mutant proteins, or produces the wrong amount of normal proteins. A cell produces inappropriate types or amounts of proteins when its DNA changes, either through mutation, as in many types of cancer cells, or by infection with a virus. In some instances, inappropriate proteins act directly to cause or support a disease. In other instances, inappropriate proteins interfere with proteins that prevent or combat disease. Most traditional drugs are designed to interact with protein molecules that are already present in the body and that cause or support disease. Antisense drugs are designed to work at an earlier stage to inhibit production of disease-causing or disease-supporting proteins.

      The full complement of human genes, known as the human genome, contains the information required to produce all human proteins. A copy of the complete human genome is present in each cell, and each cell makes proteins based on its copy of the genome. The information that controls a cell’s production of a specific protein is contained in the gene relating to that protein. Each gene is made up of two intertwined strands of DNA that form a structure called a “double helix.” Each strand of DNA consists of a string of individual DNA building blocks called nucleotides, arranged in a specific sequence. It is the sequence of nucleotides that

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      Cells make proteins in a two-stage process. First, the cell creates a molecule of messenger RNA consisting of a string of nucleotides in a sequence that is the exact mirror image of, or complementary to, the sequence of the coding strand of DNA in the double helix. This messenger RNA strand is called the “sense” sequence. In the next step, the cell produces proteins based on the information contained in the messenger RNA.

Conventional Drugs

      Most drugs are chemicals that stimulate or suppress the function of a particular molecule, usually a protein, which causes a disease. The drug acts by binding to the target molecule, often at as few as two or three points of contact with the target molecule. Once the binding takes place, the disease-causing activity of the target molecule is stopped.

      Frequently, however, sites on other non-target molecules present in the body resemble the target-binding site of a disease-causing molecule enough to permit the conventional drug to bind to some degree to those non-target molecules. Most drug side effects arise due to this drug interaction with molecules other than the target molecule. This lack of selectivity can result in unwanted side effects, potentially requiring lower doses of the drug, and thus, decreased effectiveness.

      Another characteristic of conventional drugs is that developing them is a time-consuming and expensive process. For every compound that is found to be effective and have tolerable side effects, thousands may be investigated and rejected. In the traditional drug discovery process, this may take many years and millions of dollars.

Antisense Drugs

      A synthetic DNA molecule with a sequence exactly complementary to the sense sequence of the messenger RNA of a specific gene can bind to and inhibit the function of that messenger RNA. This exact complement of the sense messenger RNA sequence is referred to as an “antisense” sequence. By inhibiting the function of the relevant messenger RNA, it is possible to decrease or eliminate the production of disease-causing or disease-supporting proteins. Moreover, the nucleotide sequence of an antisense synthetic DNA complementary to its target sequence on the messenger RNA can be designed in a manner such that the antisense synthetic DNA forms a large number of bonds at the target site, typically 30 or more, as compared to as few as two to three bonds for conventional drugs. This allows it to form a strong bond with the messenger RNA.

      Antisense drug development technology involves the design and synthesis of synthetic DNA to bind and inhibit the activity of messenger RNA which codes for the production of disease-associated proteins. We believe that drugs based on antisense technology may be more effective and cause fewer side effects than conventional drugs because antisense drugs are designed to intervene in a highly specific fashion in the production of proteins, rather than after the proteins are made.

      Recent years have seen a dramatic increase in the understanding of the role of genes in producing proteins associated with disease. This knowledge has come from many sources, including the human genome project and the work being done by academic institutions and pharmaceutical companies all over the world. As a consequence, we believe that the pharmaceutical industry is increasingly becoming an environment that is rich in potential drug targets. The challenge for the future will be to create drugs effective against these newly discovered gene targets. We believe that the increase in the number of potential targets provides us with increasing opportunities to employ our antisense technology. Once a gene associated with a disease-associated protein is identified, it should be possible to design a synthetic DNA with an antisense mechanism and to improve the pharmaceutical effects of that synthetic DNA by chemical modification.

