OXIGENE INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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Form 10-K

Annual Reports Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1999
Commission File No. 0-21990

OXIGENE, INC.

(Exact name of registrant as specified in its charter)

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DELAWARE 13-3679168
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(State or other (IRS employer
jurisdiction of identification number)
incorporation or
organization)

ONE COPLEY PLACE, SUITE 602, BOSTON, MA 02116
(Address of principal executive offices)

(617) 536-9500
(Telephone number, including area code)

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 $.01 PER SHARE NASDAQ NATIONAL MARKET
Title of Each Class Name of Each Exchange

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 such
filing requirements for the past 90 days. Yes [X] No [ ]

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 herein, or any amendment to
this Form 10-K. [ ]

The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 27, 2000 was $237,934,586.875 based
on the closing price of $22.9375 on that date.

As of March 27, 2000, the aggregate number of outstanding shares of
Common Stock of the registrant was 11,309,534.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant's Proxy Statement for the Annual Meeting of Stockholders,
scheduled to be held on May 26, 2000, is incorporated by reference to Part III
(Items 10, 11, 12 and 13) of this form 10-K.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995

Except for historical information contained herein, this Annual Report
on Form 10-K ("Annual Report") contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks and uncertainties that may cause the
Company's actual results or outcomes to be materially different from those
anticipated and discussed herein. Further, the Company operates in an industry
sector where securities values may be volatile and may be influenced by
regulatory and other factors beyond the Company's control. Important factors
that the Company believes may cause such differences are discussed in the "Risk
Factors" section of this Annual Report and in the cautionary statements
accompanying the forward-looking statements in this Annual Report. In assessing
forward-looking statements contained herein, readers are urged to read carefully
all Risk Factors and cautionary statements contained in this Annual Report.

PART I

1. BUSINESS

INTRODUCTION

OXiGENE, Inc. ("OXiGENE" or the "Company") is an international
biopharmaceutical company engaged principally in research into and the
development of products for use in the treatment of cancer. Historically, the
Company's activities have been directed primarily towards products designed to
complement and enhance the clinical efficacy of radiation and chemotherapy,
which are the most common and traditional forms of non-surgical cancer
treatment. Recently, however, the Company has begun to investigate certain of
its developmental stage products for applications as direct cancer treatment
agents, anti-inflammatory agents or in the treatment of fungal or other
infectious diseases, as well as for DNA repair measurement and stimulation.
Currently, OXiGENE has in various stages of clinical development therapeutic
product candidates that derive from three principal technology platforms.

The Combretastatin Platform. The Company's primary technology platform
presently involves the Combretastatin, a family of proprietary small molecule
anti-tumor vascular targeting agent that destroys the existing blood vessels
leading to and within a tumor, thereby stopping the growth of the tumor,
shrinking it and preventing it from metastasizing. Combretastatin targets the
inner areas and center of the tumor, which are not otherwise readily reached by
chemotherapeutic agents or radiation, and is expected thereby also to enhance
the efficacy of those forms of treatment. Ultimately, the Company expects to
participate in the development of a Combretastatin - based product that will
cause the targeted tumors to disappear, acting either alone or in combination
with other chemotherapeutic agents or radiation.

The Company has entered into an exclusive research collaboration and
licensing agreement with Bristol-Myers Squibb Company ("BMS") for the
development and commercialization of Combretastatin anti-tumor vascular
targeting agents. Under this agreement, BMS has agreed to provide up to $70
million in licensing fees, including an upfront payment, development milestones
and research funding to OXiGENE in exchange for worldwide rights to develop
Combretastatin compounds, including the lead compound, Combretastatin A-4
prodrug ("CA4P"). If a product is successfully launched, the agreement provides
for additional royalty payments. The agreement covers the systemic usage of
CA4P, and OXiGENE has maintained all rights for non systemic uses, such as local
topical applications. Preclinical studies aimed at determining the ability of
CA4P to attack vessels caused by angiogenic processes in the eye, skin and
joints are currently underway. Preliminary work toward reducing such vasculature
in an experimental eye model was carried out from the laboratory of Donald
Armstrong, Ph.D., D.Sc., University of Florida, College of Veterinary Medicine,
Division of Ophthalmology.

Combretastatin acts on proliferating tumor blood vessels, leaving
normal blood vessels intact. Combretastatin is not primarily an
anti-angiogenesis product. Products that are developed as anti-angiogenesis
agents involve a different mode of action; they attempt to prevent the formation
of new tumor blood vessels, not destroying existing ones. The Company believes
that anti-angiogenesis products, if successful, can prevent the growth of, but

(unlike Combretastatin) do not destroy, existing tumors, thereby requiring
continuous treatment to prevent continued tumor growth and metastisization.

Combretastatins are a family of naturally occurring, highly toxic
substances, of which OXiGENE's lead compound is CA4P. CA4P is an inactive
synthetic derivative that becomes activated, and thereupon becomes toxic, when
it contacts a tumor's blood vessels and cells. Recent work has shown that CA4P
can have dramatic effects on the shape of newly formed endothelial cells, but
less effect on quiescent endothelial cells. For example, effects of CA4P on
tubulin cytoskeleton and endothelial cell shape include in vitro rapid changes
in endothelial cell shape that dramatically alter capillary blood flow, and, as
a result, cause tumor blood vessel occlusion. The eventual result is stoppage of
blood flow, which is critical to tumor maintenance and growth, and consequent
tumor death.

Combretastatin, as developed by the Company, is a wholly synthetic,
water soluble product and is manufactured in a multi-step chemical process. The
Company believes that Combretastatin can be produced in commercial volumes at
reasonable cost.

Combretastatin was discovered by Dr. George R. Pettit, Regents
Professor of Chemistry at Arizona State University ("ASU"). ASU has granted the
Company an exclusive, world-wide, royalty-bearing license with respect to the
commercial rights to Combretastatin., and the Company continues to work with Dr.
Pettit. Combretastatin has been successfully tested in vitro and in vivo in
laboratories in the United States and Europe. It is currently undergoing Phase
I/II clinical testing in the United States and the United Kingdom. Completion of
those tests is expected at various times before the end of the second quarter
2000. Phase II clinical testing will then be initiated in conjunction with
Bristol-Myers Squibb.

The Declopramide Platform. Declopramide is a DNA repair inhibitor drug
that makes tumors more susceptible to damage by radiation or chemotherapy, by
inducing apoptosis, or cell death, and inhibiting the nuclear transcription
factor kappa B ("NF-kB"), which may modulate Poly ADP Ribose Polymerase ("PARP,"
a DNA repair enzyme also known and formerly referred to as Adenosine Diphosphate
Ribosyl Transferase or ADPRT) activity and activate several other genes that
protect cells against apoptosis-induced cytotoxicity and induce inflammatory
cytokine product. Hence, Declopramide enhances the efficasies of those
traditional forms of cancer treatment. Declopramide is the third generation of
drugs that stem from the Company's initial technology, and is based on the
Company's proprietary knowledge of the processes by which certain enzymes repair
damaged DNA sites. That repair function is essential to a cell's survival,
including tumor cells that have been damaged as a result of the toxic effects of
chemotherapy or radiation. In current Phase I/II clinical studies in the United
States, the Company has found that Declopramide, when administered in
combination with chemotherapeutic agents, has not exhibited any of the central
nervous system (CNS) side effects that were experienced in connection with the
Company's previous formulations, which have been abandoned. The current Phase
I/II study is expected to be completed by the end of the first quarter 2000.

The Cordycepin Platform. Cordycepin is a drug that inhibits DNA
replication, a process that is required for cancer cells to reproduce. The
Company believes that Cordycepin may be efficacious in treating patients with
TdT- positive acute lymphoblastic leukemia (approximately half of all patients
having acute lymphoblastic leukemia). The Company believes there are only
limited commercial opportunities for Cordycepin in its current state because it
must be administered in combination with a drug (Deoxycoformycin) that inhibits
an enzyme (ADA) that, if left alone, would inactivate Cordycepin. While
Deoxycoformycin are efficient ADA inhibitors, they are also quite toxic, causing
undesirable side effects, even at the low doses needed to inhibit ADA.
Consequently, the Company decided to end patient recruitment in its Phase I/II
clinical trial, due to toxicities observed in the current form of Cordecypin +
Deoxycoformycin combination therapy. During the past year the Company has
concentrated on building ADA resistance into Cordecypin analogs in order to
reduce side effects and improve efficacy. In pre-clinical work, the Company has
identified over 25 analogs possessing various degrees of ADA resistance, which
enables the compounds to be distributed throughout the body in a prodrug form
before eventual conversion to cordecypin, as well as others that remain
completely resistant to ADA. If the results of the pre-clinical work are
favorable, the Company expects to enter Phase I/II clinical testing of the
second generation Cordycepin analog by the first or second quarter 2001.

General. The Company is a Delaware corporation that was originally
incorporated in New York in 1988. The Company maintains offices in the United
States at One Copley Place, Suite 602, Boston, MA 02116

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(telephone: 617-536-9500; fax: 617-536-4700), and in Sweden at Blasieholmsgatan
2C, S-111 48 Stockholm, Sweden (telephone: 011-46-8-678-8605; fax:
011-46-8-678-8605). Consistent with its policy of operating under tightly
controlled budgetary standards, the Company maintains a small employee and
facilities base, with certain administrative and scientific functions being
performed in Sweden and most other activities, including product development,
regulatory oversight and clinical testing, being overseen from the growing
Boston office. Substantial scientific activities are conducted pursuant to
collaborative arrangements with universities and regulatory and clinical testing
functions are generally the subject of contracts with third party, specialty
enterprises. References in this Annual Report to "OXiGENE" or the "Company" mean
OXiGENE, Inc. and its wholly-owned Swedish subsidiary OXiGENE Europe AB.

PRODUCT DEVELOPMENT AND MARKETING STRATEGY

The Company's strategy is to develop innovative cancer therapeutics in
a cost-efficient manner. To that end, the Company has established relationships
with universities, research organizations and other institutions in the field of
oncology. The Company intends to further broaden these relationships, rather
than expand its in-house research, development and clinical staff. The Company
plans to market its products, if and when approved for marketing, generally
through strategic alliances or joint ventures with unaffiliated pharmaceutical
companies.

The Company has entered into an exclusive licensing and research
collaboration agreement with Bristol-Myers Squibb to develop, produce and market
Combretastatin. Under the agreement, the Company granted to BMS worldwide rights
to develop Combretastatin compounds for systemic use in all indications and BMS
assumed responsibility for the manufacture and clinical development of CA4P,
with the exception of three ongoing Phase I/II clinical trials currently being
conducted by OXiGENE in the United States and United Kingdom.

The Company has signed a letter of intent with Techniclone Corporation
to jointly develop and commercialize Techniclone's vascular targeting agent
technology in combination with that of OXiGENE. Under the proposal, Techniclone
will supply its intellectual property and the expertise of Dr. Phil Thorpe,
Professor of Pharmacology at the University of Texas Southwestern Medical
Center, along with the most promising lead candidates he has developed to date.
OXiGENE will supply funding in the form of milestone payments and development
costs as well as its next generation tubulin-binding compounds. The joint
venture will collaborate on research and development of those compounds for use
in combination with Techniclone's vascular targeting agent technology. The
current letter of intent provides for an exclusive period for completion of the
definitive agreement; however, there can be no assurance that a definitive
agreement will be reached.

In June 1999, the Company entered into a research collaboration
agreement with Active Biotech of Sweden to explore the use of OXiGENE's
benzamide and nicotinamide technology in the treatment of inflammatory diseases.
Under the agreement, Active Biotech will evaluate the potential of the
technology as a treatment for inflammatory diseases. Active Biotech will use its
resources to conduct the research over the next year, with an option to jointly
develop anti-inflammatory drug candidates together with OXiGENE upon successful
completion of the initial research.

Additionally, the Company currently has collaborative arrangements
with a number of academic and other research institutions and organizations in
the United States and Europe, including: the University of Lund in Lund, Sweden;
Boston Medical Center in Boston, Massachusetts; Aarhus University in Aarhus,
Denmark; Gray Laboratory in Middlesex, United Kingdom; Georgetown University in
Washington, D.C.; University of Florida in Gainesville, Florida; The University
of Texas M.D. Anderson Cancer Center in Houston, Texas; Baylor University in
Waco, Texas; and Arizona State University in Tempe, Arizona. See "--Research and
Development and Collaborative Arrangements."

While OXiGENE is likely to continue to explore other licensing and
development opportunities for its technologies with other companies, there can
be no assurance that the Company will be successful in establishing new, or
maintaining new or existing, collaborative agreements or licensing arrangements;
that any collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that any

4

current or future licensees will be successful in commercializing products.
Finally, if the Company's collaboration arrangements are terminated prior to
their expiration or if the other parties to such arrangements fail to adequately
perform, there can be no assurance that submission of product candidates for
regulatory approval will not be delayed. See "--Research and Development and
Collaborative Arrangements."

TECHNOLOGY OVERVIEW

OXiGENE has therapeutic product candidates in clinical development
comprising three technology platforms: Combretastatin; Declopramide (formerly
Oxi-104), the third generation of the Company's n-substituted benzamide agents;
and Cordycepin. The Company has also identified DNA repair measurement and DNA
repair stimulation as potential other applications of its proprietary DNA repair
technology.

Combretastatin: An Anti-Tumor Vascular Targeting Agent.
Combretastatins are organic small molecules found naturally in the bark of the
African Bush Willow, the Combretum Caffrum. They were discovered and isolated a
decade ago by George R. Pettit, Ph.D. of Arizona State University ("ASU"). In
May 1997, OXiGENE and ASU entered into an agreement to develop and test
Combretastatin. The May 1997 agreement also granted OXiGENE an option to acquire
an exclusive, worldwide, royalty-bearing license with respect to the commercial
rights to the Combretastatins, which OXiGENE exercised in August 1999.

OXiGENE's lead Combretastatin-family therapeutic candidate, CA4P, is a
derivative of the natural Combretastatin A-4 subtype found by Dr. Pettit. It is
a member of a relatively new class of drugs--anti-tumor vascular targeting
agents--that shrink solid tumors by selectively targeting and destroying
existing tumor-specific blood vessels. Phase I/II studies of Combretastatin have
started in the U.S. and Europe in patients with solid tumors.

Anti-tumor vascular targeting is a cancer therapy that departs
significantly from other current approaches to treating cancer. In contrast to
traditional methods involving a direct attack on cancer cells, anti-tumor
vascular targeting agents attack a tumor's life support system, a network of
existing and emerging blood vessels. Preclinical studies have shown that the use
of these therapies can cause a tumor to shrink and ultimately disappear.

