GENE LOGIC INC, S-3, 2000-01-13

GENE LOGIC INC
S-3, 2000-01-13
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENE LOGIC INC.
(Exact name of Registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
DELAWARE 8731 06-1411336
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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

708 QUINCE ORCHARD ROAD
GAITHERSBURG, MARYLAND 20878
(301) 987-1700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
MICHAEL J. BRENNAN, M.D., PH.D.
CHIEF EXECUTIVE OFFICER
GENE LOGIC INC.
708 QUINCE ORCHARD ROAD
GAITHERSBURG, MARYLAND 20878
(301) 987-1700

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

COPIES TO:

<TABLE>
<S> <C>
D. BRADLEY PECK, ESQ. FRODE JENSEN, ESQ.
CHRISTOPHER J. KEARNS, ESQ. ROBERT J. RAWN, ESQ.
JANE K. ADAMS, ESQ. WINTHROP, STIMSON, PUTNAM & ROBERTS
COOLEY GODWARD LLP FINANCIAL CENTRE
4365 EXECUTIVE DRIVE, SUITE 1100 695 EAST MAIN STREET
SAN DIEGO, CA 92121 STAMFORD, CONNECTICUT 06904-6760
(858) 550-6000 (203) 348-2300
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
---------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE

TITLE OF EACH CLASS AMOUNT PROPOSED PROPOSED AMOUNT OF
OF SECURITIES TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share... 4,025,000 $28.25 $113,706,250 $30,019
</TABLE>

(1) Includes 525,000 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments, if any.

(2) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the amount of the registration fee based on the average of the
high and low prices of the Registrant's Common Stock as reported on the
Nasdaq National Market on January 7, 2000.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JANUARY 13, 2000

PROSPECTUS

3,500,000 SHARES

GENE LOGIC INC.

COMMON STOCK

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

Gene Logic is selling 3,500,000 shares of common stock.

Our shares are listed for trading on the Nasdaq National Market under the
symbol "GLGC." On January 11, 2000, the last reported sale price of our common
stock on the Nasdaq National Market was $29.50 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" STARTING ON PAGE 7.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions......................
Gene Logic's proceeds.......................................
- -----------------------------------------------------------------------------------------
</TABLE>

The underwriters have an option to purchase up to an additional 425,000
shares from us and up to an additional 100,000 shares from certain selling
stockholders to cover over-allotments. The underwriters expect to deliver the
shares to purchasers on or about , 2000.

ING BARINGS
CHASE H&Q
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
------------------------

, 2000
<PAGE> 3

[INSIDE COVER ART]

READS(TM), GeneExpress(TM), BioExpress(TM), ToxExpress(TM), PharmExpress(TM),
and Flow-thru Chip(TM) are trademarks of Gene Logic Inc. GeneChip(R) is a
registered trademark of Affymetrix Inc. Trade names and trademarks of other
companies appearing in this prospectus are the property of their respective
holders.
<PAGE> 4

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our financial statements that
are incorporated by reference in this prospectus, before making an investment
decision. Unless the context requires otherwise, references in this prospectus
to "we," "us" and "our" refer to Gene Logic Inc. and its wholly owned
subsidiary.

GENE LOGIC INC.

Gene Logic has built and is commercializing what we believe to be the
world's most comprehensive survey of gene expression in human and animal
tissues. We market two types of gene expression database products to the global
pharmaceutical, healthcare and life science industries: our custom databases and
related software products, for which we currently have 13 customers, and our new
GeneExpress reference database suite, for which we currently have one customer.
Gene expression, which is the degree to which genes in a cell are switched on or
off, or regulated, is information critical to understanding the functions of
genes. Since genes direct all biological processes, gene expression information
is increasingly recognized by leading pharmaceutical companies as a fundamental
tool for all aspects of biomedical research, particularly drug discovery and
development.

Since 1997, we have developed custom gene expression databases designed for
each of our customers' internal programs and needs and targeted to specific
therapeutic areas of interest, including heart failure, kidney disease,
osteoporosis, psychiatric disorders and other major illnesses. Building on this
know-how, in March 1999 we began developing our GeneExpress database suite of
reference gene expression information. The GeneExpress databases contain
information from a broad range of normal and diseased human tissues, tissues
from experimental animals, human and animal cell lines and tissues that have
been treated with many different drugs. We completed development of the first
commercial version of the GeneExpress database suite in November 1999. We
currently market GeneExpress through nonexclusive subscriptions to customers in
the pharmaceutical, biotechnology and diagnostic industries, and are developing
versions of the database suite to market to the academic and government life
science research community and to physicians and patients. We sold our first
GeneExpress subscription in December 1999.

We generate our gene expression data in our own laboratories from tissues
we collect through our biorepository network using two complementary
technologies -- GeneChip microarrays produced by Affymetrix and our own patented
gene expression technology, Restriction Enzyme Analysis of
Differentially-expressed Sequences, or READS. The combination of GeneChip
microarrays and READS enables us to obtain comprehensive coverage of the genes
expressed in virtually all important tissue types. By the end of 1999, the
GeneExpress database contained gene expression profiles on over 1,000 tissue
samples representing more than 30 million gene expression data points. By the
end of 2003, we expect to have complete profiles on 30,000 tissue samples
representing an estimated 3 billion gene expression data points.

We have also developed sophisticated data management software in
conjunction with our database products to enable our customers to integrate our
information with their own in-house data, as well as with the gene sequence and
other biological information publicly available on the Internet. Our software
includes powerful tools for the analysis of this information, allowing users to
conduct a broad variety of electronic experiments designed to answer their
specific questions about mechanisms of disease and drug action.

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<PAGE> 5

underlying data. We believe our GeneExpress database suite will become a
fundamental reference source of gene expression information for many scientists
engaged in industrial and academic biological research. Because the information
is distributed over the Internet, we believe we can also establish a portal that
will create multiple e-commerce promotional and transactional revenue
opportunities. These may include the promotion and sale of third party products,
such as custom gene chips, research reagents and specialized genomic diagnostic
products.

We currently have 14 customers for our custom databases, data management
software and GeneExpress database suite:

<TABLE>
<S> <C> <C>
- - AGY Therapeutics - Organon (Akzo Nobel) - SmithKline Beecham
- - Aventis - PE Biosystems - Therapeutic Genomics
- - Aventis CropScience - Procter & Gamble - UCB Pharma
- - Fujisawa Pharmaceutical Pharmaceuticals - Wyeth-Ayerst
- - Japan Tobacco - Schering-Plough Research Laboratories
- - Merck & Co. Institute (American Home Products)
</TABLE>

These customers provide us with various combinations of technology and
database access fees, research fees, up-front payments, research and product
development milestone payments and royalties that could enable us to receive a
portion of our customers' revenues from sales of any products that result from
use of our technology or proprietary database information.

We have completed over 12,000 expression profiles in a wide variety of
tissues and identified over 2,700 genes involved in the onset and progression of
heart failure, kidney disease, infertility, psychiatric disorders and other
major illnesses as well as over 2,100 genes that predict drug toxicity and
agricultural crop characteristics. We are seeking patent protection for the most
important of these discoveries. Our customers are currently using 24 of these
genes in drug discovery programs from which we would be entitled to earn
milestone payments and royalties on sales of any resulting products.

Our goal is to be the world's leading source of gene expression
information. The key elements of our strategy are to:

- market our database information to the global pharmaceutical, healthcare
and life science industries;

- expand our gene expression databases to build the world's most
comprehensive gene expression resource;

- enhance functionality of our software to add further value to our data
content;

- include other types of biological data in our databases; and

- leverage our Internet distribution channel to earn additional e-commerce
revenues.

Our principal executive offices are located at 708 Quince Orchard Road,
Gaithersburg, Maryland 20878, and our telephone number is (301) 987-1700. Our
website is located at http://www.genelogic.com. Information contained on our
website is not part of this prospectus.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common stock offered...................... 3,500,000 shares
Common stock outstanding after the
offering................................ 23,505,688 shares
Use of proceeds........................... To fund product and technology development, to expand
our database product marketing efforts, to provide
working capital and for general corporate purposes,
including possible acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol............. GLGC
</TABLE>

The number of shares of common stock offered assumes that the underwriters'
over-allotment option to purchase 425,000 shares from us and 100,000 shares from
certain selling stockholders is not exercised. See "Underwriting."

The outstanding share information is based upon our shares of common stock
outstanding as of December 31, 1999, and assumes that no options or warrants
have been exercised since December 31, 1999. In addition, this information
excludes:

- 3,929,014 shares of common stock reserved for issuance pursuant to
outstanding stock options at a weighted average exercise price of $4.41
per share, including 1,602,753 shares subject to options exercisable
within 60 days of December 31, 1999 at a weighted average exercise price
of $3.60 per share;

- 2,177,491 shares of common stock reserved for future issuance under our
employee benefit plans; and

- 476,505 shares of common stock reserved for issuance pursuant to
outstanding warrants with a weighted average exercise price of $25.46 per
share.

5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------------
1995 1996 1997 1998 1998 1999
------ ------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues.......................... $ -- $ -- $ 2,047 $ 13,197 $ 8,618 $ 13,502
Operating expenses:
Research and development..... 486 1,741 6,061 16,605 11,234 21,506
General and administrative... 258 1,345 3,825 7,552 4,991 6,094
Acquired in-process research
and development(1)......... -- -- -- 35,196 35,196 --
Amortization of goodwill..... -- -- -- 381 -- 1,143
------ ------- ------- -------- -------- --------
Total operating expenses.......... 744 3,086 9,886 59,734 51,421 28,743
------ ------- ------- -------- -------- --------
Loss from operations.............. (744) (3,086) (7,839) (46,537) (42,803) (15,241)
Interest income, net.............. -- 221 745 1,844 1,527 589
Other income (expense)............ -- -- -- (80) (80) 30
Income tax expense................ -- -- 100 100 -- 100
------ ------- ------- -------- -------- --------
Net loss.......................... (744) (2,865) (7,194) (44,873) (41,356) (14,722)
Accretion of mandatory redemption
value of preferred stock........ 1 494 1,286 -- -- --
------ ------- ------- -------- -------- --------
Net loss attributable to common
stockholders.................... $ (745) $(3,359) $(8,480) $(44,873) $(41,356) $(14,722)
====== ======= ======= ======== ======== ========
Basic and diluted net loss per
common share.................... $(3.48) $ (5.87) $ (3.97) $ (2.86) $ (2.88) $ (0.74)
====== ======= ======= ======== ======== ========
Shares used in computing basic and
diluted net loss per common
share........................... 214 572 2,138 15,681 14,345 19,799
====== ======= ======= ======== ======== ========
OTHER DATA:
Loss from operations before
acquired in-process research and
development and amortization of
goodwill........................ $ (744) $(3,086) $(7,839) $(10,960) $ (7,607) $(14,098)
====== ======= ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $16,592 $113,763
Working capital............................................. 11,739 108,910
Total assets................................................ 42,974 140,145
Total long-term debt and capital lease obligation........... 4,646 4,646
Total stockholders' equity.................................. 28,087 125,258
</TABLE>

- ---------------
(1) In connection with our acquisition of Oncormed, we incurred a non-recurring
charge of $35.2 million related to the write-off of acquired in-process
research and development.

