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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Commission File No. 0-21794

GTC BIOTHERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
(Title of each class)

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past 90 days. Yes ý    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 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.    ý

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        Aggregate market value of voting stock held by non-affiliates of the Registrant as of June 27, 2003, the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $89,828,281, based on the closing sale price of the Company's Common Stock as reported on the NASDAQ National Market.

        Number of shares of the Registrant's Common Stock outstanding as of March 1, 2004: 32,241,425

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held May 26, 2004 are incorporated by reference into Part III of this Form 10-K.

PART I

ITEM 1. BUSINESS

Overview

        GTC Biotherapeutics, Inc., referred to as GTC or the Company, is a leader in the development, production, and commercialization of human therapeutic proteins in the milk of animals. Using a process known as transgenics, GTC inserts protein-specific DNA into an animal to enable it to produce that specific protein in its milk. The protein is then purified from the milk to obtain the therapeutic product, which is typically administered by injection.

        GTC is developing its own proprietary proteins and providing leadership in obtaining regulatory and market approval for products produced transgenically. GTC uses transgenic technology to establish commercial production systems for products that are anticipated to require large production volume or are difficult to express in traditional recombinant protein production systems. The Company's technology platform is being used to create a pipeline of internal product programs and a portfolio of external clinical and commercial production opportunities.

        The Company has three internal programs in active development. These programs are the recombinant human antithrombin program, which will be sold under the brand name ATryn® once regulatory approval is obtained, the recombinant human serum albumin program, known as rhSA, and a malaria vaccine program using one of the malaria parasite's surface proteins known as MSP-1 as an antigen. All of these programs involve products that are difficult-to-express proteins. The ATryn® and rhSA proteins are also required in large volumes. The ATryn® program has the potential to generate commercial product revenues in the next two to three years. The Company seeks partners for its internal programs to provide a source of funding for these programs as well as to augment its clinical or marketing expertise.

        GTC's external programs use the Company's intellectual property and technology platform to develop transgenic production of a partner's proprietary protein. External programs generate current revenue through research funding and achievement of milestones. These programs provide GTC the opportunity for long-term product revenues as a result of GTC serving as the clinical and commercial manufacturing partner for the program product. This business has the potential to generate positive cash flow and eventually profits, helping support the continued development of the Company's internal programs and technology platform.

        In GTC's portfolio of external programs, the most advanced is the program with Merrimack Pharmaceuticals, Inc. for production and purification of Merrimack's MM-093 (formerly named ABI.001), a recombinant human alpha-fetoprotein, or rhAFP. GTC has been producing MM-093 transgenically for use in Merrimack's ongoing human clinical studies. The rhAFP protein has been difficult to express in traditional recombinant protein production systems. GTC is also working with Centocor to develop transgenic protein production for an undisclosed protein. This program is moving forward to supply product for preclinical evaluation. Four of the other programs in the external portfolio, two with Abbott and two with Bristol-Myers Squibb, have concluded with the successful completion of founder status namely development of a transgenic animal capable of starting a production herd for a therapeutic protein. No further work will be undertaken in these programs unless the respective partner chooses to pursue transgenic production for preclinical or clinical testing.

Internal Programs

Recombinant Human Antithrombin (ATryn®)

        Antithrombin is a blood plasma protein that has anticoagulant and anti-inflammatory properties. Antithrombin, as is typical of many blood plasma proteins, is difficult to express in traditional

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recombinant production systems. In late 2001, GTC was granted permission by the European Medicines Evaluation Agency, known as EMEA, to conduct clinical studies of ATryn® in individuals who express a low level of antithrombin in their blood as a result of an hereditary deficiency of antithrombin, referred to as HD. ATryn® is a recombinant form of human antithrombin. There are approximately 1 in 5,000 people with an HD. In December 2001, GTC began dosing HD patients in a study to establish an appropriate dosing regimen for an efficacy study. GTC successfully completed this 15 patient study and began an efficacy study in HD patients in 2002, primarily based in Europe and including patients in the United States. The efficacy study was designed to assess the prevention of certain blood clots, known as deep vein thromboses, referred to as DVT, among HD patients that undergo surgery or childbirth. Based on EMEA guidance, GTC determined that at least 12 evaluable patients must be included in the efficacy study. A total of 14 patients were enrolled in the efficacy study. In the opinion of clinical experts who have reviewed these data, ATryn® offers safe and efficacious thromboprophylaxis for this difficult-to-manage group of patients. GTC submitted a Market Authorization Application, or MAA, to the EMEA in January 2004. The MAA submission includes data from this trial, as well as data from high-risk situations treated under the compassionate use program. The EMEA has accepted the MAA for review which will make a determination of the safety and efficacy of ATryn® in addition to assessing whether the product is approvable for commercial sale. GTC believes that ATryn® is the first transgenically produced therapeutic protein to be considered for approval by a regulatory agency in the U.S. or Europe. GTC is in discussions with the U.S. Food and Drug Administration, or FDA, regarding its clinical and regulatory strategy and the FDA's requirement that there be a controlled study of ATryn® for approval in the U.S.