According to the Cancer Research Campaign, a cancer organization in
the United Kingdom, nearly 90 percent of all cancers--more than 200 types--are
solid tumors and, therefore, potential candidates for anti-tumor vascular
targeting. Despite advances in treatment with surgery, radiation and
chemotherapy, serious problems with those conventional treatments persist. Many
solid tumors remain incurable, especially when the tumor has metastasized or is
a large mass at the time of diagnosis. Also, and importantly, chemotherapy and
radiation treatment damage healthy cells along with cancerous cells, resulting
in serious side effects for patients and, in many instances, eventually induce
drug resistance in the tumor.

While angiogenesis inhibitors (anti-angiogenesis agents) and
anti-tumor vascular targeting agents, such as Combretastatin, both target a
tumor's blood vessels, they differ in their approach and in their end result.
With angiogenesis inhibition, the aim is to prevent tumor growth by inhibiting
the formation of tumor-specific blood vessels that feed and sustain the tumor.
Anti-tumor vascular targeting agents on the other hand aim to destroy tumors by
selectively attacking and destroying their existing blood vessels, creating a
rapid and irreversible shutdown of these blood vessels. Such an effect is not
observed with anti-angiogenesis drugs.

The Company believes that shutting off a tumor's blood supply is an
efficient therapeutic strategy. Whereas most cancer drugs attack individual
cancer cells, Combretastatin can destroy many tumor cells simultaneously,
thereby preventing the tumors from metastasizing. Moreover, this result is
achieved with relatively small doses, as a result of which Combretastatin may
avoid side effects that accompany many other cancer drugs.

Declopramide, A DNA Repair Inhibitor. DNA repair inhibitors or
sensitizers are products that are intended to make cancer cells more receptive
to the conventional cancer therapies of radiation and chemotherapy.
Declopramide, OXiGENE's DNA repair inhibitor, is in Phase I/II clinical studies
in the U.S. in patients with advanced-stage cancers. These Phase I/II studies
combine Declopramide with 5-FU (5-fluorouracil) or cisplatin, both traditional
chemotherapeutic agents.

5

OXiGENE's proprietary technology is based on the relationship between
DNA repair and DNA damage as affected by both the operation of PARP and cell
replication. Normal cells in the human body are constantly subjected to external
assault from harmful environmental agents such as the sun's ultraviolet rays,
toxic chemicals in the diet and carcinogens such as smoke that are absorbed into
the body, as well as from internal assault from metabolic byproducts produced
within the cell. These assaults cause damage, or genetic lesions, to the DNA
molecules, which contain the genetic blueprint (instructions) for the cell. The
cell's structural integrity is dependent on its ability to read and translate
those blueprints. Repairing DNA damage is, therefore, essential to a cell's
survival. Consequently, the body attempts to counter this constant assault
through its genetic mechanisms that monitor genetic lesions to a cell's DNA
molecules and to repair them enzymatically.

Repair enzymes move constantly along the DNA molecule seeking out
genetic lesions and attempting to repair them through a process called "excision
repair." One of these enzymes is PARP. It identifies a genetic lesion, attaches
to the damaged site and engages other enzymes to help in the repair process. The
injured portion of the DNA molecule is then removed by enzymatic digestion and
additional enzymes repair the damage to that part of the molecule. As DNA is a
double helix composed of diametrically opposed strands, the repair enzymes can
use the unaffected strand of nucleotides (the class of nucleic acid compounds
from which genes are constructed) as a template for determining the correct
nucleotides to serve as replacement for the injured portion that has been
removed. The process is completed by the repair enzymes, which produce the
"complementary twin" and implant it in the previously removed damaged section.

The excision repair process is selective in that it concentrates on
active regions of the DNA helix, i.e., those containing the genes that are most
vital to the cell. Thus, when the rate of damage to a cell is more than the
repair system can handle, generally the repair mechanism first repairs lesions
in a cell that occur in frequently read genes, which are the genes that are
important to a cell's day-to-day survival. Damage occurring in inactive or
structural portions of the DNA that are not immediately important to a cell's
survival is repaired only as time permits, if at all. Therefore, OXiGENE
believes that cells become malignant or age by the accumulation of genetic
lesions that the DNA repair system has failed to correct properly or in a timely
manner.

Traditionally, cancer treatment has been based on the theory that
stopping uncontrolled cell division may halt or slow tumor growth. Both
radiation and chemotherapy increase DNA damage in tumorous cells, causing
toxicity and cell death. Tumorous cells are known to die by either of two
mechanisms, necrosis (death with cell replication) and apoptosis (death without
cell replication), or both. Based on recent scientific evidence, the Company
believes that lower doses of radiation or chemotherapy cause tumor cell death
primarily by apoptosis, whereas at higher doses necrotic death is
proportionately more prevalent. Apoptosis is initiated by cells as an
alternative pathway to block cell replication and induce death. OXiGENE's DNA
repair inhibitors are based on N-substituted benzamides, which, the Company
believes, cause tumor toxicity primarily by apoptosis. Apoptosis causes cell
death without the many toxic side effects associated with necrosis and enzymatic
digestion. This is an important basis for OXiGENE's product research and
development since its goal is to create drugs to counteract cancer that are also
less hazardous to the individual than those used today.

The Company's drugs are based on metoclopramide, a compound in the
family of N-substituted benzamides. N-substituted benzamides, together with the
family of nicotinamide compounds, have been developed into drugs for many
different medical indications, some of which have been used for more than 30
years. The Company's recent research has focused on the mechanism of action of
these compounds and their possible regulation of PARP activity and, thereby,
regulation of the processes of DNA repair and apoptosis. Based on its
preclinical studies to date, OXiGENE believes that DNA damage, such as that
induced by radiation and chemotherapy, activates NF-kB, which in turn may
modulate PARP activity and activate several other genes that protect cells
against apoptosis-induced cytotoxicity and induce inflammatory cytokine product.
Therefore, the Company believes that a drug that can inhibit NF-kB, such as
Declopramide, may be able to induce tumor killing by apoptosis and inhibit
inflammatory responses, which would sensitize DNA-damaging radio- and
chemotherapies and at the same time inhibit inflammation.

Non-Therapeutic-DNA Repair Technology. The Company believes its
knowledge of DNA repair activity may also be applied to monitor or screen
individuals for susceptibility to cancer, immune deficiencies and
chemotherapeutic drug resistance.

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DNA Repair Measurement. Studies have shown that DNA repair capacity
may vary from one individual to another. OXiGENE has quantified individual
levels of PARP as a DNA repair estimate. Pursuant to an agreement, dated October
7, 1991, with Preventive Medicine Institute, a not-for-profit corporation
affiliated with the Strang Cancer Prevention Center in New York, New York, the
Company holds an exclusive worldwide license, which expires in 2011, to certain
patents and related know-how covering a PARP diagnostic test that measures PARP
levels in white blood cells. The Company believes that a simple and inexpensive
serum-based test may give a reliable surrogate indication of the level of PARP
in white blood cells. OXiGENE has been allowed a U.S. patent with respect to
such a test.

DNA Repair Stimulation. OXiGENE believes that knowledge of the body's
metabolic function and its related process known as "oxidative stress," in which
a small number of metabolic "mistakes" occur and cause the formation of certain
intermediates that damage DNA, and knowledge of the body's inflammatory response
that causes a decline in DNA repair, may lead to the development of drugs that
may stimulate DNA repair. Drugs of that type, the Company believes, could reduce
a person's susceptibility to cancer and certain diseases associated with the
aging process by increasing net DNA repair capacity. OXiGENE has been allowed a
U.S. patent with respect to the use of Caretenoids-nicotinamide-zinc composition
and methods of treatment using the same.

These patents provide OXiGENE with proprietery positions to develop
the concept of DNA repair technology in the areas that are complementary to the
Company's therapeutic development of it's benzamide DNA repair technology.
Moreover, the patents in question represent important advances in reducing to
clinical practice the chemoprevention and diagnostic testing DNA repair
technologies.

Although the Company has conducted extensive preclinical cell and
animal research into, and is currently in the early stages of clinical testing
of, assays and drugs in each of the areas of DNA repair measurement and DNA
repair stimulation, there can be no assurance that any assays or drugs related
to either of these areas can or will be developed by the Company.

Cordycepin: An Anti-Leukemic Drug. In May, 1997, OXiGENE, in
collaboration with the National Cancer Institute and Boston Medical Center
(BMC), an affiliate of Boston University, started a Phase I/II study of
Cordycepin in patients with acute lymphoid leukemia. OXiGENE signed an agreement
with BMC that grants the Company an option to acquire an exclusive worldwide
royalty-bearing license for Cordycepin. The Company has decided to end patient
recruitment in the Phase I/II clinical trial, due to toxicities observed in the
present form of Cordecypin + Deoxycoformycin combination therapy, and is
currently developing Cordedypin analogs in order to reduce toxicity.

Acute lymphoblastic leukemia is a disease that continues to have
devastating outcomes in children and adults. Although significant advances have
been made in treating the childhood form of this acute leukemia in the past
three decades, with cure rates now at 75 percent, there is little prospect for
curing the remaining 25 percent even with the best available standard therapy.
In adults with acute lymphoblastic leukemia, using the most intensive current
treatment regimens, the overall survival rate at three years is 50 percent. In
the lymphoblastic variant of chronic myelogenous leukemia, the possibility of
cure is nonexistent unless the patient is among the minority for whom a bone
marrow transplant is useful.

Cordycepin was discovered to have antileukemic properties in studies
conducted at Boston University that were primarily directed at investigating how
certain anti-HIV drugs worked. Researchers found that one anti-HIV drug
contained Cordycepin as a minor contaminant. When tested against leukemic cells
from patients with acute lymphoblastic leukemia, Cordycepin proved to be very
toxic to these cells while sparing normal cells.

Cordycepin functions as a nucleoside analog having the ability to
confuse the DNA synthetic enzyme, terminal deosynucleotidyl transferase (TdT),
into thinking it is a normal precursor of DNA. Hence, when Cordycepin is
introduced to cells undergoing DNA replication, it produces a defective DNA that
then induces cancer cells to undergo apoptosis (programmed cell death) and
necrosis. The TdT enzyme is found in particular types of childhood and adult
leukemia and lymphoma. It is these TdT-positive leukemia and lymphoma cells that
are responsive to Cordycepin.

7

TdT is also found in certain pathogenic parasites and fungi. In
preclinical studies, Cordycepin was shown to kill such disease organisms, in
particular pathogenic fungi. Most important, OXiGENE has confirmed this
antifungal property of Cordycepin in a murine (mouse) model of invasive
candidiasis, a disease (candida) caused by yeast or fungi. Certain strains of
candida are resistant to the commonly used antibiotic flucanozole. The Company
believes that Cordycepin may therefore, have applicability for both cancer and
infectious disease markets.

OXIGENE'S CLINICAL TRIAL PROGRAM

Combretastatin A-4 Prodrug. In May 1997, OXiGENE and Arizona State
University entered into an agreement to develop and test Combretastatins.
Combretastatins are a family of naturally-occurring anti-mitotic, cytotoxic
molecules, that were identified and isolated by Dr. George R. Pettit, Regents
Professor of Chemistry, and his colleagues at ASU, from the South African bush
willow. CA4P, the Company's lead therapeutic candidate of the family, is a
wholly synthetic, water soluble manufactured molecule. CA4P is believed to
specifically attack existing tumor vasculature by first occluding blood flow to
and from the tumor and later, causing death and regression of the tumor blood
vessels. Vasculature is critical to both the survival of a solid tumor mass and
its continued growth and, therefore, represents a key target in novel cancer
treatment. Loss of these tumor specific blood vessels ultimately results in the
death of the tumor by nutrient and oxygen deprivation, as well as a loss of the
ability of tumors to metastasize. From ASU, OXiGENE has acquired an exclusive,
world-wide, royalty-bearing license with respect to the commercial rights to the
Combretastatins. The Company began testing CA4P in three Phase I/II dose
escalation clinical trials during the fourth quarter 1998 and the first quarter
1999. Each of these clinical trials examine the safety, pharmacokinetics and
mode of action of CA4P using three different dose regimens in patients with
advanced solid cancers. All three trials are expected to be completed by the end
of the first quarter 2000.

DNA Repair Inhibiting Products. OXiGENE has discovered a third
generation compound, Declopramide, in the family of N-substituted benzamides,
which it believes should be capable of inhibiting PARP-modulated DNA repair and
enhancing the ability of radiation/chemotherapy to act on cancer cells. OXiGENE
believes that tumor cells exhibiting increased DNA repair activity, as compared
to normal cells, are more sensitive to DNA repair inhibition and death by
apoptosis. The Company believes, on the basis of its research activities to
date, that Declopramide should act without producing significant toxic side
effects.

The current emphasis of the Company's clinical trial program in the
DNA repair inhibitor platform is on evaluating the safety and efficacy of
Declopramide in combination with chemotherapy and radiation. Currently, two
Phase I/II dose escalation clinical trials are on-going testing Declopramide
with radiation in combination with either 5FU/Leucovorin or cisplatin in
patients with advanced cancer. Both trials are expected to be completed by the
end of the second quarter 2000.

Cordycepin/Pentostatin. In December 1996, the Company entered into a
clinical trial and sponsored research agreement with BMC, an affiliate of Boston
University Medical Center, pursuant to which BMC is conducting a Phase I
clinical study of 3'-deoxyadenosine (cordycepin) and 2'-deoxycoformycin
(pentostatin) in patients with refractory TdT-positive acute lymphoid leukemia.
The Phase I study commenced in the first quarter of 1997 in collaboration with
Boston University and the National Cancer Institute. While Deoxycoformycin are
efficient ADA inhibitors, they are also quite toxic, causing undesirable side
effects even at the low doses needed to inhibit ADA. Consequently, the Company
decided to end patient recruitment in its Phase I/II clinical trial, due to
toxicities observed in the current form of Cordecypin + Deoxycoformycin
combination therapy. Depending upon the results of the study and the results of
the Company's current preclinical study dealing with the second generation of
Cordycepin analogs, the Company may commence additional Phase I/II studies of
Cordycepin by the first or second quarter 2001in order to develop a drug that
may have potential commercial acceptability at levels deemed satisfactory by the
Company.