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Hybridon Antisense Technology

      Our antisense technology is based on our advanced chemistries, which enable us to alter the chemical makeup of the synthetic DNA backbone in a manner designed to make synthetic DNA safer and more stable without adversely affecting its ability to inhibit the production of disease-associated proteins. A synthetic DNA backbone is the linkage between the nucleosides in a strand of DNA. Oligonucleotides which contain a natural backbone are not suitable for use as drugs because they are rapidly degraded by enzymes before they reach the intended target. To be an effective antisense agent, the oligonucleotide must be chemically modified to increase its stability against these enzymes.

      We and other companies have developed oligonucleotides which are chemically modified by replacing certain oxygen atoms on the backbone with sulfur atoms. We refer to oligonucleotides with this modification as first generation antisense compounds. Although one of our competitors in the antisense field currently markets a first generation antisense drug to treat a viral infection through local delivery and two other first generation antisense drugs are in late-stage clinical trials for cancer, we believe that the first generation antisense chemistry in these drugs limits their applicability because first generation antisense compounds are relatively toxic, degrade in the human body quickly and are less suitable for oral administration.

      We have designed and created families of advanced synthetic DNA chemistries, including DNA/ RNA combinations, called hybrid or mixed backbone chemistries. We believe that antisense compounds based on these advanced chemistries, which we refer to as second generation antisense compounds, will show favorable pharmaceutical characteristics and significantly improved therapeutic utility as compared to first generation antisense compounds. We believe that second generation antisense compounds may exhibit the following desirable characteristics in comparison with first generation compounds:

	•	fewer side effects;
	•	greater stability in the body, enabling patients to take doses less frequently;
	•	greater potency, permitting patients to take lower doses; and
	•	greater potential for multiple routes of administration, including by injection, orally or topically.

Antisense Drug Development and Discovery

      We believe that our antisense technology is potentially applicable to a wide variety of therapeutic indications. We are focusing our drug development and discovery efforts on developing second generation antisense drugs for cancer and infectious diseases. We currently have two antisense compounds in the clinical phase of development and a number of other compounds in preclinical development.

          Clinical Development

      GEM 231 for the Treatment of Cancer. GEM 231 is a second generation antisense compound for the treatment of cancer. We are currently conducting Phase I/ II clinical trials of GEM 231 as both a monotherapy and a combination therapy with currently marketed cancer therapies including irinotecan, which is marketed in the United States under the name Camptosar®, paclitaxel, which is marketed in the United States under the name Taxol®, and docetaxel, which is marketed in the United States under the name Taxotere®. The trials are intended to evaluate the safety and pharmacokinetics of GEM 231 as a monotherapy and as a combination therapy.

      GEM 231 is an inhibitor of the RIa subunit of protein kinase A. Protein kinase A is a protein that plays a key role in the control of the growth and differentiation of mammalian cells. Studies have shown that levels of protein kinase A are increased in the cells of many human cancers and that high levels of protein kinase A correlate with unfavorable clinical outcomes in patients with breast and ovarian cancers.

      We have previously conducted a Phase I clinical trial of GEM 231 to evaluate its safety in multiple doses in oncology patients. The trial explored the maximum tolerated dose of GEM 231 for both single doses and multiple doses. Even in high doses, GEM 231 did not show the side effects normally associated with most

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      GEM 92 for the Treatment of HIV-1. GEM 92 is a second generation antisense compound that is targeted to the gag region of the human immunodeficiency virus HIV-1. Based on the clinical experience we gained with GEM 91, our first generation antisense compound that also targeted the gag region of HIV-1, we created chemical modifications to improve the side effects profile and to enhance the stability of the compound. In 1997, we completed a pilot Phase I clinical study in Europe of GEM 92. All doses given in the pilot study were well tolerated by the patients. Further, GEM 92 was detected in the blood after both oral dosing and injection, suggesting that GEM 92 could be developed as an oral drug. Both GEM 92’s medicinal approach and genetic target are unique in that no antisense drug has been approved for the treatment of AIDS, and no other drug has the same target on the HIV-1 genome. We are currently seeking to out-license GEM 92 to a third party for further development and do not plan to continue its development on our own.

