The American Cancer Society cites NHL as the sixth most common form of cancer and the sixth leading cause of death among cancers in the United States.

According to the American Cancer Society, 53,400 people were diagnosed with NHL in the United States in 2003, and the NCI estimates that approximately 314,000 patients currently suffer from this disease.

The Company’s lead product candidate, FavId, is an active immunotherapy for the treatment of indolent B-cell non-Hodgkin's lymphoma, or NHL. FavId is expected to enter a pivotal Phase 3 clinical trial during the third quarter of 2004.

FavId is being developed to be used following treatment with existing standards of care to induce more durable remissions in patients with indolent B-cell NHL. The Company’s planned Phase 3 clinical trial is designed to evaluate FavId's ability to extend the time to disease progression, or TTP, in patients following treatment with Rituxan. This regimen will provide patients with indolent B-cell NHL the option of an all-biologic therapy that avoids many of the side effects associated with chemotherapy. To date, FavId has been evaluated in two multi-center, open-label Phase 2 clinical trials involving over 120 patients. Preliminary results from these trials suggest that FavId is active when used alone and may increase TTP following treatment with Rituxan.

Researchers have been conducting clinical trials of active immunotherapies in patients with B-cell NHL for more than a decade. The results of clinical trials at the Stanford University Medical Center and the NCI suggest that active immunotherapies similar to FavId, when used following chemotherapy, may induce long-term remission and improve survival time among indolent B-cell NHL patients. Despite the promising results of these trials, it is believed that manufacturing limitations have hindered commercialization of these immunotherapies. It is believed that the Company’s proprietary technology will enable it to manufacture FavId in a timely and cost-effective manner and will therefore allow the Company to offer a treatment option not currently available to physicians and patients.

FavId is believed to be effective in treating other types of B-cell NHL. Four additional physician-sponsored Phase 2 clinical trials of FavId are either ongoing or expected to begin during 2004. Moreover, it is believed that the Company’s active immunotherapy expertise and proprietary manufacturing technology will enable the Company to develop additional product candidates for other oncology indications, such as T-cell lymphoma, and for autoimmune diseases, with an initial focus on multiple sclerosis.

The Company is currently developing a second product candidate, FAV-201, for the treatment of T-cell lymphoma and intend to initiate a Phase 1/2 clinical trial evaluating the safety and preliminary efficacy of FAV-201 in the fourth quarter of 2004. This trial builds upon preclinical data that suggest activity of an immunotherapy based on a T-cell receptor. Patients will be observed for evidence of specific cell-mediated and humoral immune responses to FAV-201, and any clinical responses will also be documented.

Autoimmune disease occurs when the body's immune system mistakenly attacks and destroys body tissue that it believes to be foreign. In certain instances, autoimmune disease can result from an outgrowth of a limited number of disease-causing lymphocytes that recognize self antigens. Preclinical studies have shown that immunotherapies may prevent or treat autoimmune diseases. In the second half of 2004, the Company intends to initiate preclinical studies to evaluate whether immunotherapies manufactured in a fashion similar to FAV-201 will be effective in preventing or treating autoimmune disease, with an initial focus on multiple sclerosis.

General and administrative expense increased from approximately $2.0 million in 2002 to approximately $2.4 million in 2003.

The Company recorded deferred stock-based compensation of $1.6 million for the year ended December 31, 2003. The Company recorded amortization of stock-based compensation of $155,000 for the year ended December 31, 2003.

Interest income decreased from approximately $167,000 in 2002 to $108,000 in 2003. The decrease of $59,000, or 35%, was primarily attributable to lower average cash balances and lower interest rates.