(2) Adjusted to give effect to the sale by us of 3,500,000 shares of common
stock in this offering (assuming no exercise of the underwriters'
over-allotment option) at an assumed public offering price of $29.50 per
share after estimated expenses of the offering.

6
<PAGE> 8

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the following information about these risks, as well as the other information
contained or incorporated by reference in this prospectus, before you decide to
buy any of our common stock. Except for historical information, the information
contained in this prospectus and in our SEC reports are "forward-looking"
statements about our expected future business and performance. Our actual
operating results and financial performance may prove to be very different from
what we might have predicted as of the date of this prospectus. The risks
described below address some of the factors that may affect our future operating
results and financial performance.

TO GENERATE SIGNIFICANT REVENUES, WE MUST RETAIN EXISTING AND OBTAIN ADDITIONAL
DATABASE CUSTOMERS.

Our strategy depends on entering into agreements to provide gene expression
information products to pharmaceutical, biotechnology and other companies. Our
current customers include AGY Therapeutics, Inc., American Home Products Corp.'s
Wyeth-Ayerst Laboratories, Aventis, Fujisawa Pharmaceutical Co., Ltd., Japan
Tobacco, Inc., Merck & Co., Inc., N.V. Organon, a unit of Akzo Nobel NV, PE
Biosystems, Procter & Gamble Pharmaceuticals, Inc., Schering-Plough
Corporation's Schering-Plough Research Institute, SmithKline Beecham PLC,
Therapeutic Genomics, Inc., and UCB Research, Inc., a division of UCB Pharma. We
also have an agreement with Aventis CropScience to build a database of gene
expression for agricultural applications. Each of the agreements that we have
with our customers is for a specific term, and some of these agreements are
terminable without penalty by our customers prior to expiration. If any
agreements are terminated or expire and are not renewed, our business could
suffer.

In addition, we must obtain new customers for our products in order to be
successful. In particular, we have only recently commenced efforts to market our
GeneExpress database suite. If we are unsuccessful in selling our GeneExpress
database products, our business will suffer.

OUR SALES CYCLE IS LENGTHY AND WE MAY SPEND CONSIDERABLE RESOURCES ON
UNSUCCESSFUL SALES EFFORTS OR MAY NOT BE ABLE TO COMPLETE DEALS ON THE SCHEDULE
WE ANTICIPATE.

Our ability to obtain new customers for our database products depends upon
our customers' belief that our products can help accelerate their drug discovery
efforts. Our sales cycle is typically lengthy because we need to educate our
potential customers and sell the benefits of our products to a variety of
constituencies within such companies. In addition, each agreement involves the
negotiation of unique terms. We may expend substantial funds and management
effort with no assurance that an agreement will result. Actual and proposed
consolidations of pharmaceutical companies have affected and may in the future
affect the timing and progress of our sales efforts.

OUR TECHNOLOGIES ARE NEW AND UNPROVEN AND MAY NOT ALLOW US OR OUR CUSTOMERS TO
DEVELOP COMMERCIAL PRODUCTS.

Our technologies involve new and unproven approaches. They are based on the
assumption that information about gene expression and gene sequences may help
scientists better understand complex disease processes. There is limited
understanding of the roles of genes in these diseases. Few therapeutic products
based on gene discoveries have been developed and commercialized. Our
information and technologies may not enable us or our customers to identify drug
targets and drug leads. Even if they are successful in identifying drug targets
and drug leads based on their discoveries made using our databases, our
customers may not be able to discover or develop commercially viable products.
To date, no one has developed or commercialized any therapeutic, diagnostic or
agricultural products based on our technologies. If we fail to identify genes
useful for the discovery and development of such products, our current and
potential customers may lose confidence in our products and company and our
business may suffer as a result.

7
<PAGE> 9

OUR CUSTOMERS MAY NOT BE SUCCESSFUL IN DEVELOPING OR COMMERCIALIZING
THERAPEUTIC, DIAGNOSTIC OR OTHER LIFE SCIENCE PRODUCTS USING OUR GENE EXPRESSION
INFORMATION.

Development of therapeutic, diagnostic and other life science products
based on our customers' discoveries will also be subject to other risks of
failure inherent in their development or commercial viability. These risks
include the possibility that any such products will:

- be found to be toxic;

- be found to be ineffective;

- fail to receive necessary regulatory approvals;

- be difficult or impossible to manufacture on a large scale;

- be uneconomical to market;

- fail to be developed prior to the successful marketing of similar
products by competitors; or

- be impossible to market because they infringe on the proprietary rights
of third parties or compete with products marketed by third parties that
are superior.

If our customers discover therapeutic, diagnostic or other life science
products using our custom databases, we will rely on them for product
development, regulatory approval, manufacturing and marketing of those products
before we can realize some of the milestone payments, royalties and other
payments we may be entitled to under the terms of some of our custom database
agreements. Our agreements with our customers typically allow the customers
significant discretion in electing whether to pursue any of these activities. We
cannot control the amount and timing of resources our customers may devote to
our programs or potential products. As a result, we cannot be certain that our
customers will choose to develop and commercialize such products. In addition,
if a customer is involved in a business combination, such as a merger or
acquisition or changes its business focus, its performance in its agreement with
us may suffer and, as a result, we may not generate any revenues from the
royalty, milestone and similar payment provisions of our custom database
agreement with that customer.

WE RELY ON GENECHIP PROBE ARRAYS SUPPLIED BY AFFYMETRIX TO BUILD OUR GENEEXPRESS
DATABASE SUITE.

Our ability to continue to build the GeneExpress database suite will depend
in part on the ability of Affymetrix to supply adequate quantities of high
quality GeneChip probe arrays, which are widely accepted as the state-of-the-art
in microarray technology. Affymetrix provides us with GeneChip probe arrays
under an agreement that expires on January 1, 2002, but which we have the option
to extend for up to two additional successive two-year terms. This agreement
provides us with nonexclusive access to GeneChip probe arrays for our use in
generating gene expression databases for license to multiple third parties and
custom databases for license to a single third party. If Affymetrix licenses
GeneChip probe arrays to others for similar uses, our business may suffer. The
agreement also prohibits us from buying microarrays from third parties if
Affymetrix can demonstrate that those third party microarrays materially
infringe Affymetrix's intellectual property rights. If Affymetrix is unable or
unwilling to supply us with GeneChip probe arrays or if such probe arrays are
not available, we will need to obtain access to alternative microarray
technologies or expand the use of our patented READS technology. Alternative
microarray technologies may not be available to us, or may only be available to
us on unfavorable terms. Restricted or curtailed access to GeneChip probe arrays
could cause our business to suffer by delaying or increasing the cost of
expansion of the GeneExpress database suite.

WE HAVE A HISTORY OF OPERATING LOSSES WHICH ARE LIKELY TO CONTINUE FOR SOME
TIME.

We have incurred operating losses in each year since our inception. At
September 30, 1999, we had accumulated operating losses of approximately $72.3
million. Our losses to date have resulted principally from costs incurred in the
development of our gene expression databases, the $35.2 million non-recurring
charge incurred in connection with our acquisition of Oncormed in 1998 and
general and administrative

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<PAGE> 10

costs associated with operations. We commenced development of our GeneExpress
database suite of products in March 1999 and released the first commercial
version in November 1999. We currently have only one customer for our
GeneExpress products and expect to dedicate substantially all of our resources
for the foreseeable future to further developing and maintaining our GeneExpress
products. While we recognize revenues from our custom database products and
expect to recognize revenues from subscriptions to our GeneExpress database
products in the near term, we also expect to incur additional losses this year
and in future years and cannot predict when, if ever, we will achieve
profitability. These losses may increase in the near future as we expand our
product development activities. In addition, our customers' product development
efforts which utilize our products are at an early stage and, accordingly, we do
not expect our losses to be substantially mitigated by revenues from milestone
payments or royalties under those agreements for a number of years, if ever.

IF OUR ACCESS TO NECESSARY TISSUE SAMPLES, INFORMATION OR LICENSED TECHNOLOGIES
IS RESTRICTED, WE WILL NOT BE ABLE TO CONTINUE TO DEVELOP OUR BUSINESS.

To continue to build our GeneExpress database suite and custom database
products, we need access to normal and diseased human and other tissue samples,
other biological materials and related clinical and other information. We
compete with many other companies for these materials and information. We may
not be able to obtain or maintain access to these materials and information on
acceptable terms, if at all. In addition, government regulation in the United
States and foreign countries could result in restricted access to, or use of,
human and other tissue samples. If we lose access to sufficient numbers or
sources of tissue samples, or if tighter restrictions are imposed on our use of
the information generated from tissue samples, our business will suffer. You
should read the other sections of this prospectus regarding government
regulation.

Some of our genomics and bioinformatics technologies have been acquired or
licensed from third parties, and we expect to acquire or license additional
technologies from third parties. Our product development activities could suffer
if we are not able to establish access to new or additional technologies that we
believe are important to our business.

ANY INADEQUACY IN THE PROTECTION OF OUR INTELLECTUAL PROPERTY COULD HURT OUR
BUSINESS.

Our success will depend in part on our ability to obtain commercially
valuable patent claims and to protect our intellectual property. Our patent
position is generally uncertain and involves complex legal and factual
questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection
for our proprietary rights is uncertain. The risks and uncertainties that we
face with respect to our patents and other proprietary rights include the
following:

- the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than
we expect to result in issued patents;

- the claims of any patents which are issued may not provide meaningful
protection;

- we may not be able to develop additional proprietary technologies that
are patentable;

- the patents licensed or issued to us or our customers may not provide a
competitive advantage;

- other companies may challenge patents licensed or issued to us or our
customers;

- patents issued to other companies may harm our ability to do business;

- other companies may independently develop similar or alternative
technologies or duplicate our technologies; and

- other companies may design around technologies we have licensed or
developed.

We may apply for patent protection for methods relating to gene expression
and disease-specific patterns of gene expression that we identify and individual
disease genes and targets that we discover.
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<PAGE> 11

These patent applications may include claims relating to novel genes and gene
fragments and to novel uses for known genes or gene fragments identified from
the use of our databases. We may not be able to obtain meaningful patent
protection for our discoveries. Even if patents are issued, their scope of
coverage or protection is uncertain.

We also rely on trade secret protection and confidentiality agreements to
protect our interests in proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce. We have taken security
measures to protect our proprietary know-how and confidential data and continue
to explore further methods of protection. While we require all employees,
consultants, partners and customers to enter into confidentiality agreements, we
cannot be certain that we will be able to meaningfully protect our trade
secrets. Any material leak of confidential data into the public domain or to
third parties could cause our business, financial condition and results of
operations to suffer.

WE ARE CURRENTLY INVOLVED IN PATENT LITIGATION WITH INCYTE PHARMACEUTICALS, INC.
AND MAY IN THE FUTURE BE SUBJECT TO ADDITIONAL LITIGATION AND INFRINGEMENT
CLAIMS.