          Preclinical Development

      We have a number of antisense compounds in the preclinical testing phase of development. The two principal antisense compounds which we have in preclinical development are:

	•	GEM 220 is a second generation antisense compound directed against Vascular Endothelial Growth Factor or VEGF. VEGF is a growth factor that contributes to the growth of new blood vessels, which is a process called angiogenesis. In diseases such as cancer, the growth of new blood vessels is critical to the growth of tumors. Because GEM 220 is designed to inhibit VEGF, we believe GEM 220 can inhibit angiogenesis in malignant tumors and in other disease states such as macular degeneration and psoriasis.
	•	GEM 240 is a second generation antisense compound designed to inhibit mdm2. Mdm2 is a protein found in increased levels in many human cancers. Mdm2 binds to tumor suppressor protein p53, which results in reduced suppression of tumor cells by p53 and thereby contributes to the growth of cancer cells. In animal studies, GEM 240 has been shown to decrease levels of mdm2 in many types of cancer cells, including colon cancer cells, breast cancer cells and brain cancer cells, and in turn to stabilize p53 levels in these cells.

Cancer Therapy Potentiation

      Despite the number of advances that have been made in the treatment of human cancers, currently marketed anticancer therapies often fail to produce sustained antitumor benefits to a cancer patient. In addition, standard therapies available to treat malignancies, such as drugs that work due to their toxicity to cells, and other damaging treatments, like radiation, often produce substantial toxic side effects. To address these problems, oncologists have increasingly employed treatment regimens that include a combination of therapies, each of which has demonstrated antitumor activity.

      As part of our efforts to develop antisense drugs which could be used as part of cancer combination therapies, we discovered that the combination of oligonucleotide compounds with certain types of anticancer therapies, such as the anticancer prodrug irinotecan (Camptosar®), could enhance or potentiate the antitumor activity of the anticancer therapy included in the combination. These types of anticancer therapies are known as prodrugs because after administration they are metabolized by the body to produce their most active forms.

      We are focusing a significant portion of our antitumor research efforts on the combination of an antisense oligonucleotide with irinotecan. Irinotecan is a prodrug that is altered primarily in the liver to generate an active product designated as SN38. SN38 is considered to be the molecule responsible for most of the antitumor activity of irinotecan. SN38 is also implicated in production of the major side effects encountered clinically with irinotecan. When we tested irinotecan in animals in combination with several different oligonucleotides, we noted both incremental non-antisense and antisense specific tumor activity. In addition, in over ten animal tumor models, the co-administration of GEM 231 with irinotecan resulted in enhanced and prolonged suppression of tumor growth in comparison with irinotecan alone.

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      As part of our ongoing Phase I/ II clinical trials of GEM 231, described under “Antisense Technology — Antisense Drug Discovery and Development — Clinical Development — GEM 231 for the Treatment of Cancer,” we are studying the combination of GEM 231 and irinotecan in patients with solid tumors. We are conducting the trials at Vanderbilt University Medical Center and the University of Chicago Medical Center.

Cyclicons

      With the advent of the human genome project, researchers have identified thousands of genes whose functions have not yet been established. In order to design drugs targeting these genes, it is important to understand the role of each gene in normal and disease conditions.

      We have an established program in which our synthetic DNA can be used to determine if a specific gene is a good target for drugs. Our synthetic DNA, designed as antisense molecules, is especially useful in these studies because of its enhanced ability to interact with very specific targets.

      We have developed a novel circular-structured oligonucleotide, which we refer to as a Cyclicon, for use in drug target validation, drug discovery and as a probe and primer in PCR amplification. PCR amplification is an important process that is widely used in academic laboratories and the biopharmaceutical industry to produce many DNA copies from a single strand of DNA. We have designed our Cyclicons so that when the circular-structured oligonucleotide binds to messenger RNA, the circular structure of the oligonucleotide is disrupted and fluorescence is emitted. As a result, drug developers can use our Cyclicons as a tool to measure when and where reactions between an antisense sequence and messenger RNA occur.

Research and Development

      For the years ended December 31, 2001, 2000 and 1999, we spent approximately $4.9 million, $3.5 million and $4.8 million, respectively, on company-sponsored research and development activities. In addition, for the years ended December 31, 2000, and 1999, we spent approximately $82,500 and $965,000, respectively, on customer-sponsored research and development activities with funds provided by third parties.

Patents, Proprietary Rights and Licenses

Patents and Proprietary Issues

      Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.