        Commercially available antithrombin protein is currently produced by human plasma fractionation for therapeutic use in hereditary and acquired antithrombin deficiencies, with worldwide annual sales of approximately $250 million. GTC believes that the U.S. market is underserved by a single producer with only limited supplies being available.

        GTC is in discussions with potential partners for the ATryn® program to provide marketing and financial support. The Company is also considering the strategic option of adding a small sales force in Europe to support commercial sales of ATryn® for the hereditary antithrombin deficiency indication. GTC plans to expand the market opportunity for this product through one or more clinical studies in order to develop additional potential acquired deficiency indications in collaboration with potential partners. Acquired antithrombin deficiency occurs in a number of conditions, and may result from a decrease in the amount of antithrombin produced, an increase in the rate of antithrombin consumption or an abnormal loss of antithrombin in the circulatory system. Examples of conditions in which acquired antithrombin deficiency may occur are burns, heparin resistance, bowel perforation, acute liver failure, disseminated intravascular coagulation, sepsis and septic shock, multiple organ failure, pre-eclampsia, bone marrow or organ transplantation, and prevention of neurocognitive deficiency in patients undergoing cardio pulmonary bypass. GTC is focusing on the larger market potential indications for further clinical studies, such as developing the use of ATryn® to treat burns. Since antithrombin levels may be dramatically reduced in patients with severe thermal injury due to increased consumption and loss, GTC believes that antithrombin's anticoagulant and anti-inflammatory properties may be beneficial in reducing the intensive care hospitalization time for burns patients as well as helping to reduce the scarring that often results.

Recombinant Human Serum Albumin (rhSA)

        Albumin is a plasma protein that is principally responsible for maintaining the osmotic pressure in the vascular system, as well as maintaining plasma volume and the balance of fluids in blood. It is critical to the transport of amino acids, fatty acids and hormones in the blood stream. Albumin is used as an excipient, which is a non-active component used to stabilize the active ingredient in biologic drug formulations. Human serum albumin produced from blood plasma has been used as an excipient to

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maintain structural stability and activity in many biological drug formulations for long periods of time under a wide range of storage conditions. Albumin is also used therapeutically in situations of blood loss and/or decreased blood albumin levels which can result from shock, serious burns, pre- and post-operative conditions, congestive heart failure and gastric, liver and intestinal malfunctions (the blood expander indication).

        GTC has a strategic interest in developing recombinant human serum albumin, or rhSA, in the excipient market where there is the potential for commercial sales within the next two to three years, sooner than is practical in the blood expander indication and with significantly lower capital investment. GTC believes that the recombinant nature of this product can lead to a well characterized protein and a stable single source of supply. This will provide drug manufacturers the opportunity to avoid plasma-derived human serum albumin as an excipient for their recombinant products and establish a universally acceptable supply. GTC believes this will allow rhSA to make substantial penetration into the existing excipient market. During 2004, GTC intends to initiate the production of qualification batches for evaluation as an excipient by its clients and for the development of a Drug Master File, which is a documentation system required by the health authorities to reduce redundancy in the filing of information related to ingredients or materials that may be used in multiple therapeutic products. The Company believes that under this timetable for development GTC has the opportunity to achieve commercial sales of rhSA within two to three years, depending primarily on the level of development funding devoted to this program. The Company expects that the timetable of development will be based on the financial resources available to the Company, as well as its ability to attract additional marketing or strategic partners to provide additional funding.

        rhSA is another example of a difficult-to-express plasma protein under development by GTC, which is also required in large volumes. Albumin is currently produced by human plasma fractionation, with worldwide sales of approximately $1 billion. About $150 million to $200 million of this total is sold for excipient use. Since the total market is very large, requiring about 400 metric tons of production a year, GTC is developing this program in transgenic cattle to take advantage of the higher milk production of cattle compared to goats. The cattle in this program are maintained by Trans Ova Genetics in Iowa. GTC has developed and continues to add to the number of cattle that express rhSA in their milk. Bench scale purification of clinical grade quality has been achieved and the purification process is being scaled up for clinical production quantities. GTC estimates the total production volume to meet the needs of the excipient market is in the range of one to two metric tons per year.