In December 1999, Incyte Pharmaceuticals, Inc. filed an action against us
in the United States District Court for the Northern District of California,
Case No. C99-5180 MJJ. In the action, Incyte asserts claims against us for
purported infringement of certain patent rights held by Incyte. The alleged
infringing activity involves our use of a wet chemistry process that Affymetrix
recommends be used in connection with the preparation of samples before the
sample is measured by an Affymetrix GeneChip. We must answer or otherwise
respond to the complaint by January 26, 2000. We believe that we have
meritorious defenses and intend to defend this suit vigorously. However, we may
not be successful. At this time, we cannot reasonably estimate the possible
range of any loss resulting from this suit due to uncertainty about the ultimate
outcome. We expect to continue to spend a significant amount of money and
management time on this litigation.

As illustrated by the Incyte litigation, the technologies that we use to
develop our products, and those that we incorporate in our products, may be
subject to claims that they infringe the patents or proprietary rights of
others. In particular, we are aware of a number of patents and patent
applications owned by others relating to the analysis of gene expression or the
manufacture and use of DNA chips. The risk of additional litigation will
increase as the genomics, biotechnology and software industries expand, more
patents are issued and other companies engage in other genomic-related
businesses. We anticipate that we will probably receive in the future additional
notices from third parties alleging patent infringement.

Litigation thus may be necessary to:

- assert claims of infringement;

- enforce our patents;

- protect our trade secrets or know-how; or

- determine the enforceability, scope and validity of the proprietary
rights of others.

We could incur substantial litigation costs to defend ourselves in patent suits
brought by other companies or to initiate such suits. Substantial litigation
costs and potential adverse outcomes could cause our business, financial
condition and results of operations to suffer. In addition, litigation could
cause disruption in our business activities and divert management's time and
attention from the operation of our business.

INTERNATIONAL PATENT PROTECTION IS UNCERTAIN.

Patent law outside the United States is uncertain and is currently
undergoing review and revision in many countries. Further, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as U.S. laws. We may participate in opposition proceedings to determine
the validity of our or our competitors' foreign patents, which could result in
substantial costs and diversion of our efforts. Finally, some of our patent
protection in the United States is not available to us in foreign countries due
to the laws of those countries.
10
<PAGE> 12

OUR BUSINESS AND THE PRODUCTS DEVELOPED USING THE INFORMATION IN OUR DATABASES
MAY BE SUBJECT TO GOVERNMENT REGULATION.

Any new drug developed by the efforts of our customers as a result of their
use of our GeneExpress database suite or our other products must undergo an
extensive regulatory review process in the United States and other countries
before it can be marketed. This regulatory process can take many years and
require substantial expense. Changes in FDA policies and the policies of similar
foreign regulatory bodies can increase the delay for each new drug, product
license and biological license application. We expect similar delays in the
regulatory review process for any diagnostic or agricultural product, where
similar review or other approval is required. Even if marketing clearance is
obtained, a marketed product and its manufacturer are subject to continuing
review. Discovery of previously unknown problems with a product may result in
withdrawal of the product from the market.

No product resulting from the use of our databases has been released for
commercialization in the United States or elsewhere. In addition, no
investigational new drug application has been submitted for any such product
candidate. We expect to rely on our customers to file such applications and
generally direct the regulatory review process. We cannot be certain if or when
our customers will submit any applications for regulatory review, or whether our
customers will be able to obtain marketing clearance for any products on a
timely basis, if at all. If our customers fail to obtain required governmental
clearances, it will prevent them from marketing drugs or diagnostic products
until such clearance can be obtained, if at all. This will in turn reduce the
chance of our ever receiving royalty payments from our customers. The occurrence
of any of these events may cause our business, financial condition and results
of operations to suffer.

In addition, our access to and use of human or other tissue samples in the
expansion of our GeneExpress database suite and the creation of custom databases
may become subject to government regulation, both in the United States and
abroad. United States and foreign government agencies may also impose
restrictions on the use of data derived from human or other tissue samples. If
our access to or use of human tissue samples, or our customers' use of data
derived from such samples, is restricted, our business will suffer.

Because our customers access our products primarily via the Internet, our
business is subject to government regulation relating to the Internet. Because
of the increasing use of the Internet as a communication and commercial medium,
the government has adopted and may adopt additional laws and regulations with
respect to the Internet covering such areas as pricing, content, taxation,
copyright protection, user privacy, distribution and characteristics and quality
of production and services. For a description of risks associated with
governmental regulation relating to the Internet, you should read the other
sections in this prospectus regarding governmental regulation.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

We expect to continue to experience significant growth in the number of our
employees and customers and the scope of our operations. In particular, we plan
significant growth in our GeneExpress database suite business. This growth may
continue to place a significant strain on our management and operations. Our
ability to manage this growth will depend upon our ability to broaden our
management team and our ability to attract, hire and retain skilled employees.
Our success will also depend on the ability of our officers and key employees to
continue to implement and improve our operational and other systems, to manage
multiple, concurrent customer relationships and to hire, train and manage our
employees. Our future success is heavily dependent upon growth and acceptance of
our GeneExpress database products. If we cannot scale our business appropriately
or otherwise adapt to anticipated growth in this area, a key part of our
strategy may not be successful. In addition, we must continue to invest in
customer support resources as the number of database customers and their
requests for support increase. Our customers typically have worldwide operations
and may require support at multiple U.S. and foreign sites.

11
<PAGE> 13

THE GENOMICS INDUSTRY IS INTENSELY COMPETITIVE AND EVOLVING RAPIDLY, AND WE MAY
FALL BEHIND OUR COMPETITORS.

There is intense competition among entities attempting to identify genes
associated with specific diseases and to develop products and services based on
these discoveries. We face competition in these areas from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions and
government or other publicly-funded agencies, both in the United States and
abroad. In particular, Incyte Pharmaceuticals has announced its intention to
develop a gene expression reference database that may compete with our
GeneExpress database suite, and there may be others developing competitive
products. In addition, other entities are attempting to identify and patent
randomly sequenced genes and gene fragments, while others are pursuing a gene
identification, characterization and product development strategy based on
positional cloning. We are aware that certain entities are using a variety of
gene expression analysis methodologies, including the use of chip-based systems,
to attempt to identify disease-related genes. In addition, numerous
pharmaceutical companies are developing genomic research programs, either alone
or in partnership with our competitors. Competition among such entities is
intense and is expected to increase. In order to compete against existing and
future technologies, we will need to demonstrate to potential customers that our
technologies and capabilities are superior to competing technologies.

Many of our competitors have substantially greater capital resources,
research and development staffs, facilities, manufacturing and marketing
experience, distribution channels and human resources than we do. These
competitors may discover, characterize or develop important genes, drug targets
or drug leads, drug discovery technologies or drugs in advance of us or our
customers or which are more effective than those developed by us or our
customers, or may obtain regulatory approvals of their drugs more rapidly than
we do or our customers do, any of which could have a material adverse effect on
any of our similar programs. Moreover, our competitors may obtain patent
protection or other intellectual property rights that would limit our rights or
our customers' ability to use our products to commercialize therapeutic,
diagnostic or agricultural products. We also face competition from these and
other entities in gaining access to cells, tissues and nucleic acid samples used
in our discovery programs.

We will rely on our customers for support of certain of our discovery
programs and intend to rely on our customers for preclinical and clinical
development of related potential products and the manufacturing and marketing of
these products. Each of our customers is conducting multiple product development
efforts within each disease area that is the subject of their agreement with us.
Generally, our agreements with our customers do not preclude the customer from
pursuing development efforts utilizing approaches distinct from that which is
the subject of our agreement with them. Any of our product candidates,
therefore, may be subject to competition with another potential product under
development by a customer.

Future competition will come from existing competitors as well as other
companies seeking to develop new technologies for drug discovery based on gene
sequencing, target gene identification, bioinformatics and related technologies.
In addition, certain pharmaceutical and biotechnology companies have significant
needs for genomic information and may choose to develop or acquire competing
technologies to meet such needs. Our agreement with Affymetrix provides us with
nonexclusive access to GeneChip probe arrays for our use in generating gene
expression databases for license to third parties. If Affymetrix licenses
GeneChip probe arrays to others for similar uses, our business may suffer.

Genomic technologies have undergone and are expected to continue to undergo
rapid and significant change. Our future success will depend in large part on
maintaining a competitive position in the genomics field. Rapid technological
development by us or others may result in products or technologies becoming
obsolete before we recover the expenses we incur in connection with our
development. Products offered by us could be made obsolete by less expensive or
more effective drug discovery technologies, including technologies that may be
unrelated to genomics. We may not be able to make the enhancements to our
technology necessary to compete successfully with newly emerging technologies.
For more information about our and our customers' competitors, you should read
the other sections of this prospectus regarding competition.

12
<PAGE> 14

OUR REVENUES ARE DERIVED PRIMARILY FROM, AND ARE SUBJECT TO RISKS FACED BY, THE
PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRIES.

We expect that our revenues in the foreseeable future will be derived
primarily from products provided to the pharmaceutical and biotechnology
industries. Accordingly, our success will depend directly upon their demand for
our products. Our operating results may fluctuate substantially due to
reductions and delays in research and development expenditures by companies in
these industries. These reductions and delays may result from factors such as:

- changes in economic conditions;

- changes in the regulatory environment affecting health care and health
care providers;

- pricing pressures and reimbursement policies;

- market-driven pressures on companies to consolidate and reduce costs; and

- other factors affecting research and development spending.

None of these factors is within our control.

OUR BUSINESS IS DEPENDENT ON THE CONTINUOUS, RELIABLE AND SECURE OPERATION OF
OUR INTERNET APPLICATIONS AND RELATED TOOLS AND FUNCTIONS WE PROVIDE.

Because our customers access our products primarily via the Internet, we
depend upon the continuous, reliable and secure operation of Internet servers
and related hardware and software. To the extent that our customers' access to
our products via the Internet is interrupted, our business could suffer. Our
computer and communications hardware is protected through physical and software
safeguards. However, they are still vulnerable to fire, storm, flood, power
loss, earthquakes, telecommunications failures, physical or software break-ins
and similar events. In addition, our database products are complex and
sophisticated and could contain erroneous data, design defects or software
errors that could be difficult to detect and correct. Software bugs and viruses
may be found in current products or any future products that we develop. If we
fail to maintain and further develop the necessary data to support our
customers' drug discovery efforts, it could result in loss of or delay in our
revenues and market acceptance. We also depend upon third parties to provide our
customers with web browsers and Internet and on-line services necessary for
access to our website. Any sustained disruption in Internet access provided by
third parties could adversely impact our business.

MULTIPLE FACTORS BEYOND OUR CONTROL MAY CAUSE FLUCTUATIONS IN OUR OPERATING
RESULTS AND MAY CAUSE OUR BUSINESS TO SUFFER.

Our revenues and results of operations may fluctuate significantly,
depending on a variety of factors, including the following:

- our success in selling, and changes in the demand for, our products;

- variations in the timing of payments from customers and the recognition
of these payments as revenues;

- the pricing of our products;

- the timing of our new product introductions, if any;

- changes in the research and development budgets of our customers and
potential customers;

- the introduction of new products and services by our competitors;

- regulatory actions;

- expenses related to, and the results of, litigation and other proceedings
relating to intellectual property rights;

13
<PAGE> 15

- the cost and timing of our adoption of new technologies; and

- the cost, quality and availability of cell and tissue samples, reagents
and related components and technologies, including those supplied to us
pursuant to contractual arrangements.

In particular, revenues from our database business are unpredictable
because:

- the sales cycle for our database products is lengthy;

- we are dependent upon continued commercial demand for the information we
gather and provide; and

- the time required to develop custom databases can vary significantly.