      As of March 15, 2002, we owned or exclusively licensed 76 issued U.S. patents and 60 U.S. patent applications and 114 corresponding foreign patents and over 140 corresponding foreign patent applications. The issued patents held or exclusively licensed by us include composition of matter patents on our own advanced DNA chemistries covering the use of these chemistries with various genes or sequences, patents covering therapeutic targets, patents covering immune modulation and patents covering oral and other routes of administering our synthetic DNA. These issued patents expire at various dates ranging from 2006 to 2019.

      The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or those patent applications which we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, and the rights granted thereunder may not provide us proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible

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      Because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing and because publications of discoveries in the scientific literature often lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in each of our issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in these patent applications.

      Litigation may be necessary to defend against or assert claims of infringement, to enforce patents issued to us, to protect trade secrets or know-how owned by us, or to determine the scope and validity of the proprietary rights of others. In addition, interference proceedings declared by the U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings could result in substantial costs to and diversion of effort by us, and could have a material adverse effect on our business, financial condition and results of operations. These efforts by us may not be successful.

Trade Secrets

      We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and other contractors. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may also arise as to the rights in related or resulting know-how and inventions.

Licenses

      We are a party to a number of royalty-bearing license agreements under which we have acquired rights to patents, patent applications and technology of third parties. Our principal license agreement is with University of Massachusetts Medical Center. Under the terms of our license agreement with University of Massachusetts Medical Center, we are the worldwide, exclusive licensee under several U.S. issued patents and various patent applications owned by University of Massachusetts Medical Center relating to antisense oligonucleotides and their production and use. Many of these patents and patent applications have corresponding applications on file or corresponding patents in other major industrial countries.

      Seventeen of the issued U.S. patents and 28 of the issued foreign patents licensed by us from University of Massachusetts Medical Center broadly claim the use of our hybrid antisense oligonucleotides and ribozymes. The other issued U.S. patents covered by the license agreement include claims covering composition and uses of oligonucleotides based on advanced chemistries, and compositions of certain modified oligonucleotides that are useful for diagnostic tests or assays. The patents licensed to us by University of Massachusetts Medical Center expire at dates ranging from 2006 to 2019. This license expires upon the expiration of the last to expire of the patents covered by the license.

      Other license agreements under which we are the licensee include:

	•	an exclusive license agreement with McGill University covering patent applications relating to synthetic DNA and DNA Methyltransferase,
	•	an exclusive license agreement with Massachusetts General Hospital covering patents and patent applications jointly owned by us and Massachusetts General Hospital directed to compositions and use of antisense applied to Alzheimer’s disease,
	•	an exclusive license agreement with Louisiana State University covering patents and patent applications jointly owned by us and Louisiana State University relating to MDM2,

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	•	a non-exclusive license agreement with Genzyme Corporation covering patents and patent applications relating to MDM2,
	•	a non-exclusive license agreement with Integrated DNA Technologies, Inc., covering patents and patent applications that broadly claim chemical modifications to synthetic DNA, and
	•	an exclusive license agreement with Dr. Yoon S. Cho-Chung covering patents and patent applications relating to protein kinase A.

      Under these licenses we are obligated to pay royalties on net sales by us of products or processes covered by a valid claim of a patent or patent application licensed to us. We also are required in some cases to pay a specified percentage of any sublicense income that we may receive. These licenses impose various commercialization, sublicensing, insurance and other obligations on us. Our failure to comply with these requirements could result in termination of the licenses. Each of these licenses terminates upon the expiration of the last to expire of the patents covered by the license.

Corporate Alliances and Spinouts

      An important part of our business strategy is to enter into research and development collaborations, licensing agreements and other strategic alliances, primarily with biotechnology and pharmaceutical corporations, to develop and commercialize drugs based on our technologies. We have also established spinout companies in order to obtain external funding for the continued development of our antisense technology in specific disease fields.

Isis Pharmaceuticals, Inc.

      In May 2001, we entered into a collaboration and license agreement with Isis. Under the agreement, we granted Isis a license, with the right to sublicense, to our antisense chemistry and delivery patents and patent applications. We retained the right to use these patents and patent applications in our own drug discovery and development efforts and in collaborations with third parties. In consideration of the license, Isis agreed to pay us $15.0 million in cash plus shares of Isis common stock in four installments intended to have an aggregate value of $19.5 million based on the stock price of the Isis common stock on the dates of issuance of the shares. In 2001, Isis paid $15.0 million to us in cash and issued to us 857,143 shares of its common stock having an aggregate fair market value on the dates on which title to the shares was received of $17.3 million. The remaining $4.5 million is due in 2003, subject to possible acceleration depending on the price of Isis’ common stock. Isis has also agreed to pay us a portion of specified sublicense income it receives from specified types of sublicenses of our patents and patent applications.