        In late 2002, Fresenius AG and GTC restructured their relationship for the therapeutic blood expander market into a joint venture, called Taurus hSA LLC or the Taurus Joint Venture, to include the development of rhSA as an excipient. The Taurus Joint Venture will manage development of GTC's rhSA program for both the excipient and blood expander markets. GTC currently has a 55% interest in the joint venture. Each party has the right, but not the obligation, to make future contributions to the Taurus Joint Venture. The joint venture structure allows the development of the excipient market with the potential to attract additional marketing or strategic partners that may also assist with the financing of the joint venture. Ownership interests will be adjusted based on future levels of financial participation from existing and new partners. The Company is engaged in ongoing discussions with third parties to obtain further financing for the Taurus Joint Venture and the Company has also developed alternative plans to advance the joint venture using its existing resources with limited external financing. GTC and Fresenius made available all relevant commercial licenses, manufacturing and marketing rights, and intellectual property to enable the joint venture to operate worldwide in both the excipient and blood expander markets. The existence of the Taurus Joint Venture is perpetual unless terminated or dissolved earlier in accordance with the terms of the agreement. Upon any liquidation, sale or other disposition of all, or substantially all of the assets of the Taurus Joint Venture, and after the payment of debts and liabilities, expenses of liquidation and any reserves for unforeseen liabilities or in-kind distributions, the net proceeds would be applied and distributed first to Fresenius

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and then to the Company, each according to its percentage interest. Each member would also have reversion rights to any intellectual property it contributes to the Taurus Joint Venture. The Company consolidates the Taurus Joint Venture on GTC's financial statements for financial reporting purposes.

Malaria Vaccine

        GTC is developing the merozoite surface protein 1, or MSP-1, for use as an antigen in a malaria vaccine. This protein is normally expressed by the malaria parasite. Malaria is a disease that has an annual incidence of more than 300 million people worldwide and results in several million deaths annually, primarily among children. GTC has been working with the National Institutes of Health, or NIH, and the Federal Malaria Vaccine Coordinating Committee to develop transgenic production of the MSP-1 protein as an antigen for a vaccine and to examine the options for commercializing the vaccine. During 1998, GTC achieved high level expression of the MSP-1 antigen in the milk of transgenic mice. To express the MSP-1 protein at high quantities, GTC's scientists modified the protein's gene sequence while conserving the overall amino acid sequence of the protein. A U.S. patent has been issued to GTC for this modification. The MSP-1 protein has been expressed at 2-4 mg/ml in the milk of mice that have incorporated this gene sequence. The MSP-1 protein produced by the mice successfully protected Aotus nancymai monkeys in a preclinical vaccine study conducted by and co-authored with the National Institute of Allergy and Infectious Diseases, or NIAID. This study, titled "A recombinant vaccine expressed in the milk of transgenic mice protects Aotus monkeys from a lethal challenge with Plasmodium falciparum", was published in the December 18, 2001 Proceedings of the National Academy of Sciences. MSP-1 is difficult to express in other recombinant systems, with those other systems producing it in very limited quantities or in forms that may not induce the necessary immune response. GTC has developed goats at its research facilities that express the MSP-1 protein. The NIAID has funded a contract for the development and production of clinical grade production of MSP-1, as a malaria vaccine. The development work is being performed under the existing NIAID Contract No. NO1-A1-05421 managed by Science Applications International Corporation. The scope of work includes developing founder goats that express the MSP-1 antigen in their milk as well as the downstream purification process and final product formulation. The approved scope of work also includes the submittal of an Investigational New Drug, or IND, application to the FDA. GTC's portion of this project will be supported completely with Federal funds amounting to at least $4.9 million.

External Program Portfolio

        GTC follows a partnership strategy in its portfolio of external programs, where both the Company's unique intellectual property position and molecular biology expertise are used in the development of a transgenic version of the external partner's protein. The advantages to external partners of using GTC's production platform include enabling the development of proteins that are difficult to produce in traditional recombinant production systems, requiring significantly lower capital investment, assuring lower cost of goods, and providing for flexibility in capacity expansion. The external portfolio business area also provides GTC the opportunity for a revenue stream through milestone payments during the development phase and, assuming continuing clinical and development success, subsequent opportunities for long-term product revenues as the external partner's commercial manufacturing partner. GTC views this area as an operating business which currently contributes to the support of the production and regulatory infrastructure of the Company and has the potential to provide positive cash flow for investment in GTC's proprietary programs.

        The most advanced program in the external portfolio is with Merrimack Pharmaceuticals, formerly known as Atlantic BioPharmaceuticals. The Merrimack program is for MM-093 (formerly ABI.001), a recombinant human alpha-fetoprotein, or rhAFP. The rhAFP protein has been difficult to express in traditional recombinant systems. GTC has developed goats that express this protein in their milk. In 2002, GTC and Merrimack agreed to expand their relationship to include production and purification

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of MM-093. Merrimack completed a phase I study of MM-093 in 2003. GTC expects to deliver purified MM-093 during 2004 for use in further human clinical studies by Merrimack. Potential indications for MM-093 include autoimmune diseases such as rheumatoid arthritis, multiple sclerosis and myasthenia gravis. Assuming that MM-093 is found to be safe and efficacious as the clinical program develops, GTC expects to earn revenue totaling several million dollars for production of rhAFP to supply the clinical trials, as well as additional revenues for eventual commercial production. In December 2003, GTC exercised its option to convert $1.25 million of the receivable owed by Merrimack into Merrimack preferred stock at the same valuation as the other investors in Merrimack's recent financing. In addition, GTC agreed to defer the payment of up to $650,000 of receivables owed by Merrimack until June, 2004.