General. OXiGENE's products are in an early stage of development. In
order to achieve profitable operations on a continuing basis, the Company, alone
or in collaboration with others, must successfully develop, manufacture,
introduce and market its products. The time frame necessary to achieve market
success for any individual product is long and uncertain. See "--Product
Development and Regulatory Processes." The products currently under development
by the Company will require significant additional research and development and
extensive preclinical and clinical testing prior to application for commercial
use. A number of companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in clinical trials, even after showing

8

promising results in earlier studies or trials. Although the Company has
obtained favorable results to date in preclinical studies and clinical trials of
certain of its products, such results may not be indicative of results that will
ultimately be obtained in or throughout such clinical trials, and there can be
no assurance that clinical testing will show any of the Company's products to be
safe or efficacious. Additionally, there can be no assurance that the Company
will not encounter problems in its clinical trials that will cause the Company
to delay, suspend or terminate those clinical trials. There can also be no
assurance that the Company's research or product development efforts or those of
its collaborative partners will be successfully completed, that any compounds
currently under development by the Company will be successfully developed into
drugs, or that any products will receive regulatory approval on a timely basis,
if at all. If any such problems occur, the Company could be materially and
adversely affected.

PRODUCT DEVELOPMENT AND REGULATORY PROCESSES

Research initially involves optimization of leading chemical
structures into leading compounds. Once a leading compound has been identified,
the preclinical phase commences. In that phase, certain selected compounds are
tested for therapeutic potential in a number of animal models and undergo
laboratory testing, with the objective of characterizing the investigated
compounds in relation to existing treatment and getting a first indication of
the compounds' development potential. Successful preclinical work may lead to
the filing of an Investigational New Drug application ("IND"), or a foreign
equivalent, with the relevant national regulatory authorities. The IND is a
permission to administer the compound to humans in clinical trials. Several
years of research and testing generally are necessary before an IND may be
obtained and clinical development may commence. There can be no certainty that
submission of an IND will result in FDA authorization to commence clinical
trials or that authorization of a particular phase of a clinical trial program
will result in authorization of other phases or that the completion of any
clinical trials will result in FDA approval.

The clinical development of new drugs is subject to approval by the
health authorities in individual countries, which have broad discretionary
powers. For example, the FDA reviews the results of all clinical studies and can
discontinue a trial at any time if there is a significant safety issue, or if
there is convincing evidence that the therapy is not effective for the chosen
indication. The requirements regarding the duration of a clinical phase vary
considerably among countries. For life threatening and severely debilitating
conditions where products provide meaningful therapeutic benefit over existing
treatments or where no satisfactory treatment currently exists, however, it is
possible to accelerate the development process in the United States through the
"Accelerated Drug Approval Program." In other countries, the trial process for
drugs directed toward life threatening diseases is shortened by lower
requirements regarding the patient sample size required to be met in the trials.

The time periods mentioned below are indications only and may vary and
be materially longer. Upon successful completion of the development program, a
New Drug Application ("NDA"), or a foreign equivalent, may be submitted to the
authorities, and, if approved, the product may then be marketed upon the terms
and conditions of such approval. Submission of an NDA does not assure that the
FDA will approve a product for manufacturing and marketing. Clinical trials are
typically conducted in three sequential phases, but the phases may overlap.

Phase I. The purpose of a Phase I study is to evaluate the toxicity of
the tested compound and to establish how the tested compound is tolerated and
decomposed in the human body. A Phase I clinical trial traditionally tests the
compound for safety (adverse effects), dosage tolerance, metabolism,
distribution, excretion and pharmacodynamics in a small group of healthy
individuals. A Phase I may last up to one year.

Phase II. A Phase II study marks the beginning of clinical trials on a
limited number of patients to (i) determine the efficacy of the compound for
specific indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. The trials also seek
to establish the most effective route of administration. Trials are conducted on
a larger, but still limited number of carefully monitored patients. A Phase II
may last up to two and one-half years.

Phase III. If preliminary evidence suggesting effectiveness has been
obtained during Phase II evaluations and the compound is found to have an
acceptable safety profile in Phase II evaluations, a Phase III trial may be
undertaken. A Phase III is an extensive clinical trial in a large number of
patients. The number of patients in a Phase III trial program depends to a great
extent on the clinical indications that the drug addresses. Trials are often

9

double-blinded and involve a detailed statistical evaluation of test results.
The compound is tested against placebo and existing treatment, if such treatment
is available. The product is manufactured in commercial quantities (batch
manufacturing) and tested for shelf life, or stability, and further evaluation
of the clinical efficacy and safety of the compound takes place. Phase III may
last several years and is the most time-consuming and expensive part of a
clinical trial program. There can be no assurance that Phase I, Phase II or
Phase III testing will be completed successfully within any specified time
period, if at all, with respect to any of the Company's products.

OXiGENE, like other pharmaceutical companies, will be subject to
strict controls covering the manufacture, labeling, supply and marketing of any
products it may develop and market. The most important regulation is the
requirement to obtain and maintain regulatory approval of a product from the
relevant regulatory authority to enable that product to be marketed in a given
country. Further, OXiGENE is subject to strict controls over clinical trials of
its potential pharmaceutical products.

The regulatory authorities in each country may impose their own
requirements and may refuse to grant, or may require additional data before
granting, an approval even though the relevant product has been approved by
another authority. The United States and European Union ("EU") countries have
very high standards of technical appraisal and, consequently, in most cases a
lengthy approval process for pharmaceutical products. The time required to
obtain such approval in particular countries varies, but generally takes from
six months to several years, if at all, from the date of application, depending
upon the degree of control exercised by the regulatory authority, the duration
of its review procedures and the nature of the product. The trend in recent
years has been towards stricter regulation and higher standards.

In the United States, the primary regulatory authority is the FDA. In
addition to regulating clinical procedures and processes, the FDA investigates
and approves market applications for new pharmaceutical products and is
responsible for regulating the labeling, marketing and monitoring of all such
products, whether marketed or under investigation. Upon approval in the United
States, a drug may only be marketed for the approved indications in the approved
dosage forms and dosages. In addition to obtaining FDA approval for each
indication to be treated with each product, each domestic drug manufacturing
establishment must register with the FDA, list its drug products with the FDA,
comply with cGMP requirements and be subject to inspection by the FDA. Foreign
manufacturing establishments distributing drugs in the United States also must
comply with cGMP requirements and list their products and are subject to
periodic inspection by the FDA or by local authorities under agreement with the
FDA.

In Europe, the European Committee for Proprietary Medicinal Products
provides a mechanism for EU-member states to exchange information on all aspects
of product licensing and assesses license applications submitted under two
different procedures (the multistate and the high-tech concentration
procedures). The EU has established a European agency for the evaluation of
medical products, with both a centralized community procedure and a
decentralized procedure, the latter being based on the principle of mutual
recognition between the member states.

There can be no assurances that any of the Company's products will
ever obtain the governmental approvals necessary to permit commercial sales of
any of its products. Further, even if regulatory approval of a product is
obtained, such approval may entail limitations on the indicated uses for which
that product may be marketed.

RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS

OXiGENE's research and development programs are generally pursued in
collaboration with academic and other institutions. Currently, the Company has
collaborative agreements and arrangements with a number of such institutions in
the United States and abroad, including the University of Lund (Lund, Sweden),
Boston Medical Center (Boston, Massachusetts), the Danish Cancer Society
(Aarhus, Denmark), the Gray Laboratory Cancer Research Trust (Middlesex, United
Kingdom), Georgetown University (Washington D.C.), the University of Florida
(Gainesville, Florida), The University of Texas M.D. Anderson Cancer Center
(Houston, Texas), Baylor University (Waco, Texas) and Arizona State University
(Tempe, Arizona).

In addition, the Company has entered into an exclusive research
collaboration and licensing agreement with Bristol-Myers Squibb Company with
respect to the development, production and marketing of

10

Combretastatin. Under this agreement, BMS has agreed to provide up to $70
million in licensing fees, including an upfront payment, development milestones
and research funding to OXiGENE, and OXiGENE has granted to BMS worldwide rights
to develop Combretastatin compounds, including CA4P for systemic use in all
indications. BMS assumed responsibility for the manufacture and clinical
development of CA4P, with the exception of three ongoing Phase I/II clinical
trials currently being conducted by OXiGENE in the United States and United
Kingdom. In addition, OXiGENE is entitled to receive royalties from any systemic
drugs resulting from the collaboration and has retained the rights for
non-systemic use in all indications.

The Company recently signed a letter of intent with Techniclone
Corporation to form a joint venture for the development and commercialization of
Techniclone's vascular targeting agent technology. The contemplated joint
venture will include an upfront licensing fee and milestone payment to
Techniclone by OXiGENE as well as OXiGENE's substantial funding of development
expenses related to commercializing a vascular targeting agent product. The two
companies will also share royalties and certain fees generated by the joint
venture. Under the terms of the letter of intent, Techniclone will supply its
intellectual property and the expertise of Dr. Phil Thorpe, Professor of
Pharmacology at the University of Texas Southwestern Medical Center, including
the most promising lead candidates he has developed to date and OXiGENE will
supply its next generation tubulin-binding compounds. The joint venture will
collaborate on research and development of the companies' vascular targeting
agent technologies to advance the technologies to commercialization. The current
letter of intent provides for an exclusive period for completion of the
definitive agreement; however, there can be no assurance that a definitive
agreement will be reached.

Further, in June 1999, the Company and Active Biotech of Sweden
entered into a research collaboration agreement regarding the use of OXiGENE's
benzamide and nicotinamide technology in the treatment of inflammatory diseases.
Under the agreement, Active Biotech will explore and evaluate the potential of
the technology as a treatment for inflammatory diseases. Active Biotech will
contribute resources in order to conduct the research over the next year, and
has an option to jointly develop anti-inflammatory drug candidates together with
OXiGENE upon successful completion of the initial research.

The Company incurred approximately $8.4 million, $10.4 million and
$7.3 million in research and development expenses in the years ended December
31, 1999, 1998 and 1997, respectively. Substantially all of these amounts
represent external research and development expenditures.

Currently, the Company is not required to pay any royalties or
licensing fees for technology and products developed with financial assistance
from or at the facilities of such agencies and institutions, except for a 5%
gross royalty payable to Preventive Medicine Institute, a New York
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York with respect to an exclusive worldwide license of the
patent covering the PARP diagnostic assay and certain costs related to the
filing, prosecuting and maintaining of patents and copyrights. Recently,
however, the Company has entered into agreements with a number of universities,
particularly in the United States, that may require payment of royalties in
respect of inventions made in the course of work performed pursuant to those
agreements in the event the Company exercises its option under those agreements
to acquire an exclusive, world-wide license. Generally, royalty rates are not
fixed and will be negotiated when and if the Company exercises its option to
acquire a license. There can be no assurance that such licensing negotiations
will be concluded successfully or that any royalties or fees will not be
material as to their amount.

PATENTS AND TRADE SECRETS

To date, OXiGENE's principal products have been based on certain
previously known compounds. The Company anticipates that any products it
develops hereafter may include or be based on the same or other compounds owned
or produced by unaffiliated parties, as well as synthetic compounds it may
discover. Although the Company expects to seek patent protection for any
compounds it discovers, there is no assurance that any or all of them will be
subject to effective patent protection. Further, the development of regimens for
the administration of pharmaceuticals, which generally involve specifications
for the frequency, timing and amount of dosages, has been, and the Company
believes will continue to be, important to the Company's efforts, although those
processes, as such, may not be patentable.

11

Patent Protection. It is the Company's policy to seek patent
protection in the United States and in foreign countries. Primarily because of
differences among patent laws in various jurisdictions, the scope of, and hence
the protection afforded by, any patents OXiGENE may receive may vary from
jurisdiction to jurisdiction even though they relate essentially to the same
subject matter.

The patent position of firms in the Company's industry generally
involves highly complex legal and other issues, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that patent applications owned by the
Company will result in patents being issued or that, if issued, the patents will
afford competitive protection.

Further, there can be no assurance that products or processes
developed by the Company will not be covered by third party patents, in which
case continued development and marketing of those products or processes could
require a license under such patents. There can be no assurance that if a legal
action were to be brought against the Company on the basis of any third party
patents, such action would be resolved in the Company's favor. Such an
unfavorable result against the Company could result in monetary damages and
injunctive relief. Further, even a favorable result could cause expenditure of
substantial monetary and other resources in connection with the Company's
defense against any such action.

Granted Patents and Pending Applications. The following is a brief
description of the Company's current patent position, both in the United States
and abroad. As U.S. patent applications are maintained in secrecy by the U.S.
Patent and Trademark Office until patents are issued and because publication of
discoveries in the scientific or patent literature often lags behind actual
discoveries, OXiGENE cannot be certain that it was the first creator of
inventions covered by its pending applications or that it was the first to file
patent applications for those inventions.

As of March 27, 2000, the Company is the assignee of seven granted
U.S. patents, two allowed and three pending U.S. patent applications, and of
granted patents and/or pending applications in other countries (and/or
international applications designating other countries) corresponding to six of
the granted U.S. patents and all of the allowed and pending U.S. applications.
One of the pending U.S. applications was filed in 1996, one in 1998 (based on a
1997 provisional application), and one in 2000 (based on a 1999 provisional
application).

Specifically, the Company is the assignee of a U.S. patent, granted
April 20, 1993, for glutathione-s-transferase mu (an inherited enzyme) as a
measure of drug resistance, covering a test for resistance to nitrosoureas (a
class of chemotherapeutic agents). In addition, the Company is the assignee of a
U.S. patent, granted August 23, 1994, for tumor or cancer cell-killing therapy
(covering methods of using N-substituted benzamides as radio- and
chemosensitizers), and of granted patents in Australia, Canada, Europe
(designating 13 countries), Ireland, Israel, Japan, Mexico, Russia and South
Africa (as well as a pending application in Denmark) corresponding thereto. The
Company is also the assignee of two U.S. patents, both granted October 1, 1996,
for methods of administering and pharmaceutical formulations containing
N-substituted benzamides and/or acid addition salts thereof and for methods of
administering phenothiazines and/or acid addition salts thereof, and of a
granted South African patent and pending European and other foreign applications
corresponding to these two U.S. patents. Further, the Company is the assignee of
a U.S. patent granted July 20, 1999, for a method of testing immune competency,
and of corresponding foreign applications. The Company is also the assignee of a
U.S. patent granted February 1, 2000, for carotenoid-nicotinamide-zinc
compositions and methods of treatment using the same, and of counterpart foreign
applications. In addition, the Company is the assignee of a U.S. patent granted
February 22, 2000, for the use of benzamides and nicotinamides as
anti-inflammatory agents, and of pending counterpart foreign applications. The
Company's pending U.S. applications and foreign and/or international
counterparts cover further methods of treatment and compositions.