      Under the agreement, we licensed from Isis specified antisense patents and patent applications, principally Isis’ suite of Rnase H patents. We have the right under the agreement to use these patents and patent applications in our drug discovery and development efforts and in specified types of collaborations with third parties. In consideration of this license, we agreed to pay Isis a total of $6.0 million in cash or in shares of our common stock in three equal annual installments of $2.0 million beginning in May 2002. We also agreed to pay Isis a nominal annual maintenance fee and a modest royalty on sales of products covered by specified patents and patent applications sublicensed to us by Isis.

      The licenses granted under the Isis agreement terminate upon the last to expire of the patents and patent applications licensed under the agreement. We may terminate at any time the sublicense by Isis to us of the patents and patent applications for which we have maintenance fee and royalty obligations.

EpiGenesis Pharmaceuticals, Inc.

      In April 2001, we commenced a collaboration with EpiGenesis under which we licensed antisense patents, patent applications and technology to EpiGenesis and agreed to collaborate with EpiGenesis on the

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OriGenix Technologies Inc.

      In January 1999, we and three Canadian institutional investors formed OriGenix to develop and market drugs for the treatment of infectious diseases, with an initial focus on viral diseases. In connection with the formation of OriGenix, we made a cash investment in OriGenix and granted to OriGenix an exclusive, royalty-free worldwide license to our antisense patents, patent applications and technology for the treatment of human papilloma virus, or HPV, and hepatitis B virus infections. In consideration for the cash investment and the license, we received shares of capital of OriGenix. As of March 15, 2002, we owned approximately 25% of the outstanding shares of OriGenix.

      HPV infection can cause a variety of warts, including benign genital warts. HPV infection can also lead to cervical cancer. Hepatitis B infections can lead to liver cirrhosis and cancer of the liver. OriGenix has conducted a Phase I clinical trial of ORI-1001 in 30 human volunteers to evaluate the safety of ORI-1001. The results of the trial indicated that ORI-1001 did not cause irritation in the volunteers.

      Prior to the sale of Hybridon Specialty Products, or HSP, to Avecia Biotechnology, we were the sole and exclusive supplier of oligonucleotides to OriGenix. In September 2000, in connection with the sale of HSP to Avecia, we and Avecia agreed that for so long as our supply agreement is in effect with Avecia, OriGenix would have the right to purchase oligonucleotides from Avecia on the same terms as we do.

     MethylGene Inc.

      In 1996, we and three Canadian institutional investors formed MethylGene Inc. In connection with the formation of MethylGene, we made a cash investment in MethylGene and granted to MethylGene an exclusive, royalty-free worldwide license to antisense patents, patent applications and technology owned or exclusively licensed by us from University of Massachusetts Medical Center and McGill University to develop and market the following:

	•	antisense compounds which inhibit the production of DNA methyltransferase for any indication;
	•	other methods of inhibiting DNA methyltransferase for any indication; and
	•	antisense compounds to inhibit up to two additional molecular targets for any indication.

      In consideration for the cash investment and the license, we received shares of capital of MethylGene. In 2001, we sold all of our shares in MethylGene for an aggregate purchase price of $7.2 million.

      Prior to the sale of HSP to Avecia, we were the sole and exclusive supplier of oligonucleotides to MethylGene. In September 2000, in connection with the sale of HSP to Avecia, we and Avecia agreed that for so long as our supply agreement is in effect with Avecia, MethylGene would have the right to purchase oligonucleotides from Avecia on the same terms as we do.

Academic and Research Collaborations

      We have entered into a number of collaborative research relationships with independent researchers, leading academic and research institutions and U.S. government agencies. These research relationships allow us to augment our internal research capabilities and obtain access to specialized knowledge and expertise.