We will not be able to control many of these factors. In addition, if our
revenues in a particular period do not meet expectations, we may not be able to
adjust our expenditures in that period, which could cause our business to
suffer. We believe that period-to-period comparisons of our financial results
will not necessarily be meaningful. You should not rely on these comparisons as
an indication of our future performance. If our operating results in any future
period fall below the expectations of securities analysts and investors, our
stock price may fall, possibly by a significant amount.

ANY FUTURE ACQUISITIONS WILL CREATE RISKS AND UNCERTAINTIES.

As part of our business strategy, we may acquire other assets, technologies
and businesses. We cannot be sure, however, that acquisition candidates will be
available or will be available on terms acceptable to us. Future acquisitions
that we may complete involve risks such as the following:

- we may be exposed to unknown liabilities of acquired companies;

- our acquisition and integration costs may be higher than we anticipated
and may cause our quarterly and annual operating results to fluctuate;

- combining the operations and personnel of the acquired businesses with
our own may be difficult and costly, and integrating or completing the
development and application of acquired technologies may disrupt our
business and divert management's time and attention;

- our relationships with key customers of acquired businesses may be
impaired due to changes in management and ownership of the acquired
businesses;

- we may be unable to retain key employees of the acquired businesses or
hire enough qualified technical personnel to staff new or expanded
operations;

- we may incur amortization expenses if an acquisition results in
significant goodwill or other intangible assets; and

- our stockholders may be diluted if we pay for the acquisition with equity
securities.

WE DEPEND ON KEY EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED PERSONNEL.

We are highly dependent on the principal members of our management,
operations and scientific staff. The loss of any of these persons' services
would have a material adverse effect on our business. Although we have entered
into employment agreements with many of these persons, we do not maintain a key
person life insurance policy on the life of any employee, except several members
of our senior management.

Our future success also will depend in part on the continued service of our
key scientific, software, bioinformatics and management personnel and our
ability to identify, hire and retain additional personnel. We experience intense
competition for qualified personnel. We may not be able to continue to attract
and retain personnel necessary for the development of our business.

14
<PAGE> 16

OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND MAY SUBJECT US TO ENVIRONMENTAL
LIABILITY.

Our research and development involves the controlled use of hazardous and
radioactive materials and biological waste. We are subject to federal, state and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of these materials and certain waste products. Although we believe that
our safety procedures for handling and disposing of these materials comply with
legally prescribed standards, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. In the event of an
accident, we could be held liable for damages or penalized with fines, and this
liability could exceed our resources.

We believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material additional capital expenditures for environmental control
facilities in the near term. However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.

WE ARE EXPOSED TO PRODUCT LIABILITY AND RELATED RISKS.

We may be exposed to claims of liability from the use of products that
either we or our customers provide. For example, we may be subject to product
liability if our GeneExpress or custom database products contain inaccurate
information or if any of our customers develops or commercializes a product
discovered through the use of our technology which results in injury or death to
clinical trial participants or patients. In addition, genetic testing and
information services that were provided by Oncormed prior to our acquisition of
Oncormed could expose us to the risk of certain types of litigation, including
medical malpractice claims, negligence claims or contract disputes. In
particular, we are involved in a litigation matter relating to Oncormed
described in the other sections of this prospectus regarding legal proceedings.
We currently maintain product liability and medical malpractice insurance. Our
insurance coverage may not be adequate to protect us against future claims.
Furthermore, our customers may not indemnify us against these types of claims or
may not themselves be adequately insured or, in the case of smaller companies,
have a net worth sufficient to satisfy any product liability claims. A product
liability claim, product recall or a medical malpractice claim could cause our
business, financial condition and results of operations to suffer.

WE MAY NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE.

We believe that the net proceeds of this offering together with existing
cash and marketable securities, borrowings under equipment financing
arrangements and anticipated cash flow from operations will be sufficient to
support our operations at least until the end of 2001. We may choose to raise
additional capital due to market conditions or strategic considerations even if
we have sufficient funds for our operating plan. We expect that we will require
significant additional funding in the future. In particular, we will likely need
additional funds to expand the content of our databases and to increase our
marketing efforts. We may seek funding through additional public or private
equity offerings, debt financings or agreements with customers. If we raise
additional capital by issuing equity or convertible debt securities, the
issuances may dilute share ownership and future investors may be granted rights
superior to those of current shareholders. Additional financing may not be
available when needed, or, if available, may not be available on favorable
terms. If we cannot obtain adequate financing on acceptable terms when such
financing is required, our business will be adversely affected.

OUR STOCK PRICE IS HIGHLY VOLATILE.

The market price of our common stock is likely to continue to be highly
volatile due to risks and uncertainties described in this section of the
prospectus, as well as other factors, including:

- conditions and publicity regarding the genomics or life sciences
industries generally;

- sales of substantial amounts of our stock by existing stockholders;

15
<PAGE> 17

- price and volume fluctuations in the stock market at large which do not
relate to our operating performance; and

- comments by securities analysts, or our failure to meet analysts'
expectations.

Furthermore, the stock market has from time to time experienced extreme
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. In addition, in the past, class action lawsuits have
been initiated against biotechnology and pharmaceutical companies following
periods of volatility in the market prices of these companies' stock. In
general, decreases in our stock price would reduce the value of our
stockholders' investments and could limit our ability to raise necessary capital
or make acquisitions of assets or businesses. If litigation were instituted on
this basis, it could result in substantial costs and would divert management's
attention and resources. This could have a material adverse effect on our
business, financial condition and results of operations.

YOUR INVESTMENT WILL BE IMMEDIATELY DILUTED, AND IF WE RAISE ADDITIONAL FUNDING
BY ISSUING EQUITY SECURITIES, THE VOTING POWER OF YOUR INVESTMENT WILL BE
DILUTED FURTHER.

Assuming an offering price of $29.50 per share, your investment will suffer
immediate and substantial dilution of approximately $24.51 per share in the net
tangible book value of the shares purchased. In addition, if we raise additional
funding by issuing more equity securities, the new shares will dilute the voting
power of your investment on a percentage basis. Any additional issuance of
equity securities may also result in the value of your investment declining.

IF WE HAVE NOT ADEQUATELY PREPARED FOR THE TRANSITION TO THE YEAR 2000, OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION COULD SUFFER.

We have executed a plan designed to make our computer systems,
applications, equipment and facilities Year 2000 ready. To date, none of our
systems, applications, equipment or facilities have experienced material
difficulties from the transition to Year 2000, but complete testing of those
systems by our normal business operations have been limited so far. In the first
several months of 2000, it is possible that material difficulties could be
discovered or could arise. We cannot guarantee that our Year 2000 readiness plan
has been successfully implemented, and actual results could still differ
materially from our plan. In addition, we have communicated with our critical
external suppliers to determine the extent to which we may be vulnerable to such
parties' failure to resolve their own Year 2000 issues. Where practicable, we
have attempted to mitigate our risks with respect to the failure of these
entities to be Year 2000 ready. The effect, if any, on our results of operations
from any failure of such parties to be Year 2000 ready cannot yet be determined.

WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT MAY REDUCE THE MARKET PRICE OF
OUR COMMON STOCK.

Provisions of our Certificate of Incorporation and By-laws and Delaware law
could make it more difficult for a third party to acquire us, even if the
acquisition would be beneficial to our stockholders. This could prevent the
consummation of a transaction in which our stockholders could receive a
substantial premium over the current market price for their shares.

Our Certificate of Incorporation gives our board of directors the authority
to issue up to 10,000,000 shares of preferred stock and to determine the price,
rights, preferences and privileges and restrictions, including voting rights, of
those shares without any further vote or action by our stockholders. The rights
of the holders of common stock will be subject to, and may harmed by, the rights
of the holders of any shares of preferred stock that may be issued in the
future. The issuance of preferred stock may delay, defer or prevent a change in
control, as the terms of the preferred stock that might be issued could
potentially prohibit our consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of
preferred stock. In addition, the issuance of preferred stock could have a
dilutive effect on our stockholders.

16
<PAGE> 18

We also have a classified board of directors serving staggered three-year
terms. This could delay or limit the removal of incumbent directors or the
assumption of control by stockholders, even if such removal or assumption of
control would be beneficial to stockholders, and also could discourage or make
more difficult a merger, tender offer or proxy contest, even if such events
would be beneficial, in the short term, to the interests of stockholders.

OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
FORWARD-LOOKING STATEMENTS.

This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements that involve risks and uncertainties. These
include statements about our expectations, plans, objectives, assumptions or
future events. Discussions containing forward-looking statements may be found in
the material set forth under the sections entitled "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as in this prospectus generally. We generally use words such as
"anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "we believe," "we intend" and similar
expressions to indicate when we are making forward-looking statements. These
statements involve estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed for the reasons
described in this prospectus. You should not place undue reliance on these
forward-looking statements.

The forward-looking statements speak only as of the date on which they are
made, and we undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events. In addition, we cannot assess
the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

17
<PAGE> 19

USE OF PROCEEDS

The net proceeds we will receive from the sale of the 3,500,000 shares of
common stock offered by us are estimated to be $97.2 million, assuming a public
offering price of $29.50 per share and after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us. If
the underwriters' over-allotment option is exercised in full, we estimate that
the net proceeds to us would be $109.0 million. The selling stockholders will
use a portion of the net proceeds that they receive from the sale of their
shares if the underwriters' over-allotment option is exercised to repay loans
from us. Otherwise, we will not receive any portion of the proceeds from any
sale of the shares of common stock by the selling stockholders.

We intend to use the net proceeds from this offering as follows:

- to fund our product and technology development activities, including
scale-up of our laboratory, database and business development operations;

- to provide working capital; and

- for general corporate purposes, including possible acquisitions.

We have not yet determined the amount of net proceeds to be used for each
of the purposes indicated. Accordingly, our management will retain broad
discretion in the allocation of the net proceeds and may use a portion of the
net proceeds to fund acquisitions of complementary technologies, products or
businesses, although we have no current agreements or commitments for any such
acquisitions. Pending such uses, we intend to invest the net proceeds of this
offering in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable future.
Payment of future dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results and current and anticipated cash needs.

18
<PAGE> 20

PRICE RANGE OF COMMON STOCK

Our common stock has been traded on the Nasdaq National Market under the
symbol GLGC since November 21, 1997. The following table sets forth for the
periods indicated the high and low closing prices for our common stock, as
reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Fourth Quarter (from November 21, 1997)..................... $ 8.375 $7.500
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... 9.250 7.625
Second Quarter.............................................. 8.500 6.000
Third Quarter............................................... 10.125 3.688
Fourth Quarter.............................................. 6.969 3.000
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... 8.000 4.375
Second Quarter.............................................. 5.219 3.438
Third Quarter............................................... 6.906 3.688
Fourth Quarter.............................................. 28.125 5.438
YEAR ENDING DECEMBER 31, 2000
First Quarter (through January 11, 2000).................... 36.563 24.750
</TABLE>

On January 11, 2000, the last reported sale price of our common stock on
the Nasdaq National Market was $29.50. As of December 31, 1999, there were
20,005,688 shares of our common stock outstanding held by approximately 223
holders of record.