Moreover, the Company is the exclusive licensee of a U.S. patent,
granted January 9, 1996, for a diagnostic test involving measurements related to
the cellular process of DNA repair and drug resistance, and is the exclusive
licensee of corresponding granted Canadian and European patents and a
corresponding pending Japanese patent application. The owner of the licensed
patents and application is Preventive Medicine Institute, a New York
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York.

The Company is also the exclusive licensee of five U.S. patents, one
pending international application, and of granted patents and/or pending
applications in other countries corresponding to three of the granted

12

U.S. patents relating to combretastatins. The owner of record of the licensed
patents and applications is the Arizona Board of Regents, a body corporate of
the State of Arizona, acting for and on behalf of Arizona State University.

Trade Secrets and Technological Know-How. While the Company generally
has and will continue to pursue a policy of seeking patent protection to
preserve its proprietary technology, it also has and will continue to rely on
trade secrets, unpatented proprietary information and continuing technological
innovation to develop and maintain its competitive position. There can be no
assurance, however, that others will not independently develop substantially
equivalent proprietary information and technology or otherwise gain access to
such or equivalent trade secrets, proprietary information or technology or that
OXiGENE can meaningfully protect its rights to such secrets, proprietary
information and technology.

OXiGENE generally requires its employees and Scientific Advisory Board
members to enter into confidentiality agreements with the Company. Those
agreements provide that all confidential information developed or made known to
the individual during the course of the relationship is to be kept confidential
and not to be disclosed to third parties, except in specific circumstances.
There can be no assurance, however, that any such agreement will provide
meaningful protection for the Company's trade secrets, proprietary information
or technology in the event of unauthorized use or disclosure of such
information. Moreover, although the Company has confidentiality agreements with
the institutions (other than the University of Lund) that perform its research,
development, preclinical tests and clinical trials, the Company has no such
agreements with the employees of such institutions, and there can be no
assurance that these employees will abide by the terms of such agreements.

EMPLOYEES

The Company's policy has been, and continues to be, to maintain a
relatively small number of executives and other employees and to rely as much as
possible on consultants and independent contractors for its research,
development, preclinical tests and clinical trials. As of March 27, 2000, the
Company had 11 full-time employees, of which 8 were engaged in research and
development and monitoring of clinical trials. Most of the Company's preclinical
tests and clinical trials are subcontracted and performed at the University of
Lund, Sweden, and at other European centers, with the assistance primarily of
ILEX Oncology Inc., a contract research organization in San Antonio, Texas. The
Company plans to expand its activities in drug development, regulatory and other
areas in the U.S., and therefore expects to increase the number of employees in
its Boston office.

SCIENTIFIC ADVISORY BOARD AND CLINICAL TRIAL ADVISORY BOARD

In November 1998, the Company determined to restructure its Scientific
Advisory Board, bifurcating its functions into two components: scientific
research and development and clinical trial planning and evaluation. A
newly-created Clinical Trial Advisory Board will assess and evaluate the
Company's clinical trial program. The restructured Scientific Advisory Board
will continue to discuss and evaluate the Company's research and development
projects. Members of both the Scientific Advisory Board and the Clinical Trial
Advisory Board will be independent of the Company and will have no involvement
with the Company other than serving on such board.

Some members of the Scientific Advisory Board and the Clinical Trial
Advisory Board receive cash compensation. Others have from time to time
received, and are expected to continue to receive, options to purchase shares of
Common Stock of the Company. All members are reimbursed for reasonable
out-of-pocket expenses.

The composition of the Scientific Advisory Board has not yet been
determined, except that it will continue to operate under the Chairmanship of
Professor Hans Wigzell.

HANS WIGZELL, M.D., PH.D., is Professor of Immunology at the
Karolinska Institute, Stockholm, Sweden, a well-known medical research institute
in Europe. Professor Wigzell is the chairman of OXiGENE's Scientific Advisory
Board and also serves as an advisor to the Company's Board of Directors. He has
for many years been a member of the Nobel committee for the prize in medicine,
of which he also has served as chairman. Professor Wigzell is currently a member
of the editorial board of several international medical journals and has
published more than 400 articles in the areas of tumor biology, immunology, cell
biology and infectious diseases.

13

The members of the Company's Clinical Trial Advisory Board are:

HAKAN MELLSTEDT, M.D. PH.D. is Professor of Experimental Oncology at
Uppsala University, Uppsala, Sweden, and Administrative Director of Cancer
Center Karolinska, Karolinska Institute, Stockholm, Sweden. He holds a position
as Chief Physician at the Department of Oncology, Academic Hospital, Uppsala,
and has specialist certificates in Oncology, Hematology and Internal Medicine.
He is the Chairman of the Swedish Society of Oncology. Professor Mellstedt is
currently a member of the Editorial Board of several international scientific
journals and has published more than 350 articles in the areas of hematology,
medical oncology, tumor immunology and the development of
immunotherapeutics/biotherapeutics in hematological malignancies as well as in
solid tumors. Professor Mellstedt is the Chairman of OXiGENE's Clinical Trial
Advisory Board.

MARGARET A. TEMPERO, M.D. is Professor of Medicine at the Department
of Internal Medicine of the University of Nebraska Medical Center ("UNMC") and
Deputy Director of UNMC's Eppley Cancer Center. Professor Tempero is the
Principal Investigator for a number of studies in the areas of pancreatic cancer
and colon cancer. Professor Tempero currently serves on the Board of Directors
of the American Society of Clinical Oncology. She is the associate editor of
Cancer Research and serves on the editorial board of the Journal of Clinical
Oncology.

JAN B. VERMORKEN, M.D., PH.D. is Professor of Oncology and head of the
Department of Medical Oncology of the University Hospital of the University of
Antwerp, Belgium. Professor Vermorken has held numerous functions with the Dutch
Cancer Society and the European Organization for Research on Treatment of Cancer
(EORTC), and currently is a member of EORTC's Early Clinical Studies Group and
the Subcommittee for Chemotherapy of EORTC's Head and Neck Cancer Cooperative
Group. Professor Vermorken has lectured extensively in the area of gynecological
oncology and currently serves of the Editorial Board of the International
Journal of Gynecological Oncology.

LEE S. ROSEN, M.D. is Adjunct Assistant Professor at UCLA's Department
of Medicine, Division of Hematology-Oncology and is a Director of UCLA's Cancer
Therapy Development Program. In 1995, Dr. Rosen received the Merit Award of the
American Association of Cancer Research and in 1996, Dr. Rosen was the recipient
of the Fellow Merit Award of the American Society of Clinical Oncology.

COMPETITION

The industry in which the Company is engaged is characterized by
rapidly evolving technology and intense competition. The Company's competitors
include, among others, major pharmaceutical and biotechnology companies, many of
which have financial, technical and marketing resources significantly greater
than those of the Company. In addition, many of the small companies that compete
with the Company have also formed collaborative relationships with large,
established companies to support research, development, clinical trials and
commercialization of products that may be competitive with those of the Company.
Academic institutions, governmental agencies and other public and private
research organizations are also conducting research activities and seeking
patent protection and may commercialize products on their own or through joint
ventures or other collaborations.

The Company is aware of a number of companies engaged in the research,
development and testing of new cancer therapies or ways of increasing the
effectiveness of existing therapies. Such companies include, among others,
Agouron Pharmaceuticals, Inc., Ciba-Geigy Ltd., Eli Lilly and Company, Glaxo
Wellcome PLC, Johnson & Johnson, Matrix Pharmaceuticals, Inc., NeoPharm, Inc.,
Pharmacyclics, Inc., Pierre Fabre S.A. and U.S. Bioscience Inc., some of whose
products have already received, or are in the process of receiving, regulatory
approval or are in later stages of clinical trials.

The Company is aware that Techniclone, Inc. is working on tumor
vascular targeting agent technology. The Company believes Techniclone's
technology differs significantly from the Company's Combretastatin technology
because it is based on antibody technology. The Company has signed a letter of
intent with Techniclone to collaborate in developing vascular targeting agents;
however, there can be no assurance that a definitive agreement will be reached.
See "--Research and Development and Collaborative Arrangements." In addition,
the Company knows of a number of companies that are in the process of developing
and testing compounds

14

that affect angiogenesis (the formation on new blood vessels), including Agouron
Pharmaceuticals, Inc., British Biotech Plc., EntreMed, Inc. and Collagenex, Inc.

The Company is also aware of companies engaged in the research,
development and testing of diagnostic assays for cancer, including Introgen
Therapeutics, Inc., AntiCancer Inc., Transgene S.A. and Medarex Inc. There are
other companies that have developed, or are in the process of developing,
technologies that are, or in the future may be, the basis for competitive
products in the field of cancer therapy or other products the Company intends to
develop. Some of those products may have an entirely different approach or means
of accomplishing the same desired effects as the products being developed by the
Company, such as gene transfer therapy, immunotherapy and photodynamic therapy.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective, safer or more
affordable than those being developed by the Company.

The Company expects that if any of its products gain regulatory
approval for sale they will compete primarily on the basis of product efficacy,
safety, patient convenience, reliability, price and patent position. The
Company's competitive position also will depend on its ability to attract and
retain qualified scientific and other personnel, develop effective proprietary
products and implement joint ventures or other alliances with large
pharmaceutical companies in order to jointly market and manufacture its
products.

RISK FACTORS

History of Losses and Anticipated Future Financial Results;
Uncertainty of Future Profitability. The Company has experienced net losses
every year since its inception and, as of December 31, 1999, had an accumulated
deficit of approximately $47.4 million. The Company anticipates incurring
substantial additional losses over at least the next several years due to, among
other factors, the need to expend substantial amounts on its continuing clinical
trials and anticipated research and development activities and the general and
administrative expenses associated with those activities. The Company has not
commercially introduced any product and its products are in varying stages of
development and testing. The Company's ability to attain profitability will
depend upon its ability to develop products that are effective and commercially
viable, to obtain regulatory approval for the manufacture and sale of its
products and to license or otherwise market its products successfully. There can
be no assurance that the Company will ever achieve profitability or that
profitability, if achieved, can be sustained on an ongoing basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Early Stage of Product Development; Uncertainties of Clinical Trials;
Unproven Safety and Efficacy. OXiGENE's products are in an early stage of
development. In order to achieve profitable operations on a continuing basis,
the Company, alone or in collaboration with others, must successfully develop,
manufacture, introduce and market its products. The time frame necessary to
achieve market success for any individual product is long and uncertain. See
"--Product Development and Regulatory Processes." The products currently under
development by the Company will require significant additional research and
development and extensive preclinical and clinical testing prior to application
for commercial use. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical trials,
even after showing promising results in earlier studies or trials. Although the
Company has obtained favorable results to date in preclinical studies and
clinical trials of certain of its products, such results may not be indicative
of results that will ultimately be obtained in or throughout such clinical
trials, and there can be no assurance that clinical testing will show any of the
Company's products to be safe or efficacious. Additionally, the Company has
encountered problems in its clinical trials and may in the future experience
further problems that may cause it to delay, suspend or terminate those clinical
trials. There can also be no assurance that the Company's research or product
development efforts or those of its collaborative partners will be successfully
completed, that any compounds currently under development by the Company will be
successfully developed into drugs, or that any products will receive regulatory
approval on a timely basis, if at all. If any such problems occur, the Company
could be materially and adversely affected.

Need for Additional Funds; Uncertainty of Future Funding. The
Company's operations to date have consumed substantial amounts of cash. Negative
cash flow from the Company's operations is expected to continue and even to
accelerate over at least the next several years. The Company's capital
requirements will depend on numerous factors, including: the progress of
preclinical testing and clinical trials; the progress of the Company's research
and development programs; the time and costs required to obtain regulatory
approvals; the resources devoted

15

to manufacturing methods and advanced technologies; the ability to obtain
licensing arrangements; the cost of filing, prosecuting and, if necessary,
enforcing patent claims; the cost of commercialization activities and
arrangements; and the demand for the Company's products if and when approved.
The Company will have to raise substantial additional funds to complete
development of any product or bring products to market. Issuance of additional
equity securities by the Company, for these or other purposes, could result in
dilution to then existing stockholders. There can be no assurance that
additional financing will be available on acceptable terms, if at all. If
adequate funds are not available on acceptable terms, the Company may be
required to delay, scale back or eliminate one or more of its product
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies or products that the Company would not otherwise relinquish,
which may have a material adverse effect on the Company.

Dependence on Others for Clinical Development and Manufacturing and
Marketing. The Company has limited experience in drug development, the
regulatory approval process, manufacturing and marketing. Other than Dr. Ronald
W. Pero, Ph.D., the Company's Chief Scientific Officer, the Company does not
directly employ any scientists or other laboratory personnel and all of its
preclinical tests and clinical trials are subcontracted to and performed at the
University of Lund, Sweden and at other centers in Europe and the United States,
with the assistance of research and consulting firms. Accordingly, OXiGENE has
depended, and in the future is likely to continue to depend, on others for
assistance in many areas, including research, conducting preclinical testing and
clinical trials, the regulatory approval process, manufacturing and marketing.
Although the Company considers its relations with existing collaborative
partners to be satisfactory, most of its current arrangements are short term in
nature. Funding requirements, competitive factors or prioritization of other
opportunities may lead the Company to seek additional arrangements with third
parties. While OXiGENE is likely to continue to explore other licensing and
development opportunities for its technologies with other companies, there can
be no assurance that the Company will be successful in establishing new, or
maintaining new or existing, collaborative agreements or licensing arrangements;
that any collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that any current or future licensees will be successful in commercializing
products. Finally, if the Company's collaboration arrangements are terminated
prior to their expiration or if the other parties to such arrangements fail to
adequately perform, there can be no assurance that submission of product
candidates for regulatory approval will not be delayed. See "--Research and
Development and Collaborative Arrangements."

Clinical Trials; Government Regulation and Health Care Reform; Managed
Care. The Company's research and development activities, preclinical testing and
clinical trials, and the manufacturing and marketing of its products are subject
to extensive regulation by numerous governmental authorities in the United
States and other countries. See "-- Product Development and Regulatory
Processes." Preclinical testing and clinical trials and manufacturing and
marketing of OXiGENE's products are and will continue to be subject to the
rigorous testing and approval processes of the FDA, the Swedish Medical Products
Agency and other corresponding foreign regulatory authorities. Clinical testing
and the regulatory process generally take many years and require the expenditure
of substantial resources. In addition, delays or rejections may be encountered
during the period of product development, clinical testing and FDA regulatory
review of each submitted application. Similar delays may also be encountered in
foreign countries. There can be no assurance that, even after such time and
expenditures, regulatory approval will be obtained for any products developed by
OXiGENE or that a product, if approved in one country, will be approved in other
countries. See "--Product Development and Regulatory Processes." Moreover, if
regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which that product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
(such as previously undiscovered side effects) with a product, manufacturer or
facility may result in restrictions on such product, manufacturer or facility,
including a possible withdrawal of the product from the market. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions, injunctions and criminal prosecution. Additionally, further
government regulation may be established which could prevent or delay regulatory
approval of the Company's products. Further, the U.S. Congress continues to
debate various health care reform proposals which, if adopted, may have a
material adverse effect on the Company. Moreover, continued cost control
initiatives by health care

16

maintenance organizations and similar programs may affect the financial ability
and willingness of patients and their health care providers to utilize certain
therapies.