      In general, our collaborative research agreements require us to pay various amounts to support the research. We usually procure the synthetic DNA for the collaboration, which the collaborator then tests. If in the course of conducting research under its agreement with us a collaborator, solely or jointly with us, creates any invention, we generally have an option to negotiate an exclusive, worldwide, royalty-bearing license to the

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Government Regulation

      The testing, manufacturing, labeling, advertising, promotion, export, and marketing, among other things, of drugs are extensively regulated by governmental authorities in the U.S. and other countries. In the U.S., the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act, or FDCA, and other laws. Both before and after approval is obtained, violations of regulatory requirements may result in various adverse consequences, including the FDA’s delay in approving or refusal to approve a drug, suspension or withdrawal of an approved product from the market, operating restrictions, and the imposition of civil or criminal penalties.

      The steps required before a product may be approved for marketing in the U.S. generally include (i) preclinical laboratory tests and animal tests, (ii) the submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin, (iii) adequate and well-controlled human clinical trials to establish the safety and efficacy of the product, and (iv) satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is made to assess compliance with the FDA’s good manufacturing practices regulations, or GMP.

      Preclinical tests include laboratory evaluation of the product, as well as animal studies to assess the potential safety and efficacy of a drug. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may be commenced. The IND will automatically become effective 30 days after its receipt by the FDA, unless the FDA before that time raises concerns or questions about the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed. We cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin.

      Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined, and certain phases may be eliminated. In Phase I, the initial introduction of the drug into human subjects, the drug is usually tested for safety (adverse effects), dosage tolerance, and pharmacologic action. Phase II usually involves studies in a limited patient population to (i) evaluate preliminarily the efficacy of the drug for specific, targeted conditions, (ii) determine dosage tolerance and appropriate dosage and (iii) identify possible adverse effects and safety risks. Phase III trials generally further evaluate clinical efficacy and test further for safety within an expanded patient population. We, or the FDA, may suspend clinical trials at any time on various grounds, including a finding that the patients are being exposed to an unacceptable health risk.

      The results of the preclinical and clinical studies, together with other detailed information, including information on the manufacture and composition of the product, are submitted to the FDA as part of a new drug application for approval prior to the marketing and commercial shipment of the product. The FDA may deny a new drug application if all applicable regulatory criteria are not satisfied or may require additional clinical, toxicology or manufacturing data. Even after a new drug application results in approval to market a product, the FDA may withdraw product approval if compliance with regulatory standards is not maintained or if safety problems occur after the product reaches the market. In addition, the FDA requires surveillance programs to monitor the consistency of manufacturing and the safety of approved products that have been commercialized. The agency has the power to require changes in labeling or to prevent further marketing of a product based on new data that may arise after commercialization. Also, new federal, state, or local government requirements may be established that could delay or prevent regulatory approval of our products under development.

      We will also be subject to a variety of foreign regulations governing clinical trials and sales of our products. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries. The approval process varies from country to country and the time may be longer or

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      In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other present and potential future federal, state, or local regulations. Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources.

Manufacturing

      Until September 2001, when we sold HSP to Avecia, we manufactured on our own all of the oligonucleotide compounds that we needed for research, preclinical and clinical purposes. As part of the sale, we entered into a supply agreement with Avecia under which we may purchase our requirements for oligonucleotide compounds from Avecia at a preferential price until March 2003.

      We expect that, following the termination of the supply agreement with Avecia, we will seek to enter into arrangements with Avecia or other third-party manufacturers to supply us with the oligonucleotide compounds that we need for our research, preclinical, clinical and commercial supply purposes.

Competition

      We expect that our product candidates will address several different markets defined by the potential indications for which these product candidates are developed and ultimately approved by regulatory authorities. For several of these indications, these product candidates will be competing with products and therapies either currently existing or expected to be developed, including IMO compounds and antisense oligonucleotides developed by third parties.

      Competition among these products and therapies will be based, among other things, on

	•	product efficacy,
	•	safety,
	•	reliability,
	•	availability,
	•	price, and
	•	patent position.

      The timing of market introduction of our products and competitive products will also affect competition among products. We also expect the relative speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market to be an important competitive factor. Our competitive position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes and to secure sufficient capital resources for the often substantial period between technological conception and commercial sales.