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<PAGE> 21

CAPITALIZATION

The following table sets forth on an unaudited basis our capitalization as
of September 30, 1999:

- on an actual basis; and

- on an as adjusted basis after giving effect to the sale of the 3,500,000
shares of common stock we are offering at an assumed public offering
price of $29.50 per share, after deducting the underwriting discounts and
commissions and estimated offering expenses.

You should read this table in conjunction with the consolidated financial
statements and notes incorporated by reference herein and "Selected Consolidated
Financial Data" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital lease
obligation.................................................. $ 1,439 $ 1,439
======== ========
Noncurrent portion of long-term debt and capital lease
obligation................................................ $ 3,207 $ 3,207
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding.......... -- --
Common stock, $.01 par value, 60,000,000 shares
authorized, actual and as adjusted; 19,905,994 shares
issued and outstanding, actual; 23,405,994 shares
issued and outstanding, as adjusted................... 199 234
Additional paid-in capital............................. 103,140 200,276
Deferred compensation, net............................. (2,934) (2,934)
Accumulated other comprehensive loss................... (49) (49)
Accumulated deficit.................................... (72,269) (72,269)
-------- --------
Total stockholders' equity........................ 28,087 125,258
-------- --------
Total capitalization......................... $ 31,294 $128,465
======== ========
</TABLE>

The number of shares outstanding excludes:

- 3,719,813 shares of common stock reserved for issuance pursuant to
outstanding stock options at a weighted average exercise price of $3.94
per share;

- 2,486,386 shares of common stock reserved for future issuance under our
employee benefit plans; and

- 476,505 shares of common stock reserved for issuance pursuant to
outstanding warrants with a weighted average exercise price of $25.46 per
share.

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<PAGE> 22

DILUTION

Our net tangible book value as of September 30, 1999 was approximately
$19.6 million, or $0.98 per share. After the sale of the 3,500,000 shares of
common stock at an assumed public offering price of $29.50 per share and after
deducting the underwriting discounts and commissions and estimated offering
expenses, our pro forma net tangible book value as of September 30, 1999 would
have been approximately $116.7 million, or $4.99 per share. This represents an
immediate increase in net tangible book value of $4.01 per share to existing
stockholders and an immediate dilution in net tangible book value of $24.51 per
share to purchasers in this offering. Net tangible book value represents the
amount of tangible assets less total liabilities. Dilution represents the
difference between the amount per share paid by purchasers in this offering and
the pro forma net tangible book value per share upon completion of this
offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $29.50
Net tangible book value per share as of September 30,
1999.................................................. $ 0.98
Increase in book value per share attributable to new
investors............................................. 4.01
------
Net tangible book value per share after this offering....... 4.99
------
Dilution per share to new investors......................... $24.51
======
</TABLE>

If the underwriters' over-allotment option is exercised in full, the
dilution to new investors will be $24.10 per share.

To the extent outstanding options and warrants are exercised, there will be
further dilution to new investors. See "Capitalization."

21
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus and the
consolidated financial statements and notes thereto and the unaudited
consolidated financial statements and notes thereto incorporated by reference
herein. The selected consolidated financial data set forth below with respect to
our consolidated statements of operations for the years ended December 31, 1996,
1997 and 1998 and with respect to the consolidated balance sheets at December
31, 1997 and 1998 have been derived from audited consolidated financial
statements incorporated by reference herein. The statement of operations data
for the year ended December 31, 1995 and the balance sheet data at December 31,
1995 and 1996 are derived from audited financial statements not included or
incorporated by reference herein. The unaudited consolidated statement of income
data for the nine months ended September 30, 1998 and 1999 and the unaudited
consolidated balance sheet data at September 30, 1999 are derived from, and are
qualified by reference to, the unaudited consolidated financial statements
incorporated by reference herein that include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information set forth therein. The results of
operations for the nine months ended September 30, 1999 are not necessarily
indicative of the results to be expected for the full year.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------------
1995 1996 1997 1998 1998 1999
------ ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE D(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ -- $ -- $ 2,047 $ 13,197 $ 8,618 $ 13,502
Operating expenses:
Research and development.................... 486 1,741 6,061 16,605 11,234 21,506
General and administrative.................. 258 1,345 3,825 7,552 4,991 6,094
Acquired in-process research and
development(1)........................... -- -- -- 35,196 35,196 --
Amortization of goodwill.................... -- -- -- 381 -- 1,143
------ ------- ------- -------- -------- --------
Total operating expenses........................ 744 3,086 9,886 59,734 51,421 28,743
------ ------- ------- -------- -------- --------
Loss from operations............................ (744) (3,086) (7,839) (46,537) (42,803) (15,241)
Interest income, net............................ -- 221 745 1,844 1,527 589
Other income (expense).......................... -- -- -- (80) (80) 30
Income tax expense.............................. -- -- 100 100 -- 100
------ ------- ------- -------- -------- --------
Net loss........................................ (744) (2,865) (7,194) (44,873) (41,356) (14,722)
Accretion of mandatory redemption value of
preferred stock............................... 1 494 1,286 -- -- --
------ ------- ------- -------- -------- --------
Net loss attributable to common stockholders.... $ (745) $(3,359) $(8,480) $(44,873) $(41,356) $(14,722)
====== ======= ======= ======== ======== ========
Basic and diluted net loss per common share..... $(3.48) $ (5.87) $ (3.97) $ (2.86) $ (2.88) $ (0.74)
====== ======= ======= ======== ======== ========
Shares used in computing basic and diluted net
loss per common share......................... 214 572 2,138 15,681 14,345 19,799
====== ======= ======= ======== ======== ========
OTHER DATA:
Loss from operations before acquired in-process
research and development and amortization of
goodwill...................................... $ (744) $(3,086) $(7,839) $(10,960) $ (7,607) $(14,098)
====== ======= ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
----- ------- -------- -------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities......... $ 348 $ 5,671 $ 46,621 $ 30,982 $16,592
Working capital.......................................... 246 4,581 42,455 26,573 11,739
Total assets............................................. 424 7,819 53,972 55,566 42,974
Total long-term debt and capital lease obligation........ -- 446 1,551 5,305 4,646
Total stockholders' equity............................... (833) (4,187) 46,067 41,288 28,087
</TABLE>

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

(1) In connection with our acquisition of Oncormed, we incurred a non-recurring
charge of $35.2 million related to the write-off of acquired in-process
research and development.

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<PAGE> 24

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

OVERVIEW

We were incorporated in September 1994 and have devoted substantially all
of our resources to the development of our genomics technologies, bioinformatics
systems and database products for use in pharmaceutical, diagnostic and
agricultural product research and development. Our current customers include AGY
Therapeutics, Inc., the American Home Products Corp.'s Wyeth-Ayerst Research
unit, Aventis, Aventis CropScience, Fujisawa Pharmaceutical Co., Ltd., Japan
Tobacco Inc., Merck & Co., Inc., N.V. Organon, a unit of Akzo Nobel NV, PE
Biosystems, Procter & Gamble Pharmaceuticals, Inc., Schering-Plough
Corporation's Schering-Plough Research Institute, SmithKline Beecham PLC,
Therapeutic Genomics, Inc. and UCB Research Inc., a division of UCB Pharma.

Customers for our custom database and related software products provide us
with various combinations of recurring technology and database access fees,
research fees, certain additional payments upon the attainment of research and
product development milestones, royalty payments based on sales of any products
resulting from their use of our products, and nonrefundable upfront payments.
Subscribers to our GeneExpress database suite will pay us varying database
access fees depending upon the level and type of information they obtain.

Technology and database access fees are recognized evenly over the term of
each customer agreement. We recognize revenues from research and development
support when they are earned which is ordinarily when the work is performed or
costs are incurred. Milestone payments and royalties are recognized when they
are earned in accordance with the applicable performance requirements and
contractual terms. Revenues for such amounts are deferred until earned.
Nonrefundable upfront payments received for the value of transferred technology
or other contractual rights that are not contingent upon future performance
under the terms of the agreements are recognized as revenue upon execution of
the agreements.

Our future profitability will depend in part on the successful
establishment of agreements with additional customers which include various
combinations of genomic databases, bioinformatics software and genomics
technology and the successful commercialization of our GeneExpress database
suite. Payments for access to custom databases and the GeneExpress database
suite are expected to be our primary source of revenue for the foreseeable
future. We have not received and do not expect to receive significant royalty or
other revenues from development and commercialization of products by our
customers using our databases and other technology for several years, if at all.
Revenues from our customers may be subject to significant fluctuation in both
timing and amount, and, therefore, our results of operations for any period may
not be comparable to the results of operations for any other period.

We have incurred operating losses in each year since our inception. At
September 30, 1999, we had accumulated operating losses of approximately $72.3
million. Our losses have resulted principally from costs incurred in the
development of our gene expression databases, the $35.2 million non-recurring
charge incurred in connection with our acquisition of Oncormed and general and
administrative costs associated

23
<PAGE> 25

with our operations. These costs have exceeded our revenues which, to date, have
been generated principally from agreements for our custom database and related
software products. We expect to incur additional operating losses in future
years.

UPDATE ON IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with the acquisition of Oncormed in September 1998, we
allocated $35.2 million of the $39.2 million purchase price to in-process
research and development projects. This allocation represents the estimated fair
value based on discounted cash flows related to the incomplete research and
development projects. At the time of acquisition, the progress of these projects
had not yet reached technological feasibility and the projects had no
alternative future uses. Accordingly, these costs were expensed as of the
acquisition date.

At December 31, 1999, we had substantially completed the technology
projects that were underway as of the acquisition. In general, we believe these
research and development projects are on track with management's plans at the
time the acquisition occurred. Through December 31, 1999, no significant
adjustments have been made in the overall economic assumptions or expectations
that underlie our acquisition decision and related purchase accounting. All
in-process research and development projects acquired as a result of the
Oncormed acquisition have been incorporated in our existing products or
technologies.

Although we have substantially completed the projects, we cannot assure you
that products or technologies resulting from those projects will achieve
commercial success. If these products or technologies are not successfully
developed or commercially successful, future results of operations of ours may
be adversely affected.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Revenues increased to $13.5 million for the nine months ended September 30,
1999, from $8.6 million for the same period in 1998. The increase in revenues
was the result of the expansion of our relationships with Japan Tobacco and
Procter & Gamble in late 1998, offset partially by the timing of revenue
recognized under other existing partner and customer relationships. Payments
from each of Aventis CropScience, Japan Tobacco, Organon and Procter & Gamble
accounted for 10% or more of revenues for the nine months ended September 30,
1999 and the nine months ended September 30, 1998.

Research and development expenses increased to $21.5 million for the nine
months ended September 30, 1999 from $11.2 million for the same period in 1998.
The increase of $10.3 million for the nine months ended September 30, 1999 as
compared to the same period in 1998 was primarily attributable to approximate
increases of $4.2 million in research agreement expenses, $2.2 million in
personnel expenses, and $1.8 million in laboratory supplies. This increase
primarily relates to our efforts in building our GeneExpress database suite
which started in 1999, expansion of our custom database and bioinformatics
software businesses to accommodate new and expanded relationships with
customers, and further development of our Flow-thru Chip program. We expect
research and development expenses to increase as we expand our GeneExpress
database suite, maintain new and expanding custom database development programs
with customers, and further develop the Flow-thru Chip.