Competition and Risk of Technological Obsolescence. The Company is
engaged in a rapidly evolving field. Competition from other pharmaceutical
companies, biotechnology companies and research and academic institutions is
intense and expected to increase. Many of those companies and institutions have
substantially greater financial, technical and human resources than the Company.
Those companies and institutions also have substantially greater experience in
developing products, in conducting clinical trials, in obtaining regulatory
approval and in manufacturing and marketing pharmaceutical products.
Accordingly, competitors may succeed in obtaining regulatory approval for their
products more rapidly than the Company. The Company also competes with
universities and other research institutions in the development of products,
technologies and processes. Competitors have developed or are in the process of
developing technologies that are, or in the future may be, the basis for
competitive products. Some of those products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company. See "--Competition." There can be no assurance
that the Company's competitors will not succeed in developing technologies and
products that are more effective and/or cost competitive than those being
developed by the Company or that would render the Company's technology and
products less competitive or even obsolete. In addition, one or more of the
Company's competitors may achieve product commercialization or patent protection
earlier than the Company, which could materially adversely affect the Company.

Dependence on Patents and Proprietary Technology. To date, OXiGENE's
principal products have been based on certain previously known compounds. The
Company anticipates that products it develops hereafter may include or be based
on the same or other compounds owned or produced by unaffiliated parties, as
well as synthetic compounds it may discover. Although the Company expects to
seek patent protection for any compounds it discovers and/or for any specific
uses it discovers for new or previously known compounds, there is no assurance
that any or all of them will be subject to effective patent protection. Further,
the development of regimens for the administration of pharmaceuticals, which
generally involve specifications for the frequency, timing and amount of
dosages, has been, and the Company believes may continue to be, important to the
Company's efforts, although those processes, as such, may not be patentable.

The Company's success will depend, in part, on its ability to obtain
patents, protect its trade secrets and operate without infringing on the
proprietary rights of others. As of March 27, 2000, the Company is the assignee
of seven granted U.S. patents, two allowed and three pending U.S. patent
applications, and of granted patents and/or pending applications in other
countries (and/or international applications designating other countries)
corresponding to six of the granted U.S. patents and all of the allowed and
pending U.S. applications. The patent position of pharmaceutical and
biotechnology firms like OXiGENE generally is highly uncertain and involves
complex legal and factual questions, resulting in both an apparent inconsistency
regarding the breadth of claims allowed in U.S. patents and general uncertainty
as to their legal interpretation and enforceability. Accordingly, there can be
no assurance that the Company's patent applications will result in patents being
issued, that any issued patents will provide the Company with competitive
protection or will not be challenged by others, or that the patents of others
will not have an adverse effect on the ability of the Company to do business.
Moreover, since some of the basic research relating to one or more of the
Company's patent applications and/or patents was performed at various
universities and/or funded by grants, particularly in Sweden, there can be no
assurance that one or more universities, employees of such universities and/or
grantors will not assert that they have certain rights in such research and any
resulting products, although the Company is not aware of any such assertions or
any basis therefor. Furthermore, there can be no assurance that others will not
independently develop similar products, will not duplicate any of the Company's
products or, if patents are issued to the Company, will not design around such
patents. In addition, the Company may be required to obtain licenses to patents
or other proprietary rights of others. No assurance can be given that any
licenses required under any such patents or proprietary rights would be made
available on terms acceptable to the Company, if at all. If the Company does not
obtain such licenses, it could encounter delays in product market introductions
while it attempts to design around such patents, or could find that the
development, manufacture or sale of products requiring such licenses is
foreclosed. In addition, the Company could incur substantial costs in defending
itself in suits brought against it or in connection with patents to which it
holds a license or in bringing suit to protect the Company's own patents against
infringement. The Company generally requires employees, Scientific Advisory
Board members and the institutions that perform its preclinical and clinical
tests (though not the employees of such institutions) to enter into
confidentiality agreements with the Company. Those

17

agreements provide that all confidential information developed or made known to
the individual during the course of the relationship with the Company is to be
kept confidential and not to be disclosed to third parties, except in specific
circumstances. There can be no assurance, however, that any such agreement will
provide meaningful protection for the Company's trade secrets or other
confidential information in the event of unauthorized use or disclosure of such
information. See "--Patents and Trade Secrets."

Dependence on Certain Officers and Directors and Others. The Company
believes that its success is, and will likely continue to be, materially
dependent upon its ability to retain the services of certain of its current
officers and directors, particularly Dr. Bjorn Nordenvall, its Chief Executive
Officer, and Dr. Ronald Pero, its Chief Scientific Officer. The loss of the
services of any of these individuals could have a material adverse effect on the
Company. In addition, the Company has established relationships with
universities, hospitals and research institutions, particularly the University
of Lund, Lund, Sweden, which have historically provided, and continue to
provide, the Company with access to research laboratories, clinical trials,
facilities and patients. Dr. Pero is a Professor of Molecular Ecogenetics at the
University of Lund. The Company benefits indirectly from certain research grants
received by Dr. Pero. The Company is materially dependent on the research and
development efforts of Dr. Pero and his various relationships and affiliations,
the loss of which could have a material adverse effect on the Company's
business. Additionally, the Company believes that it may, at any time and from
time to time, be materially dependent on the services of consultants and other
unaffiliated third parties.

Product Liability Exposure; Limited Insurance Coverage. The use of the
Company's products in clinical trials and for commercial applications, if any,
may expose the Company to liability claims, in the event such products cause
injury, disease or result in adverse effects. These claims could be made
directly by health care institutions, contract laboratories, patients or others
using such products. Although the Company has obtained liability insurance
coverage for its ongoing clinical trials, and there can be no assurance that
such coverage will be in amounts sufficient to protect the Company against
claims or recalls that could have a material adverse effect on the financial
condition and prospects of the Company. Further, adverse product and similar
liability claims could negatively impact the Company's ability to obtain or
maintain regulatory approvals for its technology and products.

Price Volatility of the Common Stock. The market price of the Common
Stock has been, and likely will continue to be, highly volatile as frequently is
the case with the publicly-traded securities of pharmaceutical research and
development companies. See "Market For Registrant's Common Equity and Related
Stockholder Matters." Factors such as results of clinical trials, announcements
of research developments and results by the Company or its competitors and
government regulatory action affecting the Company's products in both the United
States and foreign countries have had, and may continue to have, a significant
effect on the Company's business and on the market price of the Common Stock. As
of December 31, 1999, an aggregate of 45,612 stock appreciation rights ("SARs"),
with a weighted average exercise price of $7.26 per SAR, had been granted to
certain clinical investigators and consultants. The Company is not required to
make any cash payments upon exercise of any such SAR. If and when the spread
between the market price of the Company's Common Stock and the exercise price of
the SARs changes, the charge for financial reporting purposes to research and
development will be adjusted to reflect an increase or decrease, as the case may
be, in the market price of the Company's Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition, substantially all of the shares of Common Stock issuable upon exercise
of outstanding options, SARs and warrants have been registered and may be sold
from time to time hereafter. Such sales, as well as future sales of Common Stock
by existing stockholders, or the perception that sales could occur, could
adversely affect the market price of the Common Stock. The price and liquidity
of the Common Stock may also be significantly affected by trading activity and
market factors related to the Nasdaq and Stockholm Stock Exchange markets, which
factors and the effects thereof may differ between those markets.

No Dividends. The Company has not declared or paid dividends on its
Common Stock since its inception and does not intend to declare or pay any
dividends to its stockholders in the foreseeable future. See "Market For
Registrant's Common Equity and Related Stockholder Matters."

18

GLOSSARY OF SCIENTIFIC TERMS

Apoptosis A natural programmed cell death not involving cell
replication

Chemotherapy Drugs that control cancer growth

Cisplatin A chemotherapeutic compound

Control group A group of patients involved in a clinical trial who
are receiving placebos

Cytotoxic Tumor-killing agent

DNA Chemical building blocks of genetic material

Double-blind study A study in which neither the investigators assessing
the outcome of the trial nor the patients know whether
the patient is receiving the drug being investigated
or merely a placebo. The outcome can only be determined
when the results are decoded

Enzyme A protein that carries out a metabolic function by
converting one substance to another

Genetic blueprint The code that tells cells what to do and how to
function

Immune deficiencies Suppression of the cells that fight disease within
the body

IND An "Investigational New Drug" application filed with the
U.S. Food and Drug Administration that permits the
administration of compounds to humans in clinical trials

Malignant cell Cancer cell

Metabolic function Living process of growth and reproduction

NDA A "New Drug Application" filed with the U.S. Food and
Drug Administration, which, if approved, allows a drug
to be marketed in the U.S.

Necrosis Cell death by decomposition after replication

N-substituted benzamide Class of drugs believed by OXiGENE to sensitize
radiation and chemotherapy

Nucleotides A class of nucleic acid compounds from which genes
are constructed

Oxidative stress Undesired natural metabolism of oxygen-derived
molecules by the body that can induce DNA damage

PARP Poly (ADP Ribose) Polymerase--an enzyme involved in
the DNA repair process. Also known as Adenosine
Diphosphate Ribosyl Transferase or ADPRT

Placebo A non-active substance given to a control group of
patients in a clinical trial to duplicate the treatment
method, but without the administration of the active
drug under investigation

Radiation Physical energy that splits molecules and induces DNA
damage

2. PROPERTIES

19

The Company's executive offices are located in Boston, Massachusetts.
The Boston office lease has a current annual rent of approximately $63,000 and
expires on April 30, 2002, but may be terminated at any time by the Company upon
six months' written notice and payment of a cancellation fee. On February 28,
2000, the Company signed a lease for a new office at the Arsenal on the Charles,
in Watertown, Massachusetts. The initial term of the lease is ten years and
three months, with a yearly lease of approximately $294,410 for the first five
years, and a lease of approximately $324,350 for the following five years.
Payments under the Watertown lease are scheduled to begin three months after the
date on which OXiGENE takes possession, which the company currently estimates to
be in June 2000. OXiGENE is currently in negotiations to sublease its Boston
office to a third party. In connection with the listing of its Common Stock on
the Stockholm Stock Exchange, the Company opened an executive office in
Stockholm, Sweden. The Stockholm office is leased at an annual rate of
approximately $41,000, and the lease expires on September 30, 2000. The Company
does not own or lease any laboratories or other research and development
facilities.

3. LEGAL PROCEEDINGS

There are no material suits or claims pending or, to the best of the
Company's knowledge, threatened against the Company.

4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to the vote of security holders of the Company
during the fourth quarter of the year ended December 31, 1999.

PART II

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

Effective November 19, 1996, the Company's Common Stock and Warrants
commenced trading on the Nasdaq National Market under the symbols "OXGN" and
"OXGNW," respectively. Prior thereto, since the completion of the Company's
initial public offering in August 1993, the Company's securities had been listed
for quotation on the Nasdaq Small-Cap Market. The Company's shares of Common
Stock are also traded on the Stockholm Stock Exchange in Sweden. The following
table sets forth the high and low per share and per warrant prices for the
Company's Common Stock and Warrants for each quarterly period within the two
most recent fiscal years.

20

COMMON STOCK WARRANTS
------------ --------

CALENDAR YEAR HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---

1998

First Quarter $18.75 $14.63 $ 9.00 $ 5.00
Second Quarter 18.00 9.75 6.63 2.38
Third Quarter 12.88 5.88 3.25 1.03
Fourth Quarter 11.31 4.63 3.50 1.00

1999

First Quarter $11.6875 $7.4375 $ 4.5000 $ 1.8750
Second Quarter 11.1250 7.8125 2.8750 1.1875
Third Quarter 11.0000 8.3125 2.4375 1.1250
Fourth Quarter 20.1250 12.3125 6.7500 1.59375

As of March 27, 2000, there were 59 holders of record of the Company's
Common Stock. As of December 22, 1999, the Company redeemed its outstanding
publicly traded Warrants, and currently no such Warrants are outstanding. The
Company believes, based on the number of proxy statements and related materials
distributed in connection with its 1999 Annual Meeting of Stockholders, that
there are approximately 4,000 beneficial owners of its Common Stock.

The Company has not declared any cash dividends on its Common Stock
since its inception in 1988, and does not intend to pay cash dividends in the
foreseeable future. The Company presently intends to retain future earnings, if
any, to finance the growth and development of its business.

21

6. SELECTED FINANCIAL DATA

SUMMARY FINANCIAL INFORMATION
OXIGENE, INC.

(A DEVELOPMENT STAGE COMPANY)

Year ended December 31,
--------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
--------------------------------------------------------------------------------------------

STATEMENT OF OPERATIONS DATA:

Revenues:
Licensing revenue $ - $ - $ - $ - $ 1,271,918
Interest income 420,949 684,039 2,217,467 1,997,991 1,340,738
--------------------------------------------------------------------------------------------
Total revenues 420,949 684,039 2,217,467 1,997,991 2,612,656

Expenses:
Costs related to licensing
revenue - - - - 1,250,000
Amortization of license
agreement - - - - 40,639
Research and development 2,843,593 4,822,834 7,281,504 10,358,913 8,397,799
General and administrative 1,295,191 1,819,638 3,046,484 3,135,871 3,336,463
Interest - - - - 36,620
--------------------------------------------------------------------------------------------
Total operating expenses 4,138,784 6,642,472 10,327,988 13,494,784 13,061,521
--------------------------------------------------------------------------------------------

Net loss $ (3,717,835) $ (5,958,433) $(8,110,521) $ (11,496,793) $ (10,448,865)
============================================================================================

Net loss per common share-basic
and dilutive $ (0.63) $ (0.80) $ (0.83) $ (1.13) $ (1.02)

Weighted average number of
common shares outstanding
(in thousands) 5,876 7,440 9,770 10,201 10,274

As of December 31,
1995 1996 1997 1998 1999
--------------------------------------------------------------------------------------------

BALANCE SHEET DATA:

Cash and cash equivalents $ 10,406,605 $ 40,517,182 $ 40,136,662 $ 31,756,534 $ 30,447,803
Securities available for sale 502,020 - - - -
Working capital 10,510,024 40,418,846 39,889,394 29,907,659 38,386,299
Total assets 11,227,251 41,168,759 41,152,357 33,018,825 42,659,727
Total liabilities 670,077 650,001 951,088 2,827,011 11,557,021
Accumulated deficit (11,399,874) (17,358,307) (25,468,828) (36,965,621) (47,414,486)
Total stockholders' equity 10,557,174 40,518,758 40,201,269 30,191,814 31,102,706

22

7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

OXiGENE has devoted substantially all of its efforts and resources to
research and development conducted on its own behalf and through strategic
collaborations with clinical institutions and other organizations, particularly
the University of Lund in Lund, Sweden. Consequently, OXiGENE believes that its
research and development expenditures have been somewhat lower than those of
other comparable development-stage companies.