Monoclonal Antibodies (MAB) and Immunoglobulin (Ig) Fusion Proteins

        GTC's believes that its technology platform is well suited to producing difficult-to-express proteins and to establish large volume production with low capital investment and an assured low cost of goods. Monoclonal antibodies, or MABs, are proteins generated by an immune system that bind to a specific target. MABs typically express at reasonable levels in traditional recombinant production systems, but are often required in large quantities due to their applications to chronic disease indications. Immunoglobulin, or Ig fusion proteins, which consists of a MAB fragment linked to a second protein fragment, may be difficult to express due to their complexity. For these reasons, GTC has attracted multiple MAB and Ig fusion protein production opportunities to its external program portfolio.

        GTC is actively participating in the field of MABs and Ig fusion proteins. The Company has been granted several patents covering the production of MABs in the milk of transgenic mammals, along with other transgenic process patents, which it believes establish a strong proprietary position in the field.

        GTC has two programs with Centocor. The second program with Centocor for its undisclosed MAB has begun expansion of production capacity to provide a supply of product for preclinical evaluation.

        The two programs with Bristol-Myers Squibb and the two programs with Abbott have been successfully completed with the achievement of founder status. No further development work is expected in these four programs with Abbott and Bristol-Myers Squibb unless the respective partner chooses to pursue transgenic production for preclinical or clinical testing. Abgenix has discontinued clinical studies at this time for its ABX-IL8 MAB program.

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Summary Chart of External Programs

        The following chart contains a summary of the Company's portfolio of external programs: (Note that a founder is a transgenic animal capable of starting a production herd for a therapeutic protein.)

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Transgenic Technology Platform

Overview

        GTC's technology platform includes the molecular biology expertise and intellectual property to generate appropriate transgenic animals, primarily goats and in some cases cattle, that express a specific recombinant protein in their milk. The Company also has the capacity to perform downstream purification. This technology platform is supported by the quality systems and regulatory, clinical development, and information technology infrastructure necessary to bring therapeutic protein products through clinical trials to commercial scale.

        The economic and technical advantages of GTC's technology make it well suited to large volume applications, particularly 100 kilograms or more per year, in comparison to traditional recombinant protein production systems. These advantages include significantly reduced capital expenditures, greater flexibility in capacity expansion and lower unit production costs. In the case of certain complex proteins that do not express well in traditional systems, transgenic production may represent the only technologically and economically feasible method of commercial production. Some immunoglobulin, or Ig, fusion proteins as well as some proteins found in human plasma are examples of recombinant proteins that may not express at practical levels in traditional systems.

        GTC's technology platform has been established as an operating infrastructure in goat husbandry, breeding, milking and downstream purification. These operations occur at the Company's biopharmaceutical production facilities in central Massachusetts, where it has approximately 1,600 goats, and at its facilities in Framingham, Massachusetts. Goat husbandry includes veterinary care with a clinic and medicinal supplies, all established within the farm's biosecurity program. The biosecurity program includes barriers to provide separation of the animals from contact with wildlife, separation from people, and specified and quality control monitored feed. Milking is typically performed using modern milking and processing equipment. Clarification to the intermediate bulk material is typically performed using tangential flow filtration equipment that removes much of the fats and casein from the milk. Manufacturing to clinical grade purity under standards of good manufacturing practice occurs either in GTC's facilities, the facilities of GTC's partners, or in contracted facilities. During 2002, GTC established capacity in its Framingham facilities for the purification of recombinant proteins suitable for clinical studies.

        The Company uses goats and cattle in its commercial development programs. A goat reaches sexual maturity in about twelve months and gestates in approximately five months. A typical goat will produce an average of approximately 2 liters of milk per day during most of its natural lactation cycle. A cow reaches sexual maturity in about eighteen months and gestates in about nine months. A typical cow will produce an average of approximately 20 liters of milk per day during most of its natural lactation cycle. The species selected for a particular program will depend on a variety of factors, including the expected market size, desired herd size, and anticipated productivity of the desired protein within the animal's mammary gland. GTC has obtained broad freedom to operate in cattle technology through a licensing agreement with Pharming Group N.V., which was obtained in 2002.