General and administrative expenses increased to $6.1 million for the nine
months ended September 30, 1999 from $5.0 million for the same period in 1998.
These costs include the costs of corporate operations, finance and accounting,
human resources and other general operations. For the nine months ended
September 30, 1999 as compared to the same period in 1998, the increase of $1.1
million was primarily attributable to an approximate increase of $800,000 in
personnel expenses and $300,000 in professional fees. This increase primarily
relates to the expansion of our business development efforts, marketing costs of
new products, and other general costs necessary to support the expansion of our

24
<PAGE> 26

operations. We expect that general and administrative expenses will increase as
we expand our product lines and our sales and marketing efforts.

Amortization of goodwill was $1.1 million for the nine months ended
September 30, 1999, as a result of the acquisition of Oncormed in September
1998.

Acquired in-process research and development was $35.2 million for the nine
months ended September 30, 1998, as a result of the non-recurring charge for the
acquisition of Oncormed in September 1998.

Net interest income decreased to $589,000 for the nine months ended
September 30, 1999, from $1.5 million for the same period in 1998 primarily due
to smaller cash and investment balances as a result of funding our operating
losses through September 30, 1999 and additional interest expense paid on
equipment loans.

YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997

Revenues increased to $13.2 million in 1998 from $2.0 million in 1997. The
increase in revenues resulted primarily from a full-year of custom database
development activities under existing customer relationships in addition to new
and expanded relationships in 1998. Payments from each of Aventis CropScience,
Japan Tobacco, Organon and Procter & Gamble accounted for 10% or more of
revenues for the year ended December 31, 1998, and payments from each of Procter
& Gamble and Japan Tobacco accounted for 10% or more of revenues for the year
ended December 31, 1997.

Research and development expenses increased to $16.6 million in 1998 from
$6.1 million in 1997. Excluding the increase in research and development costs
of approximately $815,000 as a result of our acquisition of Oncormed, the
remaining increase in research and development expenses was primarily
attributable to approximate increases of $4.6 million in personnel expenses,
$1.0 million in research agreement expenses and $1.0 million in facility costs.
We also had general increases in laboratory supplies and depreciation expense.
During 1998, we further expanded our custom database and bioinformatics software
businesses and our Flow-thru Chip development program.

General and administrative expenses increased to $7.6 million in 1998 from
$3.8 million in 1997. Excluding the increase in general and administrative
expenses of approximately $496,000 as a result of our acquisition of Oncormed,
the remaining increase in general and administrative expenses was primarily
attributable to approximate increases of $1.2 million in personnel expenses,
$486,000 in amortization of deferred compensation on stock options and $465,000
in facility costs. We also had general increases in costs due to becoming a
public company and depreciation expense. In 1998, we continued to expand our
operations and business development efforts.

Amortization of goodwill was $381,000 in 1998 as a result of the
acquisition of Oncormed.

Acquired in-process research and development was $35.2 million for the year
ended December 31, 1998, as a result of the non-recurring charge for the
acquisition of Oncormed in September 1998.

Net interest income increased to $1.8 million in 1998 from $745,000 in 1997
due to a full-year of investment income in 1998 relating to the investment of
proceeds from our 1997 private placement of equity securities and initial public
offering.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

Revenue under agreements with customers was approximately $2.0 million in
1997. We received no revenues in 1996. Substantially all of our 1997 revenues
were from Procter & Gamble and Japan Tobacco. Revenues from other sources were
not material.

Research and development expenses increased to $6.1 million in 1997 from
$1.7 million in 1996. The increase in research and development expenses was
primarily attributable to approximate increases of $1.9 million in personnel
expenses, $882,000 in laboratory supplies and $465,000 in depreciation expense
as

25
<PAGE> 27

a result of our expanding our custom database and bioinformatics software
businesses and our Flow-thru Chip development program.

General and administrative expenses increased to $3.8 million in 1997 from
$1.3 million in 1996. The increase in general and administrative expenses was
primarily attributable to approximate increases of $690,000 in personnel
expenses, $376,000 in legal costs and $249,000 in facility costs in connection
with the overall scale-up of our operations and business development efforts and
$279,000 in amortization of deferred compensation on stock options.

Net interest income increased to $745,000 in 1997 from $221,000 in 1996.
The increase was primarily due to the larger cash and investment balance on hand
during 1997 as a result of private placements of equity securities and the
completion of our initial public offering.

LIQUIDITY AND CAPITAL RESOURCES

From inception through September 30, 1999, we financed our operations
through the sale of equity securities, payments under agreements with partners
and customers, and equipment and tenant improvement financing. As of September
30, 1999, we had obtained $471,000 of capital lease financing and $6.3 million
under equipment and tenant improvement loans. As of September 30, 1999, we had
approximately $16.6 million in cash and marketable securities, compared to $31.0
million as of December 31, 1998.

Net cash used in operating activities was $10.5 million for the nine months
ended September 30, 1999 compared to $7.7 million for the nine months ended
September 30, 1998. We primarily used cash during 1999 and 1998 to fund our
operating losses in addition to expenditures relating to intangibles and other
assets.

During the nine months ended September 30, 1999 and 1998, we had
expenditures relating to intangibles and other assets of approximately $937,000
and $523,000, respectively. These expenditures were primarily for patent costs
and license fees. We amortize such patent costs to research and development
expense over the useful life of the underlying patent upon issuance. License
fees are amortized to research and development expense over periods of one to
seventeen years. These expenditures are necessary and are expected to increase
as a result of continuing efforts to protect our intellectual property and to
secure rights to current technology.

Our investing activities, other than sales, maturities and purchases of
available-for-sale securities, consisted of capital expenditures, which totaled
$2.8 million and $5.6 million for the nine months ended September 30, 1999 and
1998, respectively, and the issuance of promissory notes to three of our
officers totaling $750,000 during the nine months ended September 30, 1999. The
decrease in capital expenditures from year to year was primarily due to the
funding of tenant improvements and furniture purchases in the first quarter of
1998 relating to the completion of our new facility.

Net cash used in financing activities was $283,000 for the nine months
ended September 30, 1999 compared to net cash provided by financing activities
of $4.0 million in the nine months ended September 30, 1998. During the nine
months ended September 30, 1999, we obtained $425,000 to finance tenant
improvements compared to $4.3 million of equipment financing received during the
same period in 1998. The cash obtained in these periods was offset by increased
repayments under equipment loans and a capital lease obligation during 1999.

In June 1998, we entered into a $5.0 million loan agreement for the
financing of laboratory, computer and office equipment. At September 30, 1999,
we had borrowed approximately $4.8 million. We expect to increase the borrowing
amount under the loan agreement or obtain similar financing from additional
sources during 2000. In November 1999, we entered into a capital lease to
purchase laboratory equipment for $300,000.

In January 1999, we entered into a three-year agreement with Affymetrix,
pursuant to which Affymetrix supplies its GeneChip probe arrays to us for the
development of gene expression databases.

26
<PAGE> 28

Under the terms of the agreement, we will pay Affymetrix subscription fees for
access to the probe arrays, purchase the probe arrays and related
instrumentation and software, and pay royalties to Affymetrix on revenues
generated from certain database subscriptions fees. Our commitments under other
research and license agreements do not represent a significant expenditure in
relation to our total research and development expense.

In September 1999, we signed an amendment to a Collaboration and License
Agreement we entered into in 1997 with Organon, one of our significant custom
database customers. The amendment enables both parties to limit the scope and
accelerate the date of termination of the original agreement. At the time of the
amendment, we discontinued recognizing revenue related to the agreement, pending
a determination by Organon whether to terminate the agreement. As amended, the
customer can terminate our agreement effective as of February 27, 2000. In
consideration for our agreement to allow early termination by Organon, which
would result in the elimination of its obligation to provide future financial
and other support for the collaboration, Organon agreed to grant us an exclusive
perpetual license upon any such early termination for data developed pursuant to
such agreement by Organon and us. We believe this data has significant value and
would significantly enhance our GeneExpress database suite. If Organon
terminates the agreement early, Organon must pay $2.0 million owed to us, $1.7
million of which has been previously recognized as revenue, and we must
simultaneously purchase, for $2.0 million, the exclusive license. At this time,
we believe it is unlikely that the agreement will be terminated as permitted by
the amendment but cannot be certain of the ultimate outcome. If the agreement is
not terminated, the parties will remain obligated to perform in accordance with
the terms of the agreement, as amended.

To date, all revenue received by us has been generated principally from our
agreements with customers. We expect that substantially all revenue for the
foreseeable future will come from subscribers to our GeneExpress database suite.
Furthermore, our ability to achieve profitability will be dependent upon our
ability to enter into additional arrangements with customers and successfully
commercialize our GeneExpress database suite.

- progress of our discovery programs;

- the number and breadth of these programs;

- our ability to establish and maintain additional arrangements with
customers;

- the commercial success of the in-process technologies we acquired in our
acquisition of Oncormed;

- the progress of the development and commercialization efforts of our
customers;

- the level of our activities relating to our independent discovery
programs and to the development and commercialization rights we retain in
our arrangements with customers;

- competing technological and market developments;

- the costs associated with obtaining access to tissue samples and related
information; and

- the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights.

We expect that we will require significant additional financing in the
future, which we may seek to raise through public or private equity offerings,
debt financing or arrangements with additional customers. Additional financing
or arrangements with additional customers may not be available when needed, or
if available, we might not be able to obtain them on terms favorable to us and
our stockholders. To the

27
<PAGE> 29

extent that we raise additional capital by issuing equity or convertible debt
securities, ownership dilution to stockholders will result. If adequate
financing is not available when needed, we may be required to:

- curtail significantly one or more of our research and development
programs;

- obtain funds through arrangements with customers that may require us to
relinquish rights to certain of our technologies, discoveries or
potential products; or

- grant licenses on terms that are not favorable to us.

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<PAGE> 30

BUSINESS

OVERVIEW

We generate our gene expression data in our own laboratories from tissues
we collect through our biorepository network using two complementary
technologies -- GeneChip microarrays produced by Affymetrix and our own patented
READS technology. The combination of GeneChip microarrays and READS enables us
to obtain comprehensive coverage of the genes expressed in virtually all
important tissue types. By the end of 1999, the GeneExpress database contained
gene expression profiles on over 1,000 tissue samples representing more than 30
million gene expression data points. By the end of 2003, we expect to have
complete profiles on 30,000 tissue samples representing an estimated 3 billion
gene expression data points.

The GeneExpress database suite can be used for many important research
applications, such as to discover and validate novel drug targets, develop
therapeutic compounds and facilitate clinical trials and patient management.
Because our gene expression information is warehoused in electronic form in a
relational database, we have the flexibility of repackaging the data into
different versions for customers requiring varying levels of information and
pricing such versions optimally. As a result, we can market the same information
to many different types of customers, thereby maximizing the revenue potential
of the underlying data. We believe our GeneExpress database suite will become a
fundamental reference source of gene expression information for many scientists
engaged in industrial and academic biological research. Because the information
is distributed over the Internet, we believe we can also establish a portal that
will create multiple e-commerce promotional and transactional revenue
opportunities. These may include the promotion and sale of third party products,
such as custom gene chips, research reagents and specialized genomic diagnostic
products.