      There are a number of companies, both privately and publicly held, that are conducting research and development, preclinical and clinical and commercial activities relating to technologies and products that are similar to our technologies and products, including large pharmaceutical companies with programs in IMOs or antisense technology and biotechnology companies with similar programs, such as Isis, Genta Incorporated,

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Employees

      As of March 15, 2002, we employed 22 individuals full-time, including 14 employees in research and development. Sixteen of our employees had M.D.s and/or Ph.D.s. None of our employees is covered by a collective bargaining agreement, and we consider relations with our employees to be good.

Item 2. Properties

      We lease approximately 26,000 square feet of laboratory and office space, including 6,000 square feet of specialized preclinical lab space, in Cambridge, Massachusetts under a lease that expires April 30, 2007. We believe these facilities are adequate to accommodate our needs for the near term.

Item 3. Legal Proceedings

      We are not party to any material legal proceedings.

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

      No matters were submitted to a vote of security holders in the quarter ended December 31, 2001.

Executive Officers of Hybridon

      The following table sets forth the names, ages and positions of our executive officers and significant employees as of March 15, 2002:

      Stephen R. Seiler was appointed our Chief Executive Officer and elected to our board of directors on September 1, 2001. Prior to joining us, Mr. Seiler served as Executive Vice President, Planning Investment & Development at Elan Corporation plc from 1995 to 2001. From 1991 to 1995, Mr. Seiler worked as an Investment Banker at Paribas Capital Markets in both London and New York. He was founder and head of Paribas’s pharmaceutical investment banking group. Mr. Seiler received a J. D. from Georgetown University with Honors in 1980 and a B.A. summa cum laude in History from the University of Notre Dame in 1977. He is a member of the bar in New York, Arizona, and Missouri.

      Dr. Sudhir Agrawal joined us in 1990 and has served as our Chief Scientific Officer since January 1993, our Senior Vice President of Discovery since March 1994, our President since February 2000 and as a director since March 1993. Prior to his appointment as Chief Scientific Officer, he served as our Principal Research Scientist from February 1990 to January 1993 and as our Vice President of Discovery from December 1991 to January 1993. He served as Acting Chief Executive Officer from February 2000 until September 2001. Prior to joining us, Dr. Agrawal served as a Foundation Scholar at the Worcester Foundation from 1987 through 1991. Dr. Agrawal served as a Research Associate at Research Council Laboratory of Molecular Biology in Cambridge, England from 1985 to 1986, studying synthetic oligonucleotides. Dr. Agrawal received a D. Phil in chemistry in 1980, an M.Sc in organic chemistry in 1975 and a B.Sc. in chemistry, botany and zoology in 1973

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      Robert G. Andersen joined us in November 1996 and has served as our Vice President of Operations since 1997, our Treasurer since March 1998 and our Chief Financial Officer since February 2000. From November 1996 to 1997, he served as our Vice President of Systems Engineering and Management Information Systems. Mr. Andersen also serves as a director of OriGenix, Inc., our spin-off company based in Montreal, Canada. Prior to joining us, Mr. Andersen served in a variety of positions at Digital Equipment Corporation from 1986 to 1996, most recently as Group Manager of the Applied Objects Business Unit. From 1978 to 1986, Mr. Andersen held technical management positions at United Technologies Corporation, most recently as Director of Quality for Otis Elevator Company’s European Operations and Worldwide Director of Controls. Mr. Andersen received his B.E.E. magna cum laude in Electrical Engineering from The City College of New York in 1972 and an M.S. in Management from Northeastern University in 1978. He is also a graduate of the United Technologies Advanced Studies Program.

      Dr. R. Russell Martin joined us in 1994 and has served as our Senior Vice President of Drug Development since 1998. He served as our Vice President of Drug Development from 1996 through 1998 and our Vice President of Clinical Research from 1994 through 1996. Prior to joining us, Dr. Martin served in a variety of positions at Bristol-Myers Squibb from 1983 to 1993, most recently as Vice President of Infectious Diseases Clinical Research. Dr. Martin received an A.B. degree from Yale University in 1956 and a M.D. degree from the Medical College of Georgia in 1960. From 1971 to 1983, he was on the faculty of Baylor College of Medicine, most recently as Professor of Medicine, Microbiology and Immunology. He is a Fellow of the American College of Physicians and of the Infectious Diseases Society of America.