        GTC is now using nuclear transfer technology in the development of transgenic animals. The first step in this technology involves the generation of a characterized cell line which has incorporated the specific DNA for expression of the target protein in milk. Individual cells from the cell line(s) are then fused to an animal's ovum after removal of the ovum's own DNA. Thus, the transgenic nucleus of the cell becomes the driver for further development of the embryo, which is then placed in a surrogate female animal. All animals that are born through this process are transgenic. Nuclear transfer may mitigate the impact of long gestation and maturation periods in cattle, by producing a larger number of transgenic animals in one generation. The U.S. Patent and Trademark Office, or PTO, has declared an interference proceeding between Advanced Cell Technologies, Inc., or ACT, and Geron Corporation for

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one of the patents GTC licenses from ACT. The Company does not know at this time what impact, if any, this interference proceeding may have on its ability to practice nuclear transfer.

Advantages of Transgenic Technology

        GTC believes that its current and future partners will elect to employ transgenic technology for the production of recombinant proteins in cases where transgenic technology either uniquely enables development of proteins that are hard to express with traditional methods or offers economic and technological advantages over other production systems. These advantages, any one of which may be critical to the decision to proceed with a particular development project, include:

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Technological Enablement.  Transgenic technology offers the ability to produce certain biotherapeutics that cannot be made in a commercially feasible manner in any other system. The potential of transgenic production for high-volume proteins requiring more than 100 kilograms per year is widely acknowledged. In addition, GTC has achieved consistent expression rates with complex molecules, which may not be producible at commercial scale in cell culture systems. This accomplishment, in conjunction with the favorable economics of herd development, means that transgenics may be a viable production system for some complex proteins, regardless of the volume required.



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Lower Capital Investment.  Developing a herd and providing appropriate production facilities can be accomplished with substantially lower investment than building a cell culture bioreactor facility.



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Lower Cost of Goods.  Economic factors unique to transgenic production may lower the ultimate cost of goods in most cases. The lower amortization of the initial capital investment, the lower cost of consumable materials and the high productivity of operations result in the cost of transgenically produced products, in most cases, being substantially lower than that of a cell culture derived product.



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Flexible Production.  Transgenic production offers the ability to rapidly match production capacity to the market demand, once the first appropriate animal is identified. If the product's market is larger than originally planned, the incremental investment to breed additional animals and expand capacity is relatively small. In contrast, traditional bioreactor methods are hard assets with a generally fixed capacity. If a bioreactor product's market will support sales significantly higher than the installed capacity can achieve, more bioreactor space needs to be built or acquired at unit costs similar to the original capital investment with construction times of generally three to five years.

Transgenic Development Process

        GTC's development of a typical transgenic protein is designed to proceed in a logical sequence of three principal steps:

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Development of Transgenic Animals.  In this first step, GTC takes the genetic material for a desired protein and establishes an appropriate expression vector by combining the genetic material with the appropriate coding and promoter sequences to ensure expression in the mammary gland. The Company then employs nuclear transfer techniques to initiate pregnancies to produce a transgenic animal. The first animals are then born after the appropriate gestation period.



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Transgenic Evaluation.  GTC and its partner evaluate the genetic profile of the animal. The animal's production levels under induced or natural lactation are evaluated and the recombinant protein produced by the animal in its milk is characterized. Some initial process development work takes place in which pilot clarification and purification methods are examined.

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Founder.  GTC and the partner select one or more appropriate transgenic animals as founders. A founder animal has the appropriate genetic profile and is the potential start of a herd of transgenic animals capable of producing a desired therapeutic protein. GTC and the partner may then begin a collaborative effort to establish a commercially robust purification process for the protein. This enables substantial amounts of material to be delivered for preclinical studies and initial human clinical studies. Thereafter, scale up of the herd to reach needed commercial production capacity is then planned.

Patents and Proprietary Rights

        Currently, GTC holds 17 issued or allowed U.S. patents and 111 corresponding foreign patents. GTC's patents generally expire between 2013 and 2019, with the most significant patents expiring in 2015. Of the GTC patents expiring in 2015, two relate to transgenically produced antithrombin, its lead product. In accordance with ongoing research and development efforts, GTC has 40 pending U.S. patent applications and 174 corresponding foreign applications covering relevant and newly developed portions of its transgenic technology. Several of these pending applications are included in various cross-licensing or out-licensing arrangements with other companies that in turn provide access to their proprietary technologies. Specifically GTC has cross-licensed its proprietary technology for the production of proteins in milk to Pharming B.V. and PPL Therapeutics, while limited access has been granted to its technology related to the production of antibodies in milk to Pharming B.V. and the French company Bioprotein. Recently issued GTC U.S. patents provide claim coverage for protein purification from the milk of transgenic animals, the production of monoclonal and assembled antibodies at commercial levels in the milk of transgenic mammals, the production of recombinant antithrombin in the milk of transgenic goats and one covering the production of Prolactin in the milk of transgenic animals.