29
<PAGE> 31

We currently have 14 customers for our custom databases, data management
software and GeneExpress database suite:

<TABLE>
<S> <C> <C>
- - AGY Therapeutics - Organon (Akzo Nobel) - SmithKline Beecham
- - Aventis - PE Biosystems - Therapeutic Genomics
- - Aventis CropScience - Procter & Gamble - UCB Pharma
- - Fujisawa Pharmaceutical Pharmaceuticals - Wyeth-Ayerst Laboratories
- - Japan Tobacco - Schering-Plough Research (American Home Products)
- - Merck & Co. Institute
</TABLE>

These customers provide us with various combinations of technology and
database access fees, research fees, up-front payments, research and product
development milestone payments, and royalty payments that could enable us to
receive a portion of our customers' revenues from sales of any products that
result from use of our technology or proprietary database information.

We have completed over 12,000 expression profiles in a wide variety of
tissues and identified over 2,700 genes involved in the onset and progression of
heart failure, kidney disease, infertility, psychiatric disorders and other
major illnesses and over 2,100 genes that predict drug toxicity and agricultural
crop characteristics. We are seeking patent protection for the most important of
these discoveries. Our customers are currently using 24 of these genes in drug
discovery programs from which we would be entitled to earn milestone payments
and royalties on sales of any resulting products.

THE IMPORTANCE OF GENE EXPRESSION INFORMATION

Diseases result when the physiological pathways that regulate the
functioning of cells become abnormal or disturbed. The main components of these
pathways are proteins, the synthesis of which is directed by genes within the
cells. Genes translate their instructions for protein synthesis into messenger
RNA, or mRNA; the amount of mRNA present in any given cell, which is termed gene
expression, is thus a measure of the gene's activity. While each cell of the
human body contains all of the approximately 100,000 genes, only about 10-20% of
the genes are active in any particular cell type. By analyzing which genes are
expressed in a cell or tissue and to what level, it can be determined which
physiological pathways are active in the cell and to what degree. By
understanding when and where abnormal gene expression occurs and the changes in
expression that a drug can cause, the physiological pathways implicated in
disease and drug action can be pinpointed. This knowledge can be used to help
discover drug targets, screen drug leads, predict toxic effects of compounds,
anticipate pharmacological responses to drug leads, and tailor clinical trials
to the specific needs of subgroups within a population. By understanding the
gene expression patterns of relevant tissues from patients with a disease,
physicians may also be able to determine which treatments are likely to be
effective for that condition and which may be ineffective or harmful.

We believe that the GeneExpress database suite is the world's largest
reference set of gene expression information and that it enables our customers
to exploit the power of gene expression information to reduce the time, risk and
cost involved in their product development efforts.

OUR STRATEGY

Our goal is to be the world's leading source of gene expression
information. The key elements of our strategy are to:

- MARKET OUR DATABASE INFORMATION TO THE GLOBAL PHARMACEUTICAL, HEALTHCARE
AND LIFE SCIENCE INDUSTRIES. We market our gene expression database
products to a variety of customers that require different levels of
information and support depending upon their gene expression data needs.
Initially, we are marketing full-access subscriptions to our GeneExpress
database suite to the global pharmaceutical industry and large
biotechnology companies for use in their drug discovery, development and
commercialization efforts. We also market less expensive subscriptions to
versions of the GeneExpress database suite, which we call "data marts,"
to smaller biotechnology companies

30
<PAGE> 32

and academic research centers for specific product development or
research applications. We will also continue to develop custom gene
expression databases as requested by major customers, for which we expect
to earn database access fees, and may earn milestone and royalty payments
as products are developed and commercialized using our data.

- EXPAND OUR GENE EXPRESSION DATABASES TO BUILD THE WORLD'S MOST
COMPREHENSIVE GENE EXPRESSION RESOURCE. We are continually expanding the
breadth and depth of our gene expression information with the intent of
maintaining the GeneExpress database suite as the largest and most
comprehensive gene expression database in the world. By the end of 1999,
the database contained gene expression profiles on over 1,000 tissue
samples representing more than 30 million gene expression data points. By
the end of 2003, we expect to have complete profiles on 30,000 tissue
samples representing an estimated 3 billion gene expression data points.

- ENHANCE FUNCTIONALITY OF OUR SOFTWARE TO ADD FURTHER VALUE TO OUR DATA
CONTENT. We introduced the first version of our GeneExpress database
suite in November 1999 and plan to introduce new versions of GeneExpress
over the next several months. Planned upgrades include expansion of the
GeneExpress Index and enhanced data-analysis algorithms and other tools.

- INCLUDE OTHER TYPES OF BIOLOGICAL DATA IN OUR DATABASES. As gene
expression information becomes more widely used, we expect that our
customers will demand various types of biological data complementary to
the gene expression information we provide. These include, for example,
single nucleotide polymorphism, or SNP, and protein expression profile
information. Because we have designed our databases with leading-edge
functionality, we believe that we will be able to readily generate and/or
incorporate such data either into our existing products or into separate,
specialized databases and become a source of an increasingly broad range
of information.

- LEVERAGE OUR INTERNET DISTRIBUTION CHANNEL TO EARN ADDITIONAL E-COMMERCE
REVENUES. We intend to use the Internet distribution channels
established to deliver our database information to sell other products to
our database subscribers. We also intend to build promotional and
transactional revenue streams derived from sales of third party products
to our installed customer base. We believe that if we develop a respected
Internet portal for genomics and research products, we will be able to
sell a number of research products to our current customers, as well as
new potential customers such as physicians and patients.

OUR PRODUCTS

We generate the gene expression data in our own laboratories from tissues
we collect through our biorepository network using two complementary
technologies -- the GeneChip microarrays produced by Affymetrix Inc. and our own
proprietary READS gene expression technology. The GeneChips currently provide
quantitative expression levels for 40,000 human genes for which either full or
partial sequences are known. During 2000, we expect that this number will grow
significantly as Affymetrix releases new GeneChip microarrays. Currently
GeneChip microarrays are also available for 19,000 mouse and 24,000 rat genes
and we use these to profile experimental animals and disease models and in
toxicology studies. Our READS technology does not depend on any prior knowledge
of gene sequence, is applicable to all animal types, and is extremely sensitive.
We use READS to determine the expression levels of novel genes that are not
represented on the GeneChip microarrays and genes that are expressed at low
abundance. The combination of GeneChip microarrays and READS enables us to
obtain comprehensive coverage of the genes expressed in virtually all important
tissue types.

The GeneExpress Database Suite

The content of the GeneExpress database suite is organized into three
modules:

- THE BIOEXPRESS DATABASE allows subscribers to use gene expression
information to study normal physiology, elucidate the mechanisms of
disease, identify disease-associated pathways and select and prioritize
potential drug targets. This database represents a survey of gene
expression in a broad

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<PAGE> 33

range of normal and diseased human tissues, tissues from experimental
animals and also human and animal cell lines. We are also building more
in-depth profiles of samples specifically related to therapeutic areas in
which the pharmaceutical industry spends the majority of its research
dollars. These include central nervous system (or CNS), oncological and
cardiovascular disease, diabetes, osteoporosis and inflammatory and
immunological diseases.

- THE TOXEXPRESS DATABASE contains gene expression profiles produced by
drugs and other compounds associated with known classes of toxicity in
the organs typically subject to such toxic effects, like the liver. These
toxicity profiles can be used as references against which new drug leads
can be screened to assess their toxic potentials. Screening early in the
drug discovery and development process allows researchers to potentially
reject compounds having unacceptable toxicity profiles before incurring
the substantial expenses of traditional animal toxicology studies and
clinical trial failures. We also have cases which indicate that gene
expression profiling may predict human toxicity where traditional animal
toxicity screening failed to reveal such effects. The database currently
contains gene expression data from liver tissue from experimental animals
treated in vivo at various dosages for varying time periods and primary
rat and human hepatocytes treated in vitro. During 2000, we intend to
expand the database to include toxicity profiles in CNS tissues, bone
marrow, kidney and heart tissue.

- THE PHARMEXPRESS DATABASE is analogous to the ToxExpress database and
contains gene expression profiles produced by a wide range of marketed
drugs across many human and animal tissue samples. Subscribers can use
this information to analyze mechanisms of drug action at the molecular
level, to re-engineer compounds to have more specific effects and,
potentially, to identify new indications for existing products. At the
end of 1999, there were approximately 400 drugs represented in the
database. We expect that the content of the PharmExpress database will
grow in parallel with the number of tissue samples accrued and processed.
During 2000, we will also profile important categories of drugs in
experimental animals in vivo and in cellular systems in vitro at a range
of dosages and treatment periods.

For each human sample in the GeneExpress suite, there is a variety of
information, including biographical data, clinical history and diagnosis,
laboratory values, medication history, drug treatment outcomes and social and
family histories. Experimental animal samples are annotated with the details of
the applicable experimental protocols, such as types and durations of
treatments. This information can be used to define the samples that are relevant
to specific biological questions. A user of our database conducting an
electronic experiment begins by constructing a sample set relevant to the query,
choosing among more than 150 attributes to define the set. For example, one
might select all normal liver samples from males aged 20 to 50 years who have
normal serum cholesterol levels and are not taking medications

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<PAGE> 34

and compare this set with those having elevated cholesterol, as shown in Figure
1, which is representative of a sample search page of the database.

FIGURE 1

[HUMAN SAMPLE SEARCH GRAPHIC]

Within such a comparison a user could decide to look at all the genes or
any subset, defined again by a wide choice of attributes. For example, one could
choose only genes encoding a certain family of enzymes or all the genes on
chromosome 22, as shown in Figure 2.

FIGURE 2

[SEQUENCE BLAST QUERY GRAPHIC]

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<PAGE> 35

The results of these queries may be displayed in many ways. For instance,
they may, at the click of a button, be exported to sophisticated visualization
and statistical analysis packages, or automatically mapped to the biological
pathways with which they are associated by clicking on a button, as shown in
Figure 3.

FIGURE 3

[C4-DICARBOXYLIC ACID CYCLE GRAPHIC]

The GeneExpress database suite also incorporates a GeneExpress Index, which
serves as the link between the genes identified by a query and comprehensive
information available about those genes from publicly available sources and our
own proprietary annotations. This includes sequences and sequence clusters, gene
homologies, gene classification and gene family data, gene function and pathway
maps, chromosome location, single nucleotide polymorphism, or SNP, information,
protein structures and relevant medical and scientific literature. These data
sources are refreshed weekly. By selecting among these elements, a user can
bring up on the computer screen an up-to-date customized report for genes of
interest, as shown in Figure 4.

FIGURE 4

[KNOWN GENE NAME GRAPHIC]

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In December 1999, we entered into our first subscription agreement for the
GeneExpress database suite with Therapeutic Genomics, Inc. We expect to enter
into additional subscription agreements for our GeneExpress database suite of
products in the near future.

During 2000, we plan to introduce enhanced features and functionality in
versions of our database planned for release in the second and third quarters.
Among these is expansion of the GeneExpress Index to rat and mouse sequences
with associated homology links to human sequences. Also, we plan to introduce a
feature, which we call an "electronic Northern blot," that allows profiling of a
gene across multiple tissues at a single click. In addition, we expect to
provide enhanced algorithms for clustering and statistical analysis, multiple
new visualization tools and a pathway constructor that allows users to define
their own proprietary biological pathways based on their discoveries.