      Dr. Jinyan Tang joined us in 1991 and has served as our Vice President of Chemistry since 2000. Dr. Tang was our Vice President of Process Research and Development from 1995 to 1997 and Vice President of Production from 1997 to 2000. Prior to joining us, Dr. Tang served as Visiting Fellow at the Worcester Foundation from 1988 to 1991. Dr. Tang served as Visiting Research Professor at the University of Colorado in 1988 and Associate Professor at the Shanghai Institute of Biochemistry, Chinese Academy of Sciences from 1985 to 1988 studying oligonucleotide chemistry. Dr. Tang received a B.Sc. in Biochemistry in 1965 and a Ph.D. of Biochemistry in 1978 from the Shanghai Institute of Biochemistry, Chinese Academy of Sciences.

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PART II.

Item 5. Market For Registrant’s Common Equity and Related Stockholder Matters

(a) Market Information

      Our common stock is quoted on the OTC Bulletin Board under the symbol “HYBN.OB”. Quotes on the OTC Bulletin Board may reflect inter-dealer prices, without retail markups, markdowns or commissions and do not necessarily represent actual transactions.

      The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock during each of the quarters set forth below as reported on the OTC Bulletin Board since January 1, 2000:

      The reported closing sales price of our common stock on the OTC Bulletin Board on March 15, 2002 was $1.54 per share.

      The number of common stockholders of record on March 15, 2002 was 386.

      We have never declared or paid cash dividends on our capital stock and we do not expect to pay any cash dividends on our capital stock in the foreseeable future. The indenture under which we issued 9% convertible subordinated notes in April 1997 limits our ability to pay dividends or make other distributions on our common stock or to pay cash dividends on our convertible preferred stock. As of March 15, 2002, $1.3 million in total principal amount of the 9% notes remained outstanding.

      Our Series A preferred stock pays dividends at 6.5% per year, payable semi-annually in arrears. These dividends may be paid either in cash or in additional shares of Series A preferred stock, at our discretion subject to the restriction under the indenture described above. As of March 15, 2002, we have only paid these dividends in shares of Series A preferred stock.

(b) Sales of Unregistered Securities

      Sales by us during the year ended December 31, 2001 of securities that were not registered under the Securities Act of 1933, as amended, consist of:

	•	During 2001, holders of 26,079 shares of our Series A preferred stock converted such shares into 613,624 shares of our common stock. We relied upon Section 3(a)(9) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.
	•	On April 9, 2001, we issued 46,429 shares of our common stock to Dr. Paul C. Zamecnik, a member of our board of directors, in lieu of $26,000 in director and consulting fees. On December 17, 2001, we issued 16,765 shares of our common stock to Dr. Zamecnik in lieu of $28,500 in director and consulting fees. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.

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	•	Between May 14, 2001 and May 24, 2001,we issued 178,571 shares of our common stock in lieu of $100,000 in consulting fees due to an affiliate of Mr. Youssef El Zein and Mr. Nasser Menhall, two members of our board of directors. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.
	•	On July 27, 2001, holders of 78,259 shares of Series B preferred stock converted such shares of Series B preferred stock into 19,564,500 shares of common stock. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.
	•	Between July 27, 2001 and November 20, 2001, holders of approximately $456,000 of 8% notes converted these notes into 1,140,448 shares of common stock. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.
	•	Between July 27, 2001 and October 17, 2001, holders of warrants to purchase an aggregate of 7,661,893 shares of our common stock with exercise prices ranging between $0.60 and $2.40 per share exercised and/or converted such warrants for 4,669,808 shares of our common stock. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.
	•	On October 2, 2001, we issued 50,000 shares of common stock to Dr. James B. Wyngaarden, a member of our board of directors, for services provided to us. On December 17, 2001, we issued 6,765 shares of common stock to Dr. Wyngaarden in lieu of $11,500 in director and committee meeting fees. We relied upon Section 4(2) of the Securities Act of 1933, as amended, as an exemption from registration for the newly issued common stock.

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Item 6.     Selected Financial Data

      The selected financial data presented below have been derived from our consolidated financial statements, as adjusted to reflect the disposition of HSP as discontinued operations, and have been audited by Arthur Andersen LLP, independent public accountants. The financial data should be read along with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and notes thereto and the Report of Independent Public Accountants included elsewhere in this annual report on Form 10-K.