Breast cancer is the most common cancer in women. In the United States, there are two million patients diagnosed with breast cancer. There are approximately one million postmenopausal women in the United States diagnosed with hormone-dependent breast cancer. Approximately 130,000 postmenopausal women in the United States are diagnosed each year with hormone-dependent breast cancer, where estrogen is the primary driver of tumor growth, and an estimated 40,000 U.S. patients are diagnosed with advanced breast cancer annually. The goal of current hormonal therapy is to reduce estrogen levels or block receptor binding to prevent estrogen-stimulated tumor growth. Worldwide sales of hormonal therapies for breast cancer exceeded $1.2 billion in 2004 and is projected to grow to more than $2.5 billion by 2007.

Hepatitis C is a major global public health problem. According to the World Health Organization, more than 170 million people worldwide are chronically infected with HCV, and three to four million new HCV infections occur annually. The U.S. Centers for Disease Control and Prevention, or CDC, has estimated that in the United States approximately 2.7 million people are chronically infected with HCV and approximately 25,000 patients are diagnosed each year. It is estimated that 10,000 to 12,000 patients die annually in the United States from complications resulting from HCV infection. The annual worldwide market for currently approved HCV therapeutics is projected to grow from approximately $2.0 billion in 2004 to $3.5 billion in 2010.

The American Cancer Society estimates that there will be approximately 36,000 new cases of kidney cancer and approximately 60,000 new cases of melanoma in the United States in 2005. IL-2 is the primary treatment for approximately 30,000 metastatic renal cell cancer patients and approximately 95,000 patients with metastatic melanoma disease amenable to IL-2 therapy. However, IL-2 use is severely limited because of its sometimes life-threatening or even fatal toxicity. It is believed that a therapeutic intervention that reduces the side effects and promotes greater acceptability of IL-2 doses to be used would represent an important clinical advance.

The Company is developing omega DUROS® to improve the treatment of HCV by offering a more convenient and potentially safer and more efficacious therapy. Omega DUROS® is designed to deliver a continuous and consistent dose of omega interferon, a therapeutic protein, for three months via the implantable DUROS® device, a proven drug delivery technology developed by ALZA Corporation. If approved, omega DUROS® would eliminate the need for weekly injections and potentially reduce side effects and the viral breakthrough associated with current therapies. The Company has demonstrated the antiviral activity of omega interferon given by injection through two clinical trials in over 100 HCV patients. The Company has developed a proprietary formulation of omega interferon for long-term delivery from omega DUROS® and plans to file an IND in the second half of 2005 to initiate clinical testing for omega DUROS® in previously untreated HCV patients.

In addition to its breast cancer and hepatitis C programs, the Company has two earlier stage programs in development for the treatment of cancer. Biomed 101 is being developed to reduce interleukin 2, or IL-2, toxicity in cancer patients. IL-2 is an approved anticancer agent that is used in the treatment of patients with metastatic kidney cancer or metastatic melanoma. The Company has acquired the assets, including pertinent patent rights, of Matrix Pharmaceutical, Inc. related to the injectable form of a collagen-based protein known as Lucent Protein and previously known as Intradose. Lucent Protein is able to localize high concentrations of toxic molecules to the target tumor site for extended periods while at the same time reducing systemic exposure to the toxic molecule. The Company is studying alternate product candidates for combination with the Lucent Protein technology for the treatment of multi-drug resistant tumors and will consider beginning formal clinical development based on the results of this work.

General and administrative expenses were approximately $2.4 million for the year ended December 31, 2003, compared with approximately $3.0 million for the year ended December 31, 2004.

Stock-based compensation recovery was approximately $2.3 million for the year ended December 31, 2003, compared to stock compensation expense of approximately $0.2 million for the year ended December 31, 2004.

Interest and other income, net was approximately $0.3 million for the year ended December 31, 2003, compared with approximately $0.3 million for the year ended December 31, 2004.