        In addition, GTC holds exclusive and non-exclusive licenses from Genzyme Corporation, Biogen, and other individuals and corporations to rights under a number of issued patents and patent applications in the U.S. and the corresponding cases abroad for a variety of technologies enabling the transgenic production of proteins in the milk of non-human animals. GTC holds licenses to 35 issued U.S. patents and 19 pending U.S. applications. On an international basis, GTC holds licenses to 61 issued patents, and 99 pending applications. The in-licensed patents that are related to the transgenic platform begin to expire in 2009.

        GTC also has exclusive and nonexclusive licenses to specific technologies owned by other parties. GTC has also concluded an extensive cross-licensing arrangement with Pharming providing broad access to the transgenic cattle platform as well as some additional nuclear transfer technology. GTC's relationship with ACT also focuses on intellectual property concerning cloning and nuclear transfer. Certain of the licenses require GTC to pay royalties on sales of products which may be derived from or produced using the licensed technology. The licenses generally extend for the life of any applicable patent. GTC has signed an exclusive, worldwide licensing agreement with ACT that allows GTC to utilize ACT's patented nuclear transfer technology for the development of therapeutic proteins in the milk of transgenic mammals. The majority of GTC's current programs have used, and most of its future programs are expected to use, this technology. The PTO has declared an interference proceeding between ACT and Geron Corporation for one of the patents GTC licenses from ACT. The Company does not know at this time what impact, if any, this interference proceeding may have on its ability to practice nuclear transfer. GTC has broadened its rights to practice nuclear transfer as part of its licensing agreement with Pharming, which was executed in 2002.

        The Company also relies upon trade secrets, know how and continuing technological advances to develop and maintain its competitive position. In an effort to maintain the confidentiality and ownership of trade secrets and proprietary information, the Company requires employees, consultants

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and certain collaborators to execute confidentiality and invention assignment agreements upon commencement of a relationship with the Company.

Competition

        Many companies, including biotechnology and pharmaceutical companies, are actively engaged in seeking efficient methods of producing proteins for therapeutic or diagnostic applications. This includes companies that are developing transgenic technology using various plant and avian systems, as well as many companies that are building their own cell-culture-based production systems or other traditional protein production methods, and contract manufacturers who are using those systems to produce proteins for others.

        The other companies known to GTC to be engaged in the application of transgenic technology in mammals for the production of proteins for therapeutic use in humans are Pharming Group N.V. and PPL. Based in the Netherlands, Pharming is primarily engaged in the development of recombinant proteins in the milk of transgenic cows and rabbits. Pharming has one product in clinical development that is in phase II studies. PPL, now in liquidation, is based in Scotland and utilizes primarily sheep for transgenic protein production. PPL has developed recombinant alpha-1 antitrypsyn into Phase II stage of clinical testing. There are also other companies seeking to develop transgenic technology in animals and in plants, which may be competitive with GTC's technology with respect to its patents and proprietary rights.

        For ATryn®, a number of companies internationally produce and market antithrombin from the fractionation of human plasma. Aventis has approximately a 40% share of this market worldwide. Bayer is the only company that has commercially available fractionated antithrombin material that is approved for sale in the U.S., which sales represent only about 1% of the worldwide market.

        There are a number of companies worldwide that produce and market human serum albumin from the fractionation of human plasma. We estimate that Bayer and Aventis sales represent approximately 30% and 10% market shares, respectively, of the worldwide market for human serum albumin. We are aware of two companies internationally that are developing recombinant forms of human serum albumin derived from yeast cultures. One company, Aventis, is developing its recombinant albumin product for the excipient market.

Government Regulation

        The manufacturing and marketing of GTC's potential products and certain areas of research related to them are subject to regulation by federal and state governmental authorities in the U.S., including the FDA, the U.S. Department of Agriculture and the Environmental Protection Agency. Comparable authorities are involved in other countries, including the EMEA in Europe.

        To GTC's knowledge, no therapeutic protein produced in the milk of a transgenic animal has been submitted to the FDA for final regulatory approval or, except for GTC's submission of Atryn® to the EMEA in January 2004, to any other regulatory agency for final regulatory approval. However, the FDA issued its Points to Consider in August 1995, addressing the Manufacture and Testing of Therapeutic Products for Human Use Derived from Transgenic Animals. Points to Consider, which are not regulations or guidelines, are nonbinding published documents that represent the current thinking of the FDA on a particular topic. Earlier in 1995, comparable guidelines were issued by European regulatory authorities. GTC believes that its programs satisfactorily address the topics identified in these documents and generally views them as a very positive milestone in the acceptance of the transgenic form of production. Nonetheless, obtaining required regulatory approvals for our transgenically produced products may take several years to complete and is expensive and uncertain.