On December 15, 1999, the Company entered into a Research
Collaboration and License Agreement with Bristol-Myers Squibb Company ("BMS"),
to sub-license the rights to certain patent rights and other know-how and
technology to which the Company had an exclusive license (the "Sub-License
Agreement"). Pursuant to the terms of the Sub-License Agreement, BMS will pay a
non-refundable license fee, reimburse certain expenses incurred by the Company
and fund future research to be performed by the Company based on a research
program determined by a joint development committee. In addition, BMS will pay
additional amounts upon certain milestones being reached and royalties on future
net sales of products.

OXiGENE has generated a cumulative net loss of approximately $47.4
million for the period from its inception through December 31, 1999.

OXiGENE expects to incur significant additional operating losses over
at least the next several years, principally as a result of its continuing
clinical trials and anticipated research and development expenditures. The
principal source of OXiGENE's working capital has been the proceeds of private
and public equity financings and, prior to entering into the Sub-License
Agreement, the Company had no material amount of licensing or other fee income.

RESULTS OF OPERATIONS

Year ended December 31, 1999, compared to year ended December 31, 1998.

During the year ended December 31, 1999, the Company recognized
approximately $1.3 million of licensing revenue pursuant to the Sub-license
agreement and approximately $1.3 million of interest income. During the year
ended December 31, 1998, the Company had no licensing revenues and approximately
$2.0 million of interest income. The Company's total operating expenses for the
year ended December 31, 1999, decreased to approximately $13.1 million from
approximately $13.5 for the comparable 1998 period. Research and development
expenses for those years were approximately $8.4 million and $10.4 million,
respectively. Approximately $1.3 million of research and development expenses in
1999 were recoverable under the Sub-license Agreement and, accordingly, has been
classified as costs relating to licensing revenue and is not included in
research and development expenses. The remaining decrease is attributed to the
discontinuation of the Neu-Sensamide project. Generally, the Company makes
payments to its clinical investigators if and when certain pre-determined
milestones in its clinical trials are reached, rather than on a fixed quarterly
or monthly basis. As a result, research and development expenses may fluctuate
from year to year. General and administrative expenses for the year ended
December 31, 1999, increased to approximately $3.3 million from approximately
$3.1 million for the comparable 1998 period. In an effort to preserve cash and
reduce cash flow requirements, the Company's policy has been to minimize the
number of employees and to use outside consultants to the extent practicable.
OXiGENE expects that its clinical trial expenses will increase as it expands its
clinical trial program, and initiates research and clinical trials on its new
compounds.

Year ended December 31, 1998, compared to year ended December 31, 1997.

During the years ended December 31, 1998 and 1997, the Company had no
revenues, except for approximately $2.0 million and $2.2 million of interest
income, respectively. The Company's total operating expenses for the year ended
December 31, 1998, increased to approximately $13.5 million from approximately
$10.3 million for the comparable 1997 period. Research and development expenses
for those years were approximately $10.4 million and $7.3 million, respectively.
Research and development expenses in 1998 included a charge recorded

23

for financial reporting purposes of approximately $1.3 million related to the
issuance of non-employee stock options and the extension of the terms of certain
stock options. The increase also reflects the planned significant increase in
research and development, clinical trials and other expenses related to the
Company's product development program. General and administrative expenses for
the year ended December 31, 1998 increased to approximately $3.1 million from
approximately $3.0 milliion for the comparable 1997 period.

LIQUIDITY AND CAPITAL RESOURCES

OXiGENE has experienced net losses and negative cash flow from
operations each year since its inception and, as of December 31, 1999, had an
accumulated deficit of approximately $47.4 million. The Company expects to incur
substantial additional expenses, resulting in significant losses, over at least
the next several years due to, among other factors, its continuing clinical
trials and anticipated research and development activities. To date, the Company
has financed operations principally through the net proceeds it has received
from private and public equity financings, and from the exercise of outstanding
options and warrants.

OXiGENE had cash and cash equivalents of approximately $30.4 million
and $31.8 million at December 31, 1999 and 1998, respectively.

OXiGENE's policy is to contain its fixed expenditures by maintaining a
relatively small number of employees and relying as much as possible on outside
services for its research, development pre-clinical testing and clinical trials.
Quarterly payments are being made to the University of Lund, Lund, Sweden, for
pre-clinical research and clinical trials. For the years ended December 31,
1999, 1998, and 1997, the amount of such retainer was approximately $1.1
million, $0.6 million and $1.0 million, respectively.

In May 1996, OXiGENE in collaboration with ILEX(TM) Oncology Inc.
("ILEX"), a contract research organization in San Antonio, Texas, regarding a
large-scale work-up of Declopramide in accordance with FDA current U.S. Good
Laboratory Practice standards ("cGLP"). During the years ended December 31,
1999, 1998 and 1997, the Company paid ILEX approximately $1.9 million, $2.3
million, and $1.6 million, respectively. The increase in the amounts paid to
ILEX reflects the research and development with respect to Declopramide and
CA4P.

As of December 31, 1999, OXiGENE was committed to pay certain amounts
under a license agreement with a university. The present value of the amount
payable was approximately $1.2 million at December 31, 1999. OXiGENE had no
other long-term debt or loans payable.

OXiGENE anticipates that the cash and cash equivalents it had
available at December 31, 1999, and interest income it will earn thereon and
licensing revenues should be sufficient to satisfy the Company's projected cash
requirements for approximately the next 30 months.

However, working capital and capital requirements may vary materially
from those now planned due to numerous factors including, but not limited to,
the progress of pre-clinical testing and clinical trials; progress of the
Company's research and development programs; the time and cost required to
obtain regulatory approvals; the resources the Company devotes to manufacturing
methods and advanced technologies; the ability of the Company to obtain
collaborative or licensing arrangements; the cost of filing, prosecuting and, if
necessary, enforcing patent claims; the cost of commercialization activities and
arrangements; and the demand for its products if and when approved. The Company
anticipates that it might have to seek substantial additional private or public
financing or enter into a collaborative arrangement with one or more third
parties to complete the development of any product or bring products to market.
There can be no assurance that additional financing will be available on
acceptable terms, if at all.

OXiGENE had no material commitments for capital expenditures as of
December 31, 1999.

IMPACT OF YEAR 2000

The Company's internal computer information systems are Year 2000
compliant. These systems consist only of standard software from established and
recognized providers. Any new software purchases will be Year 2000 compliant.

24

The Company has not encountered any significant disruptions to its
computer information systems due to Year 2000 issues. Any future risks related
thereto are therefore primarily dependent upon the computer systems of third
parties. These third parties consist mainly of leading educational institutions
and universities in the United States and Europe, and clinical research
organizations. The Company has reviewed its third party relationships in order
to assess Year 2000 issues and has no reason to believe that these third parties
will encounter any significant systems disruptions.

The costs associated with the Company's Year 2000 compliance have been
nominal, and the Company believes that the remaining costs will be minimal and
will not have a material adverse effect on its financial condition or results of
operations.

7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's cash and cash equivalents are maintained primarily in US
dollar accounts and amounts payable for research and development to research
organizations are contracted in US dollars. Accordingly, the Company's exposure
to foreign currency risk is limited because its transactions are primarily based
in US dollars. The Company does not have any other exposure to market risk. The
Company will develop policies and procedures to manage market risk in the future
as circumstances may require.

8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14 for a list of the OXiGENE Financial Statements and
Schedules and Supplementary Information filed as part of this report.

9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item, insofar as it relates to
directors, is incorporated herein by reference to the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders scheduled
to be held on May 26, 2000. The information regarding executive officers is
included in Part I hereof under the caption "Executive Officers of the Company,"
and is incorporated by reference into this Item 10.

11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 26, 2000.

12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 26, 2000.

25

13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 26, 2000.

26

PART IV

14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents Filed with this Report.

The following documents are filed as part of this report.

1. Financial Statements
--------------------

The financial statements listed in the accompanying List of Financial
Statements covered by Report of Independent Auditors.

2. Financial Statement Schedules
-----------------------------

None.

3. Exhibits
--------

The information called for by this paragraph is contained in the Index
to Exhibits of this report which is incorporated herein by reference.

(b) Reports on Form 8-K.

The registrant filed reports on Form 8-K during the fourth
quarter of the year ended December 31, 1999 on December 8, 1999,
December 20, 1999 and December 28, 1999.

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

OXiGENE, INC.

By:/s/ Bjorn Nordenvall
--------------------
Bjorn Nordenvall
President and Chief Executive
Officer
March 28, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Bjorn Nordenvall President, Chief March 28, 2000
- ------------------------ Executive Officer and
Bjorn Nordenvall Director (principal
executive officer)

/s/ Bo Haglund Chief Financial Officer March 28, 2000
- ------------------------
Bo Haglund

Director March __, 2000
- ------------------------
Marvin H. Caruthers

Director March __, 2000
- ------------------------
Michael Ionata

Director March __, 2000
- ------------------------
Arthur B. Laffer

/s/ Ronald W. Pero Director March 28, 2000
- ------------------------
Ronald W. Pero

/s/ Per-Olof Soderburg Director March 28, 2000
- ------------------------
Per-Olof Soderberg

/s/ Gerald A. Eppner Director March 28, 2000
- ------------------------
Gerald A. Eppner

28

INDEX TO EXHIBITS

EXHIBIT NUMBER DESCRIPTION
- -------------- -----------

3.1 Restated Certificate of Incorporation of the Registrant.*

3.2 By-Laws of the Registrant.*

3.3 Certificates of Amendment of Certificate of Incorporation,
dated June 21, 1995 and November 15, 1996.**

4.1 Representatives' Warrant Agreement (including form of
Representatives' Warrant Certificate), dated August 26,
1993, between the Company and RAS Securities Corp.*

4.2 Warrant Agreement (including form of Warrant Certificate),
dated August 26, 1993, between the Company and America Stock
Transfer & Trust Company.*

10.1 Patent License Agreement dated as of October 7, 1991 between
Preventive Medicine Institute and Bio-Screen, Inc.*

10.2 Amended and Restated Stock Incentive Plan of Registrant
dated as of May 15, 1993.*

10.3 Employment Agreement, dated as of April 4, 1997, between
Registrant and Dr. Ronald W. Pero. ***

10.4 Executive Employment Agreement, dated as of October 9, 1993,
between Registrant and Bjorn Nordenvall, M.D., Ph.D.+

10.5 Consulting Agreement, dated as of October 9, 1995, between
OXiGENE (Europe) AB and B. Omentum Consulting AB. +

10.6 Consulting Agreement, dated as of August 1, 1995, between
Registrant and IPC Nordic A/S. +

10.7 OXiGENE 1996 Stock Incentive Plan, as amended. ++

10.8 Collaborative Research Agreement, dated as of August 1,
1997, between the Registrant and Boston Medical Center
Corporation. ***

10.9 Technology Development Agreement, dated as of May 27, 1997,
between the Registrant and the Arizona Board of Regents,
acting for and on behalf of Arizona State University. ***

10.10 Office Lease, dated February 26, 1997, between Registrant
and Copley Place Associates Nominee Corporation. ***

10.11 Consulting Agreement, dated as of May 1, 1998, between
Registrant and Dr. Claus Moller. ***

10.12 Research Collaboration and License Agreement, dated as of
December 15, 1999, between OXiGENE Europe AB and
Bristol-Myers Squibb Company. +++

29

23.1 Consent of Ernst & Young, LLP.

27.1 Financial Data Schedule.

99.1 U.S. Patent Number 5,204,241, issued April 20, 1994,
registered to Ronald W. Pero, regarding
glutathione-s-transferase Mu as a measure of drug
resistance. ++

99.2 U.S. Patent Number 5,340,565, issued August 23, 1994,
registered to Ronald W. Pero, regarding tumor or cancer cell
killing therapy and agents useful therefor. ++

99.3 U.S. Patent Number 5,482,833, issued January 9, 1996,
registered to Ronald W. Pero and Daniel G. Miller, regarding
a test to determine the predisposition or susceptibility to
DNA-associated diseases. ++

99.4 International Application Published under the Patent
Cooperation Treaty (PCT) Number WO96/14565, published May
17, 1996, registered to Ronald W. Pero, regarding a method
of testing immune competency. ++

-------------------------

* Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (file no. 33-64968) and any
amendments thereto.

** Incorporated by reference to the Registrant's Annual Report on
Form 10-K for fiscal year ended December 31, 1996.

*** Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.

+ Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.

++ Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (file no. 333-92747) and any
amendments thereto.

+++ Incorporated by reference to the Registrant's Current Report
on Form 8-K, filed on December 28, 1999.

30

Form 10-K Item 14(a)(1)

OXiGENE, Inc.

LIST OF CONSOLIDATED FINANCIAL STATEMENTS

The following consolidated financial statements of OXiGENE, Inc. are included
in Item 8:

Report of Independent Auditors....................................... F- 2
Consolidated Balance Sheets--December 31, 1998 and 1999.............. F- 3
Consolidated Statements of Operations--Years Ended December 31,
1997, 1998 and 1999................................................ F- 4
Consolidated Statements of Stockholders' Equity--Years Ended
December 31, 1997, 1998, and 1999.................................. F- 5
Consolidated Statements of Cash Flows--Years Ended December 31,
1997, 1998 and 1999................................................ F- 6

Notes to Consolidated Financial Statements........................... F- 7

Schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.

F-1

Report of Independent Auditors

The Board of Directors and Stockholders
OXiGENE, Inc.

We have audited the accompanying consolidated balance sheets of OXiGENE, Inc.
(the "Company") as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OXiGENE, Inc. at
December 31, 1999 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1999
in conformity with accounting principles generally accepted in the United
States.

ERNST & YOUNG LLP

New York, New York
January 12, 2000

F-2

OXiGENE, Inc.

