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

For the Quarterly Period Ended March 31, 2004

OR

o

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

For the transition period from                           to                          

Commission File No. 0-29608

Delaware

33-0969592

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

11199 SORRENTO VALLEY ROAD
SAN DIEGO, CALIFORNIA  92121-1334

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

(858) 597-6006

(COMPANY’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Part I. Financial Information

Item 1.  Financial Statements

a)

Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and December 31, 2003

b)

Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003 (Unaudited)

c)

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (Unaudited)

d)

Notes to Consolidated Financial Statements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part II. Other Information

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

Signatures

March 31,
2004

December 31,
2003

(Unaudited)

ASSETS

Current

Cash and cash equivalents

$

13,128,944

$

13,460,446

Receivables, net

7,200

175,000

Prepaid expenses and other

80,755

116,526

Total current assets

13,216,899

13,751,972

Fixed assets, net

152,829

175,902

Patents and other assets, net

2,314,831

2,301,116

Total assets

$

15,684,559

$

16,228,990

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current

Accounts payable and accrued expenses

$

554,798

$

827,655

Deferred revenue

268,979

331,164

Total current liabilities

823,777

1,158,819

Deferred rent

16,389

22,536

Total liabilities

840,166

1,181,355

Stockholders’ equity

Preferred stock, $0.001 par value

1

1

Common stock, $0.001 par value

69,687

63,682

Additional paid in capital

92,656,461

91,185,936

Accumulated deficit

(77,881,756

)

(76,201,984

)

Total stockholders’ equity

14,844,393

15,047,635

Total liabilities and stockholders’ equity

$

15,684,559

$

16,228,990

Three Months
Ended March 31,
2004

Three Months
Ended March 31,
2003

REVENUE

License fee and milestone payments

$

1,471

$

1,471

Revenues under collaborative research and development arrangement

67,914

9,666

Total revenue

69,385

11,137

EXPENSES

Research and development

588,860

475,734

General and administrative

1,097,196

1,263,463

Interest (income) expense, net

(35,039

)

17,230

Total expenses

1,651,017

1,756,427

Loss from continuing operations

(1,581,632

)

(1,745,290

)

Discontinued operations:

Gain on disposal

—

2,034,078

Loss from operations

—

(110,740

)

Net (loss) income

(1,581,632

)

178,048

Declared dividends on preferred stock

(98,140

)

—

Net (loss) income attributable to common stockholders

$

(1,679,772

)

$

178,048

Amounts per common share – basic and diluted:

Loss from continuing operations

$

(0.03

)

$

(0.03

)

Income from discontinued operations

—

0.03

Declared dividends on preferred stock

—

—

Net loss per common share

$

(0.03

)

$

—

Weighted average number of common shares - basic

65,274,581

50,406,608

Weighted average number of common shares - diluted

65,274,581

50,632,087