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        Regulations in the U.S. setting forth legal requirements for the investigation and commercialization of drug products and medical devices are implemented in accordance with the Food, Drug and Cosmetic Act. Regulations mandating requirements for the development and licensure of biological products are implemented in accordance with the Public Health Service Act, or PHSA. With respect to therapeutic biological products, generally, the standard FDA approval process includes preclinical laboratory and animal testing, submission of an IND to the FDA and completion of appropriate human clinical trials to establish safety and effectiveness. The approval process is comparable in Europe and other countries.

        GTC is in discussions with the FDA regarding its clinical and regulatory strategy for approval of ATryn® in the United States. In response to an IND filed with the FDA in 2003 for clinical development of ATryn® in the hereditary deficiency indication, the FDA has provided the Company guidance that it wishes to see a controlled study as a basis for approval, which may not be feasible for this indication. Such a study has not been required under the advice GTC has received from the EMEA for approval of ATryn® in the hereditary deficiency indication in Europe. The Company is in a continuing dialogue with the FDA to define an appropriate clinical and regulatory strategy for ATryn® approval in hereditary deficiency or another indication that meets the agency's requirements. The Company intends to move forward with its clinical development program for ATryn® in the United States in 2004 under an appropriate IND once agreement has been reached with the FDA. Until the Company knows the nature of any clinical program that may be agreed with the FDA, GTC is unable to estimate a timetable for filing a Biologics License Application on ATryn® in the United States. If the Company does not reach agreement with the FDA on an appropriate IND for ATryn®, the Company will not be able to proceed with its clinical development in the United States.

        As a potential manufacturer of biological products, GTC will also be subject to regulation requiring it to successfully demonstrate that a given biological product meets PHSA standards, that is, that the product is safe, pure and potent and that the facility in which it is manufactured meets standards designed to ensure that the product continues to be safe, pure and potent. If it does so, then as the manufacturer GTC would receive a biological license to market the product in interstate commerce. It is possible, however, that the FDA may not act expeditiously or favorably on requests for approval of a biological license or will require additional data before granting approval. GTC is required to comply with these regulations to support development and commercialization of products produced in its internal programs and under its contracts with external partners.

Research and Development Costs

        During its fiscal years ended December 28, 2003, December 29, 2002 and December 30, 2001, GTC spent in total, $29.2 million, $25 million and $22.4 million, respectively, on cost of revenue and research and development expense of which $11.1 million, $13.1 million and $15.1 million, respectively, was related to external programs. Of the total spent on research and development, $8.7 million, $5.1 million and $2.3 million, was spent on the ATryn® program in fiscal years 2003, 2002 and 2001, respectively. These costs include labor, materials, supplies and overhead, as well as certain subcontracted research projects. Also included are the costs of operating the transgenic production facility such as feed and bedding, veterinary costs and utilities.

Employees

        As of December 28, 2003, GTC employed 159 people, including 6 part time and temporary employees. Of GTC's total employees, 102 were engaged in farm operations, clarification processes, quality assurance and control, 21 were engaged in research and development and 36 were engaged in administration, business development and marketing. Of GTC's employees, approximately 16 have Ph.D. degrees and 6 have D.V.M. degrees. None of GTC's employees are covered by collective bargaining agreements. GTC believes its employee relations are satisfactory. During the third quarter of

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2003, the Company implemented a restructuring plan including a headcount reduction of 13%. Additionally in February 2004, the Company announced a further restructuring of its organization to control costs and to support its focus on clinical development and commercialization of its internal pipeline of proprietary products and its portfolio of external programs. This restructuring included a headcount reduction of approximately 20% from 159 to 127 full time equivalent employees.

Available Information

        GTC's internet website is www.gtc-bio.com and through the "Investor Information" portion of the website, investors may access, free of charge, GTC's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after GTC electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

ITEM 1A.    EXECUTIVE OFFICERS OF THE REGISTRANT

        The executive officers of the Company and their respective ages and positions as of March 1, 2004 are as follows:

        Dr. Cox was appointed Chairman of the Board, President and Chief Executive Officer of GTC in July 2001. From 1997 to 2001, Dr. Cox was Chairman and Chief Executive Officer of Aronex Pharmaceuticals, Inc., a biotechnology company. In 1984, Dr. Cox joined Genzyme Corporation in the UK and, in 1988, became Senior Vice President of Operations in the United States. Subsequently, Dr. Cox was promoted to Executive Vice President for Genzyme, responsible for operations and the pharmaceutical, diagnostic and genetics business units until 1997. Prior to joining Genzyme, Dr. Cox was General Manager of the UK manufacturing operations for Gist-Brocades. Dr. Cox also serves as a director for Nabi Biopharmaceuticals and the Emerging Companies Section Governing Body of the Biotechnology Industry Organization.

        Mr. Green was appointed Senior Vice President of GTC in May 2002, having had previously served as Vice President since 1994. Mr. Green has also served as Chief Financial Officer since December 1994 and Treasurer since August 1997. Prior to that, he was Vice President and Assistant Treasurer of TSI Corporation from December 1989 until its acquisition by GTC in 1994.