Consolidated Balance Sheets

DECEMBER 31
1998 1999
--------------------------
ASSETS
Current assets:
Cash and cash equivalents $31,756,534 $30,447,803
Accounts receivable--sublicense agreement - 9,250,000
(Note 1)
Prepaid expenses 608,766 338,750
Interest receivable 196,326 207,453
Other 173,044 769,713
--------------------------
Total current assets 32,734,670 41,013,719

Furniture, fixtures and equipment, at cost 372,170 221,826
Accumulated depreciation (167,615) (114,375)
--------------------------
204,555 107,451
License agreements, net of accumulated
amortization of $40,639 (Note 4) - 1,458,957
Deposits 79,600 79,600
--------------------------
Total assets $33,018,825 $42,659,727
==========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Amount payable for license agreement--current $ - $ 224,697
(Note 4)
Accrued expenses:
Research and development expenses 1,830,333 1,130,905
Other accrued expenses 340,901 447,189
Other payables 655,777 824,629
--------------------------
Total current liabilities 2,827,011 2,627,420

Amount payable under license
agreement--non-current (Note 4) - 951,519
Deferred licensing revenue (Note 1) - 7,978,082

Commitments (Note 4)

Stockholders' equity (Note 2):
Common stock, $.01 par value:
Authorized shares--
60,000,000 shares at December 31, 1998
and 1999
Issued and outstanding shares--
10,207,049 shares at December 31, 1998;
11,261,268 shares at December 31, 1999 102,071 112,613
Additional paid-in capital 68,400,726 81,556,261
Accumulated deficit (36,965,621) (47,414,486)
Accumulated other comprehensive income 325,888 472,610
Notes receivable - (2,288,733)
Deferred compensation (1,671,250) (1,335,559)
--------------------------
Total stockholders' equity 30,191,814 31,102,706
--------------------------
Total liabilities and stockholders' equity $33,018,825 $42,659,727
==========================
See accompanying notes.

F-3

OXiGENE, Inc.

Consolidated Statements of Operations

YEAR ENDED DECEMBER 31
1997 1998 1999
--------------------- ---------------------- ---------------------

REVENUES
Licensing revenue (Note 1) $ - $ - $ 1,271,918
Interest income 2,217,467 1,997,991 1,340,738
--------------------- ---------------------- ---------------------
2,217,467 1,997,991 2,612,656
EXPENSES

Costs relating to licensing revenue (Note 1) - - 1,250,000
Amortization of license agreement (Note 1) - - 40,639
Research and development 7,281,504 10,358,913 8,397,799
General and administrative (including related party
transactions of approximately $494,000, $631,000 and
$821,000 in 1997, 1998 and 1999, respectively) (Note 5) 3,046,484 3,135,871 3,336,463

Interest expense - - 36,620
--------------------- ---------------------- ---------------------
Total expenses 10,327,988 13,494,784 13,061,521
--------------------- ---------------------- ---------------------
Net loss $ (8,110,521) $ (11,496,793) $ (10,448,865)
===================== ====================== =====================
Basic and diluted net loss per common share $(.83) $(1.13) $(1.02)

Weighted average number of common shares outstanding 9,770,364 10,200,567 10,273,902

See accompanying notes.

F-4

OXiGENE, Inc.

Consolidated Statements of Stockholders' Equity

COMMON STOCK,
$.01 PAR VALUE ADDITIONAL ACCUMULATED
------------------------------- PAID-IN ACCUMULATED
SHARES AMOUNTS CAPITAL DEFICIT
--------------- --------------- ---------------- -----------------

Balance at December 31, 1996 9,052,343 $ 90,523 $57,673,667 $(17,358,307)
Net loss for 1997 - - - (8,110,521)
Foreign currency translation adjustment for 1997 - - - -
Comprehensive loss - - - -
Issuance of common stock upon exercise of options and
warrants 1,120,378 11,204 7,918,426 -
Issuance of common stock upon exercise of stock
appreciation rights 13,044 131 348,425 -
Accrued stock appreciation rights - - (591,915) -
--------------- --------------- ---------------- -----------------
Balance at December 31, 1997 10,185,765 101,858 65,348,603 (25,468,828)
Net loss for 1998 - - - (11,496,793)
Foreign currency translation adjustment for 1998 - - - -
Comprehensive loss - - - -
Issuance of common stock upon exercise of options and
warrants 21,284 213 125,807 -
Options issued for services - - 3,261,197 -
Accrued stock appreciation rights - - (334,881) -
--------------- --------------- ---------------- -----------------
Balance at December 31, 1998 10,207,049 102,071 68,400,726 (36,965,621)
Net loss for 1999 - - - (10,448,865)
Foreign currency translation adjustment for 1999 - - - -
Comprehensive loss - - - -
Issuance of common stock upon exercise of options and
warrants 1,045,337 10,453 12,511,385 -
Issuance of common stock upon exercise of stock
appreciation rights 987 10 9,490 -
Accrued stock appreciation rights - - 208,360 -
Issuance of common stock for services at $9.50 per share 7,895 79 74,921 -
Options issued for services provided by non-employees - - 351,379 -
--------------- --------------- ---------------- -----------------
Balance at December 31, 1999 11,261,268 $112,613 $81,556,261 $(47,414,486)
=============== =============== ================ =================

OTHER
ACCUMULATED TOTAL
COMPREHENSIVE NOTES DEFERRED STOCKHOLDERS'
INCOME RECEIVABLE COMPENSATION EQUITY
--------------- ----------------- ----------------- -----------------

Balance at December 31, 1996 $112,875 $ - $ - $ 40,518,758
Net loss for 1997 - - - (8,110,521)
Foreign currency translation adjustment for 1997 106,761 - - 106,761
-----------------
Comprehensive loss - - - (8,003,760)
-----------------
Issuance of common stock upon exercise of options and
warrants - - - 7,929,630
Issuance of common stock upon exercise of stock
appreciation rights - - - 348,556
Accrued stock appreciation rights - - - (591,915)
--------------- ----------------- ----------------- -----------------
Balance at December 31, 1997 219,636 - - 40,201,269
Net loss for 1998 (11,496,793)
Foreign currency translation adjustment for 1998 106,252 - - 106,252
-----------------
Comprehensive loss - - - (11,390,541)
-----------------
Issuance of common stock upon exercise of options and
warrants - - - 126,020
Options issued for services - - (1,671,250) 1,589,947
Accrued stock appreciation rights - - - (334,881)
--------------- ----------------- ----------------- -----------------
Balance at December 31, 1998 325,888 - (1,671,250) 30,191,814
Net loss for 1999 - - - (10,448,865)
Foreign currency translation adjustment for 1999 146,722 - - 146,722
-----------------
Comprehensive loss - - - (10,302,143)
-----------------
Issuance of common stock upon exercise of options and
warrants - (2,288,733) - 10,233,105
Issuance of common stock upon exercise of stock
appreciation rights - - - 9,500
Accrued stock appreciation rights - - - 208,360
Issuance of common stock for services at $9.50 per share - - - 75,000
Options issued for services provided by non-employees - - 335,691 687,070
--------------- ----------------- ----------------- -----------------
Balance at December 31, 1999 $472,610 $(2,288,733) $(1,335,559) $ 31,102,706
=============== ================= ================= =================

See accompanying notes.

F-5

OXiGENE, Inc.

Consolidated Statements of Cash Flows

YEAR ENDED DECEMBER 31
1997 1998
-------------------- ----------------------

OPERATING ACTIVITIES
Net loss $ (8,110,521) $ (11,496,793)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 79,244 61,622
Abandonment of furniture, fixtures and equipment - 3,903
Compensation related to issuance of warrants, options and stock
appreciation rights (243,359) 1,255,066
Amortization of licensing revenue - -
Amortization of license agreement - -
Changes in operating assets and liabilities:
Accounts receivable--license agreement - -
Prepaid expenses and other current assets (173,311) (297,037)
Accounts payable, accrued expenses and
other payables 370,986 1,917,412
-------------------- ----------------------
Net cash used in operating activities (8,076,961) (8,555,827)

FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 7,929,630 126,020
-------------------- ----------------------
Net cash provided by financing activities 7,929,630 126,020

INVESTING ACTIVITIES
Amount paid for license agreement - -
Deposits (70,000) -
Purchase of furniture, fixtures and equipment (233,882) (41,349)
-------------------- ----------------------
Net cash used in investing activities (303,882) (41,349)
-------------------- ----------------------

Effect of exchange rate on changes in cash 70,693 91,028
-------------------- ----------------------

Net decrease in cash and cash equivalents (380,520) (8,380,128)
Cash and cash equivalents at beginning of period 40,517,182 40,136,662
-------------------- ----------------------
Cash and cash equivalents at end period $ 40,136,662 $ 31,756,534
==================== ======================
SUPPLEMENTAL DISCLOSURE
Interest paid $ - $ -
==================== ======================

YEAR ENDED DECEMBER 31
1999
----------------------

OPERATING ACTIVITIES
Net loss $ (10,448,865)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 16,274
Abandonment of furniture, fixtures and equipment 97,560
Compensation related to issuance of warrants, options and stock
appreciation rights 979,930
Amortization of licensing revenue (21,918)
Amortization of license agreement 40,639
Changes in operating assets and liabilities:
Accounts receivable--license agreement (1,250,000)
Prepaid expenses and other current assets (352,593)
Accounts payable, accrued expenses and
other payables (372,048)
---------------------
Net cash used in operating activities (11,311,021)

FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 10,233,105
---------------------
Net cash provided by financing activities 10,233,105

INVESTING ACTIVITIES
Amount paid for license agreement (323,380)
Deposits -
Purchase of furniture, fixtures and equipment (21,361)
---------------------
Net cash used in investing activities (344,741)
---------------------

Effect of exchange rate on changes in cash 113,926
---------------------

Net decrease in cash and cash equivalents (1,308,731)
Cash and cash equivalents at beginning of period 31,756,534
---------------------
Cash and cash equivalents at end period $ 30,447,803
=====================
SUPPLEMENTAL DISCLOSURE
Interest paid $ 36,620
=====================

See accompanying notes.

F-6

OXiGENE, Inc.

Notes to Consolidated Financial Statements

December 31, 1999

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

OXiGENE, Inc. (the "Company") is a development stage pharmaceutical company. The
Company was originally incorporated as Oxi-Gene, Inc. in the State of New York
on February 22, 1988 and subsequently recapitalized and incorporated in the
State of Delaware in December 1992.

On December 15, 1999, the Company entered into a Research Collaboration and
License Agreement with a pharmaceutical company, to sub-license the rights to
certain patent rights and other know-how and technology to which the Company had
an exclusive license (the "Sub-license Agreement") (see Note 4). Pursuant to the
terms of the Sublicense Agreement, the pharmaceutical company will pay a
non-refundable license fee, reimburse certain expenses incurred by the Company
and fund future research to be performed by the Company based on a research
program determined by a joint development committee. In addition, the
pharmaceutical company will pay additional amounts upon certain milestones being
reached and royalties on future net sales of products. Accordingly, the Company
which was previously in the development stage ceased being a development stage
company effective December 15, 1999.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of the Company and its
wholly-owned subsidiary in Sweden, OXiGENE (Europe) AB. OXiGENE (Europe) AB
manages and controls the Company's research and development work, and monitors
European clinical trials. All material intercompany balances and transactions
have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

F-7

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The non-refundable fee paid under the sublicense agreement is being recognized
as licensing revenue on pro rata basis over the term the sublicense agreement.
Licensing revenue for the reimbursement of costs is recognized as costs are
incurred.

LICENSE AGREEMENT

The present value of the amount payable under the license agreement (see Note 4)
has been capitalized and is being amortized over the term of the agreement
(approximately 15.5 years).

DEPRECIATION

Furniture, fixtures and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets,
which is principally seven years.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.

At December 31, 1999 and 1998, substantially all of cash and cash equivalents
was deposited in one financial institution.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of the subsidiary are translated at year-end rates and
income and expenses are translated at average exchange rates prevailing during
the year. Translation adjustments arising from differences in exchange rates
from period to period have been reported as other comprehensive income in
stockholders' equity.

F-8

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PATENT AND PATENT APPLICATIONS

The Company has filed applications for patents in connection with technologies
being developed. The patent applications and any patents issued as a result of
these applications are important to the protection of the Company's technologies
that may result from its research and development efforts. The pharmaceutical
industry is highly competitive and patents may be challenged from time to time.
The Company intends to vigorously defend its issued patents and may therefore
incur significant costs in the defense of the patents and related technologies.
Costs associated with the patent and patent applications are expensed as
incurred.

INCOME TAXES

The Company accounts for income taxes based upon the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"). Under SFAS 109, the liability method is used for accounting for income
taxes, and deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.

NET LOSS PER SHARE

Basic and diluted net loss per share was calculated in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, Earnings Per
Share, by dividing the net loss per share by the weighted average number of
shares outstanding. All options and warrants issued by the Company were
antidilutive and, accordingly, excluded from the calculation of weighted average
shares.

STOCK-BASED COMPENSATION

The Company accounts for stock options and stock appreciation rights granted to
employees in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations because the Company believes the
alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"), requires the use of option valuation models that were not developed for
use in valuing stock options. The Company also has issued options to
non-employees for services provided to the Company. Such options have been
accounted for at fair value in accordance with the provisions of SFAS 123.

F-9

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPREHENSIVE INCOME (LOSS)

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"), establishes rules for the reporting and display of
comprehensive income (loss) and its components and requires unrealized gains or
losses on the Company's available-for-sale securities and the foreign currency
translation adjustments to be included in other comprehensive income.
Accumulated other comprehensive income at December 31, 1999 and 1998 consists of
accumulated foreign currency translation adjustments.

RECLASSIFICATION

Certain prior year amounts have been reclassified to conform to the current
year's presentation.