        Mr. Liposky was appointed Senior Vice President, Operations in May 2002 and was previously Vice President, Operations since January 1999. Before joining GTC, Mr. Liposky served as Vice President, Contract Manufacturing for Creative Biomolecules, Inc. from 1992 through 1998 and Vice President, Bioprocessing and Operations and Projects Manager for Verax Corporation from 1987 to 1991.

        Dr. Meade has been Senior Vice President of Research and Development since 2002. Prior to that time, he was Vice President of Transgenics Research for GTC since August 1994 after serving as Research Director since May 1993. Prior to joining GTC, Dr. Meade was a Scientific Fellow at Genzyme, where he was responsible for directing the transgenic molecular biology program. From 1981 to March 1990, Dr. Meade was a Senior Scientist at Biogen, Inc., a biotechnology company, where he

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worked on the technology relating to the production of proteins in milk and was an inventor on the first issued patent covering this process.

        Mr. Woloshen was appointed Senior Vice President and General Counsel in May 2002 and was previously Vice President and General Counsel since August 1999. Prior to that, Mr. Woloshen served as Vice President and General Counsel of Philips Medical Systems North America from April 1989 until July 1999.

ITEM 2.    PROPERTIES

        GTC's corporate headquarters is located in 12,468 square feet of office space in Framingham, Massachusetts under a lease which expires in March 2006. In 2002, the Company entered into a Sublease Agreement to use additional office and laboratory space at their existing location in Framingham. The sublease consists of approximately 19,888 square feet. GTC's research facility is located in approximately 3,900 square feet of laboratory, research and office space leased from Genzyme in Framingham, Massachusetts which automatically renews annually, on a year-to-year basis.

        GTC owns a 383-acre facility in central Massachusetts. This facility contains 106,793 square feet of production, laboratory and administrative space and currently houses more than 1,600 goats. GTC believes its owned and leased facilities are adequate for significant further development of commercial transgenic products. GTC leased animal housing, care, treatment and research facilities operated by Tufts University School of Veterinary Medicine in Massachusetts until December 1, 2003, at which time GTC no longer needed such services. In January 2002, the Company completed the purchase of approximately 135 acres of farm land in eastern New York State for potential development as a second animal facility.

ITEM 3.    LEGAL PROCEEDINGS

        On November 13, 2001, two employees of one of the Company's former subsidiaries filed an action in the Court of Common Pleas for Philadelphia County in Pennsylvania against the Company seeking damages, declaratory relief and certification of a class action relating primarily to their Company stock options. The claims arise as a result of the Company's sale of Primedica Corporation to Charles River Laboratories International, Inc. in February 2001, which the Company believes resulted in the termination of Primedica employees' status as employees of the Company or its affiliates and termination of their options. The plaintiffs contend that the sale of Primedica to Charles River did not constitute a termination of their employment with the Company or its affiliates for purposes of the Company's equity incentive plan and, therefore, that the Company breached its contractual obligations to them and other Primedica employees who had not exercised their stock options. The complaint demands damages in excess of $5 million, plus interest. GTC has filed an answer denying all material allegations in the complaint, and is vigorously defending the case. The Company believes that it has meritorious defenses and that, although the ultimate outcome of the matters cannot be predicted with certainty, the disposition of the matter should not have a material adverse effect on the financial position of the Company.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        During the fourth quarter of fiscal year 2003, no matter was submitted to a vote of the security holders of the Company.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's Common Stock commenced trading on the NASDAQ National Market System in 1993. The stock's ticker symbol was changed to GTCB on June 3, 2002, in conjunction with changing the name of the Company to GTC Biotherapeutics, Inc. Quarterly high and low sales prices for the Common Stock as reported by the NASDAQ National Market are shown below.

        The records held by the transfer agent indicate that on March 1, 2004 there were approximately 914 shareholders of GTC of record.

        The Company has never paid a cash dividend on its Common Stock and currently expects that future earnings will be retained for use in its business.

ITEM 6.    SELECTED FINANCIAL DATA

        The selected financial data set forth below as of December 28, 2003 and December 29, 2002 and for each of the three fiscal years in the period ended December 28, 2003 are derived from the Company's consolidated financial statements included elsewhere in this Report, which have been audited by PricewaterhouseCoopers LLP, independent accountants. The selected financial data set forth below as of December 30, 2001, December 31, 2000 and January 2, 2000, and for the years ended December 31, 2000 and January 2, 2000 are derived from audited consolidated financial statements not included in this Report.

        This data should be read in conjunction with the Company's consolidated financial statements and related notes thereto under Item 8 of this Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Item 7 of this Report.

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SELECTED FINANCIAL DATA

(Dollars in thousands except per share data)