2. STOCKHOLDERS' EQUITY

OPTIONS AND WARRANTS

The following is a summary of the Company's stock option, warrant and stock
appreciation rights activity:

NUMBER OF OPTIONS, WARRANTS AND STOCK APPRECIATION RIGHTS

STOCK
NONQUALIFIED STOCK INCENTIVE APPRECIATION
STOCK OPTIONS OPTIONS RIGHTS STOCK WARRANTS
------------------ ------------------ ------------------ ------------------

Balance at December 31, 1996 1,112,018 128,482 67,000 1,781,846
Granted during 1997 316,120 19,880 - -
Exercised during 1997 (402,166) - (17,388) (718,212)
------------------ ------------------ ------------------ ------------------
Balance at December 31, 1997 1,025,972 148,362 49,612 1,063,634
Granted during 1998 240,594 - - -
Exercised during 1998 (20,000) - - (1,284)
Canceled during 1998 (47,500) (6,000) - (115,800)
Adjustment for options repriced
during 1998 (114,585) (3,049) - -
------------------ ------------------ ------------------ ------------------
Balance at December 31, 1998 1,084,481 139,313 49,612 946,550
Granted during 1999 254,925 - - -
Exercised during 1999 (238,750) (10,831) (4,000) (795,756)
Canceled during 1999 (10,000) - - (150,794)
------------------ ------------------ ------------------ ------------------
Balance at December 31, 1999 1,090,656 128,482 45,612 -
================== ================== ================== ==================

F-10

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

2. STOCKHOLDERS' EQUITY (CONTINUED)

WEIGHTED AVERAGE PRICE OF OPTIONS, WARRANTS AND
STOCK APPRECIATION RIGHTS

STOCK
NONQUALIFIED STOCK INCENTIVE APPRECIATION STOCK
STOCK OPTIONS OPTIONS RIGHTS WARRANTS
------------------ ------------------ ------------------ ------------------

Balance at December 31, 1996 $ 12.75 $ 8.95 $ 7.03 $ 9.60
Granted during 1997 30.75 28.81 - -
Exercised during 1997 6.35 - 6.58 8.28
Balance at December 31, 1997 20.76 11.43 7.26 12.63
Granted during 1998 9.99 - - -
Exercised during 1998 5.44 - - 13.41
Canceled during 1998 28.20 28.81 - 10.92
Balance at December 31, 1998 10.50 9.44 7.26 12.93
Granted during 1999 11.95 - - -
Exercised during 1999 9.08 8.94 7.25 12.83
Canceled during 1999 32.13 - - 13.41
Balance at December 31, 1999 10.95 9.48 7.26 -

OPTIONS, WARRANTS AND STOCK APPRECIATION RIGHTS EXERCISABLE

STOCK
NONQUALIFIED STOCK INCENTIVE APPRECIATION STOCK
STOCK OPTIONS OPTIONS RIGHTS WARRANTS
------------------ ------------------ ------------------ ------------------

December 31, 1996:
Exercisable 824,673 129,494 67,000 1,781,846
Weighted average exercise price $5.53 $7.01 $7.03 $9.60

December 31, 1997:
Exercisable 445,814 129,519 49,612 1,063,634
Weighted average exercise price $10.07 $7.01 $7.26 $12.63

December 31, 1998:
Exercisable 401,846 123,988 49,612 946,550
Weighted average exercise price $8.40 $9.02 $7.26 $12.93

December 31, 1999:
Exercisable 649,535 128,482 45,612 -
Weighted average exercise price $10.22 $9.48 $7.26 $-

F-11

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

2. STOCKHOLDERS' EQUITY (CONTINUED)

OPTIONS, WARRANTS AND STOCK APPRECIATION RIGHTS OUTSTANDING

STOCK
NONQUALIFIED STOCK INCENTIVE APPRECIATION
STOCK OPTIONS OPTIONS RIGHTS
------------------ ------------------ ------------------

December 31, 1999:
Exercise prices ranging from $5.50 per
share to $12.00 per
share:
Outstanding 914,138 115,000 45,612
Weighted average exercise price $8.32 $8.00 $7.26
Weighted average remaining
contractual life 6.9 YEARS 4.0 YEARS 4.4 YEARS
Exercisable 523,017 115,000 45,612
Weighted average exercise price $7.16 $8.00 $7.26
Exercise prices ranging from
$18.13 to $28.81:
Outstanding 176,518 13,482 -
Weighted average exercise price $24.55 $22.13 -
Weighted average remaining
contractual life 4.7 YEARS 6.5 YEARS -
Exercisable 126,518 13,482 -
Weighted average exercise price $22.87 $22.13 $-

STOCK OPTION PLANS

During 1992, the Board of Directors implemented an Stock Incentive Option
Plan (the "Plan"). The Plan, which was amended in 1993, provided for the
grant of options to purchase up to 1,166,900 shares of common stock to any
officer, director and employee of the Company upon the terms and conditions
(including price, exercise date and number of shares) determined by the
Board of Directors or a committee selected by the Board of Directors to
administer the Plan. The Plan provided for the issuance of stock
appreciation rights.

F-12

2. STOCKHOLDERS' EQUITY (CONTINUED)

Under the Plan, the exercise price determined by the Board of Directors or
committee must be at least 100% of the fair market value of the Company's common
stock as of the date of the grant. Upon termination of employment, any granted
option, vested or unvested, shall, to the extent not previously exercised,
terminate except under certain conditions as outlined in the Plan. The options
granted under the Plan are generally exercisable at specific dates over a
ten-year period.

In 1996, the Company's stockholders approved the OXiGENE 1996 Stock Incentive
Plan (the "1996 Plan"). Certain directors, officers and employees of the Company
and its subsidiary and consultants and advisors thereto may be granted options
to purchase shares of common stock of the Company. Under the terms of the 1996
Plan, "incentive stock options" (ISOs) within the meaning of Section 422 of the
Internal Revenue Code, "nonqualified stock options" (NQSOs) and stock
appreciation rights may be granted. A maximum of 1,500,000 shares may be the
subject of ISOs, NQSOs and stock appreciation rights under the 1996 Plan.

In 1998, the Company extended the term of certain options and stock appreciation
rights (see below) issued to employees. Such options and stock appreciation
rights expired in May 1998 and were extended to June 1999. In the fourth quarter
of 1998, the Company recorded compensation expense of approximately $650,000
relating to this extension.

On December 14, 1998, the Company repriced certain options issued to employees,
directors and members of the Scientific Advisory Board. Pursuant to the
revision, the number of options issued to these employees was reduced by 117,634
and the exercise price was reduced to $8.93 per share (market value on December
14, 1998) and $10 per share. However, the term of the options was not revised.

In 1999 and 1998, the Company also recorded stock-based compensation expense of
approximately $687,000 and $939,000, respectively, in connection with other
options issued to non-employees.

STOCK APPRECIATION RIGHTS

From 1993 through 1995, the Board of Directors granted stock appreciation rights
to 77,000 shares at exercise prices ranging from $5.88 to $7.63. Stock
appreciation rights expire ten years from date of grant.

F-13

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

2. STOCKHOLDERS' EQUITY (CONTINUED)

In 1997 and 1999, stock appreciation rights to 17,388 and 4,000 shares were
exercised when the market values of the Company's common stock exceeded the
exercise price of the stock appreciation rights and 13,044 and 987 shares,
respectively, were issued. No stock appreciation rights were exercised in 1998.

The Company records a charge for financial reporting purposes when the market
value of the common stock exceeds the exercise price of the stock appreciation
rights. The charge is adjusted to reflect subsequent changes in market value.
Because stock appreciation rights are satisfied, upon exercise, only by the
distribution of shares of common stock of the Company, the charge related to
unexercised stock appreciation rights is credited to additional paid-in capital.
The market value of the Company's common stock at December 31, 1999 ($15.63) was
greater than the market value at December 31, 1998 ($10.75) and, accordingly,
the charge previously recorded for financial reporting purposes was increased by
approximately $208,000 to reflect the market value of the unexercised stock
appreciation rights at December 31, 1999.

STOCK WARRANTS

During 1993, the Company completed an initial public offering of 1,500,000 units
at $6.00 per unit and an over-allotment issuance of 105,000 units at $6.00 per
unit. Each unit consists of one share of the Company's common stock and one
warrant (the "Public Warrant"). Each warrant was exercisable for one share of
the Company's common stock at a price of $7 per share during the first year of
exercisability. Thereafter, the exercise price increased each year by $2. In
connection with this offering, the Company sold to the Underwriters, for nominal
consideration, 150,000 Warrants (the "Underwriters' Warrants"). The
Underwriters' Warrants were initially exercisable at a price of $9.90 per unit
for a period of four years, commencing August 26, 1994. The shares of common
stock and warrants issuable upon the exercise of the Underwriters' Warrants are
identical to those included in the units offered in the initial public offering
except that the warrants contained in the Underwriters' Warrants were initially
exercisable to purchase one share of common stock at $11.55. In January 1997, to
comply with anti-dilution provisions, the number of shares issuable upon the
exercise of the Public Warrants and Underwriters' Warrants were revised to
1,717,350 and 163,500, respectively.

F-14

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

2. STOCKHOLDERS' EQUITY (CONTINUED)

The exercise prices of such warrants were also revised to $10.35 (subsequently
increased to $12.35 and $14.35 in August 1996 and 1997, respectively) and $8.95
per share, respectively. In addition, the total shares of common stock issuable
upon the exercise of the warrant contained in the Underwriters' Warrants was
increased to 172,500 and the exercise price was revised to $13.69 per share. In
July 1998, the term of the Public Warrants that were due to expire in August
1998 were extended through December 31, 1999. The amended terms of these
warrants include a redemption feature. On December 2, 1999, the Company
announced that it would exercise its right to redeem the Public Warrants if they
were not exercised prior to December 21, 1999 (the required notice period per
the warrant agreement). Public Warrants to purchase 795,756 shares of common
stock were exercised in 1999. There were no Public Warrants and Underwriters'
Warrants outstanding at December 31, 1999.

In addition, the Company has issued warrants to directors and other individuals
of which warrants to purchase 40,000 shares that were outstanding as December
31, 1998 were exercised in 1999.

NOTES RECEIVABLE AND OTHER

The holders of certain stock options exercised such options by the presentation
to the Company of non-recourse promissory notes. Such options could be exercised
only by the presentation of such non-recourse promissory notes. In accordance
with the terms of the promissory notes, the number of shares and the exercise
price payable for the shares were fixed upon the exercise of the options. The
shares vest over periods ranging from 3 to 5 years.

In 1999, the Company issued 7,875 shares as consideration for research and
development services. Such shares were valued at their fair market value which
amounted to approximately $75,000.

COMMON STOCK RESERVED FOR ISSUANCE

As of December 31, 1999, the Company has reserved approximately 1,950,000 shares
of its common stock for issuance in connection with stock options, stock
appreciation rights and warrants.

F-15

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

2. STOCKHOLDERS' EQUITY (CONTINUED)

STOCK-BASED COMPENSATION

Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options and stock appreciation rights under the fair value method of SFAS
123. The fair value for these options and stock appreciation rights was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1997, 1998 and 1999:

ASSUMPTION 1997 1998 1999
- --------------------------------------------------------------------

Risk-free rate 5.5% 4.8% 6.25%
Dividend yield 0.0% 0.0% 0.0%
Volatility factor of the expected
market price of the Company's
common stock .649 .858 .762
Average life 3 years 4 years 4 Years

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options and stock appreciation rights have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options and stock appreciation rights.

For purposes of pro forma disclosures, the estimated fair value of the options
and stock appreciation rights is amortized to expense over the vesting period of
the options and stock appreciation rights. The Company's pro forma information
follows:

1997 1998 1999
---------------------------------------------

Pro forma net loss $(10,500,000) $(13,900,000) $(13,200,000)
Pro forma net loss per
share $(1.07) $(1.36) $(1.29)

The weighted average fair value of options granted during the years ended
December 31, 1997, 1998 and 1999 were $14.47, $7.00 and $7.11, respectively.

F-16

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

3. INCOME TAXES

At December 31, 1999, the Company had net operating loss carryforwards of
approximately $67,800,000 for U.S. and foreign income tax purposes, $39,500,000
expiring for U.S. purposes through 2019. The utilization of approximately
$2,500,000 of such U.S. net operating losses are subject to an annual limitation
pursuant to Section 382 of the Internal Revenue Code of approximately $350,000.

Components of the Company's deferred tax asset at December 31, 1998 and 1999 are
as follows:

1998 1999
-------------------------------

Net operating loss carryforwards $ 19,482,000 $ 22,303,000
Compensatory stock options, warrants
and stock appreciation rights 694,000 1,018,000
-------------------------------
Total deferred tax asset 20,176,000 23,321,000
Valuation allowance (20,176,000) (23,321,000)
-------------------------------
Net deferred tax asset $ - $ -
===============================

The change in valuation allowance amounted to increases of approximately
$7,745,000 and $3,130,000 for the years ended 1997 and 1998, respectively.

4. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases premises in facilities in Boston and Stockholm, Sweden. Rent
expense for the years ended December 31, 1997, 1998 and 1999 was approximately
$185,000, $228,000 and $202,000, respectively.

F-17

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

4. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The minimum annual rent commitments for the above leases are as follows:

2000 $ 94,000
2001 63,000
2002 21,000
-----------
$ 178,000
===========

LICENSE AGREEMENTS

On August 2, 1999, the Company entered into an exclusive license for the
commercial development, use and sale of products or services covered by certain
patent rights owned by a U.S. university (the "License Agreement"). The Company
paid an initial license fee of $200,000 and, is required to pay additional
license fees in ten equal semi-annual installments of $160,000 commencing June
1, 2000. The license agreement and the related obligation have been recorded at
the present value of the amount payable using an effective rate of 8.7%. The
Company also is required to pay royalties on future net sales of products.

The Company has another license agreement to patent rights to a certain product.
The agreement requires the Company to pay royalties, as defined, based on
revenues received by the Company in respect to the specified product. This
license expires in October 2011 and the product has not yet been commercially
developed.

LITIGATION

From time-to-time, the Company may be a party to litigation arising from the
normal course of its business. The Company is and will continue to vigorously
defend the actions and claims against it. In the opinion of management, these
claims are either without merit or, based in part on opinions from legal
counsel, will not have a material adverse effect on the Company's financial
position.

F-18

OXiGENE, Inc.

Notes to Consolidated Financial Statements (continued)

5. RELATED PARTY TRANSACTIONS

The Company has consulting agreements with certain organizations whose principal
stockholders are officers of the Company. Consulting fees paid to such
organizations amounted to approximately $494,000, $330,000 and $482,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.

During 1998 and 1999, the Company incurred approximately $301,000 and $339,000,
respectively, in fees for services provided by a law firm, of which one of the
members of the Board of Directors is a partner.

6. FOREIGN OPERATIONS

Summary financial information for assets, liabilities at December 31, 1997, 1998
and 1999 and expenses and net loss for the years then ended related to foreign
operations are as follows:

DECEMBER 31
1997 1998 1999
-------------------------------------------

Assets $40,264,000 $32,512,000 $21,043,000
Liabilities 728,000 1,600,000 776,000
Expenses 7,899,000 8,654,000 5,871,000
Net loss 7,822,000 8,639,000 5,865,000

Foreign exchange gains for the years ended December 31, 1997, 1998, and 1999
were not significant.

F-19