Custom Databases and Software Products

Gene Logic has been developing customized databases tailored to specific
customers' internal programs and needs since 1997. We currently have 13
customers for our custom gene expression and other genomic databases and data
management software. Eleven are major pharmaceutical and life science technology
companies, one a major agricultural company and one a biotechnology company.
Five of these agreements provide us with various technology and database access
fees, research funding and up-front payments. These five agreements also provide
for additional payments upon attainment of research and product development
milestones and royalty payments based on sales of any products that result from
use of our technology or proprietary database information. We also have an
agreement with a pharmaceutical company for the development of a database for
predicting drug toxicity. Under that agreement, we may license the database and
other products developed pursuant to the agreement to third party customers. In
addition, we have agreements with a major pharmaceutical company, a life science
technology company and a biotechnology company for bioinformatics software,
database development, and data integration. Under those agreements, we receive
annual software license fees and development fees. We have an additional four
agreements with major pharmaceutical companies in which we receive fees for gene
expression and genomic analysis of samples for the profiling of drugs both at
the preclinical and clinical trial stages of development.

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<PAGE> 37

The following table summarizes our relationships with our current custom
database and bioinformatics software customers:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DATE OF CUSTOM BIOINFORMATICS
CUSTOMER INITIATION DATABASES SOFTWARE APPLICATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Procter & Gamble May 1997 X Drug discovery for heart
Pharmaceuticals failure and osteoporosis
- ----------------------------------------------------------------------------------------------------------
Japan Tobacco Sept. 1997 X Drug discovery for renal and
other diseases
- ----------------------------------------------------------------------------------------------------------
Organon(1) Dec. 1997 X Drug discovery for fertility
and psychiatric disorders
- ----------------------------------------------------------------------------------------------------------
Wyeth-Ayerst Laboratories(2) June 1998 X Predictive toxicology
- ----------------------------------------------------------------------------------------------------------
Aventis Crop Science June 1998 X Identification of genes for
agricultural products
- ----------------------------------------------------------------------------------------------------------
Merck & Co. Sept. 1998 X Clinical trial profiling
- ----------------------------------------------------------------------------------------------------------
SmithKline Beecham Sept. 1998 X Custom database development
- ----------------------------------------------------------------------------------------------------------
Schering Plough Research Sept. 1998 X Clinical trial profiling
Institute
- ----------------------------------------------------------------------------------------------------------
Aventis Sept. 1998 X Clinical trial profiling
- ----------------------------------------------------------------------------------------------------------
AGY Therapeutics Feb. 1999 X Custom database development
- ----------------------------------------------------------------------------------------------------------
PE Biosystems Mar. 1999 X Custom database development
- ----------------------------------------------------------------------------------------------------------
UCB Pharma Sept. 1999 X Drug discovery for asthma and
allergies
- ----------------------------------------------------------------------------------------------------------
Fujisawa Pharmaceutical Dec. 1999 X Proprietary and reference drug
profiling for diabetes
- ----------------------------------------------------------------------------------------------------------
(1) A unit of Akzo Nobel
(2) A division of American Home Products
- ----------------------------------------------------------------------------------------------------------
</TABLE>

MARKET SEGMENTS

Since release of the first commercial version of the GeneExpress database
suite in November 1999, our sales and marketing efforts have concentrated
principally on the largest pharmaceutical companies. We are expanding our
marketing group and hiring field specialists to service what we see as rapidly
increasing interest in and demand for our products from this first target
market. Because of the flexible, modular nature of the GeneExpress database
suite, we also plan to create smaller, less expensive databases, which we call
data marts, containing segments or versions of the data from GeneExpress which
we believe will make our products more accessible to potential customers lacking
the resources of the largest pharmaceutical companies. Accordingly, during 2000,
we will broaden our marketing efforts to include other market segments;
specifically, we are assembling sales teams to focus on the smaller
pharmaceutical, biotechnology and diagnostic sectors and have recently recruited
a senior executive with wide experience in Internet-based business and
e-commerce strategies. In addition, we may establish relationships with several
major companies in the healthcare and life science industries that could link
into our GeneExpress database suite as a portal for the promotion and sales of
their goods and services over the Internet to a broad group of high value
database users.

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<PAGE> 38

The following table summarizes our business and marketing strategy for
these market segments:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
MARKET SEGMENT REVENUE MODEL CUSTOMER ACCESS ADDITIONAL REVENUE OPPORTUNITIES
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Largest Pharmaceutical and Annual subscription to full Internet Products:
Biotechnology Companies GeneExpress database suite In-house server Custom databases
Custom chips
Software
e-Commerce:
Research reagents
- ---------------------------------------------------------------------------------------------------------------------
Other Pharmaceutical and Annual subscription to target Internet Products:
Biotechnology Companies gene expression data marts In-house server Custom databases
Custom chips
Software
e-Commerce:
Research reagents
- ---------------------------------------------------------------------------------------------------------------------
Academic Research Inexpensive basic Internet Products:
data/subscription access to Custom chips
specialized gene expression e-Commerce:
data marts Research reagents
- ---------------------------------------------------------------------------------------------------------------------
Diagnostic Companies Annual subscription to full Internet Products:
GeneExpress database suite In-house server Custom databases
Annual subscription to gene Diagnostic chips
expression data marts Software
e-Commerce:
Specialized gene probes
- ---------------------------------------------------------------------------------------------------------------------
Clinical Research Annual subscription to clinical Internet Products:
Organizations gene expression data marts In-house server Custom databases
Custom chip
Software
- ---------------------------------------------------------------------------------------------------------------------
Biomedical Companies Promotional, advertising and Internet e-Commerce:
Targeting Physicians and transaction-based revenues from Pharmaceutical promotion:
Patients Via the Internet biomedical and other companies -- to physicians
-- direct-to-consumer
e-Health direct-to-consumer
Specialized diagnostics
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

CORE PROCESSES USED TO CREATE OUR DATABASES

To build our gene expression information products we have developed
quality-controlled and quality-assured processes by which we acquire the
appropriate human and animal tissues samples and related information and enter
them into our biorepository, measure the level of gene expression in the samples
under standardized conditions and manage, analyze and distribute to customers
the massive amounts of resulting data.

Biorepository

Over the past three years, we have established an international network of
clinical centers where we have agreements to collect human tissue samples. We
believe this established network provides us with a significant competitive
advantage because it has enabled us to acquire comprehensive data and gives us
what we believe is superior access to tissue samples for genomic analysis
purposes. The network currently consists of six major sites, four in the United
States and two in the United Kingdom, which provide a broad range of normal and
diseased human tissues; and nine other centers for the accrual of specialized
tissue types. During 2000 we intend to add additional clinical centers to this
network.

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<PAGE> 39

At each center we have approvals and patient informed consent processes in
place allowing us free and clear use of the tissues and related information.
Tissues are obtained directly from the operating rooms according to protocols we
have established to preserve their quality and shipped to our headquarters
together with extracts from the clinical records. To obtain normal and treated
experimental animal tissues we have contracted with a clinical research
organization that specializes in this area. At our facilities every human and
animal sample undergoes rigorous quality control and examination by a
board-certified pathologist on our staff before accession into the
biorepository. The process includes taking photomicrographs of each sample which
are captured in the GeneExpress database suite and may be examined by users.
There thus exists a complete audit trail from the clinical center to entry into
the database. We have also set up a laser capture micro-dissection unit to allow
us to separate certain complex tissues into their constituent cell types, each
of which may then be analyzed independently.

As of December 31, 1999, we had accrued over 3,000 human tissues samples,
approximately one-third being normal and two-thirds diseased, and 4,000
experimental animal samples in the biorepository. Our human tissue collection
comprises at least five samples from each of the major organ systems, because we
believe multiple samples helps assure statistical accuracy and account for
aberrational samples and inter-individual variation. By the end of 2000, our
goal is to have 20 samples of each organ type. The animal samples consist of
tissues from normal rats and mice and animals that have been treated with drugs
of interest for the ToxExpress and PharmExpress databases. We have also
collected tissues from experimental animal disease models and cell lines that
are widely used in drug discovery research.

Gene Expression Data Production

The expression levels of the genes in each sample is measured using
Affymetrix GeneChip microarrays. The current GeneChip set comprises five glass
chips to which are attached small pieces of DNA from 5,600 full-length genes and
35,000 gene fragments. We expect that these numbers will be significantly
expanded during 2000 and eventually cover the entire human genome. Our agreement
with Affymetrix requires Affymetrix to supply us with GeneChip microarrays on a
nonexclusive basis and provides us with price concessions, quality assurances
and negotiated delivery requirements, which we believe give us an advantage not
shared by other companies using gene expression technologies for commercial
purposes.

Fluorescent-labeled DNA sequences from a tissue sample bind to their
complements on the GeneChip array. By detecting the positions of the fluorescent
spots on the chip, researchers can determine which genes were expressed in the
sample. The brightness of the spot represents a precise, quantitative measure of
the level of expression of the gene. This measure is permanently stored and can
be compared across all the samples in the GeneExpress database suite. Currently
GeneChip microarrays are also available for 19,000 mouse and 24,000 rat genes
and we use these to profile experimental animals and disease models and in
toxicology studies.

GeneChip microarrays are capable of measuring the expression levels of only
those genes for which sequence information is available and for which probes
have been placed on the chips. Currently this number is approximately 40,000. In
order to obtain comprehensive coverage of all the genes expressed in important
tissue types, we use our patented READS technology. The READS process does not
depend on any prior knowledge of gene sequence, is applicable to all animal
types, and is extremely sensitive. We use READS to determine the expression
levels of novel genes that are not represented on the GeneChip microarrays and
genes that are expressed at low abundance.

The protocols and procedures we have developed for tissue accrual and for
running both GeneChip microarrays and the READS process have been highly
automated and extensively validated to the level of good laboratory practices,
or GLP. We conduct regular audits of all key steps of these processes and the
results of these audits are available to database subscribers.

Our current production capacity is 400 samples, a throughput of 2,000
GeneChip microarrays, per month. During 2000, we expect to increase production
to 800 samples per month. By December 2000, we

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<PAGE> 40

expect to be adding approximately 50 million gene expression data points to the
GeneExpress database suite every month.

Data Management, Analysis and Distribution

The production process generates very large amounts of gene expression
data, which must be managed effectively and integrated with data from
subscribers' in-house databases and a growing number of public domain genomic
and medical databases available on the Internet. These various databases often
have different, incompatible structures, but our proprietary Object Protocol
Model, or OPM, data management software allows us and our customers to manage,
integrate, and query them as if they were part of a single database. A major
advantage of OPM is that it is easier to use for genomic applications than
conventional database management software. Using OPM, a bioinformatics
specialist can view the structure of the underlying database on a computer
screen and interact with it by pointing and clicking. OPM software thus allows
expert users to customize their version of the GeneExpress database suite
rapidly.

The GeneExpress database suite consists of three inter-related data
sets -- the biological descriptions of the tissue samples and the associated
clinical data, the quantitative measurements of gene expression in the samples,
and the GeneExpress Index -- contained within an open Oracle 8.1 data warehouse
core. Running on top of the data warehouse, through a structure known as a
"run-time engine," is a layer of analysis applications. These applications allow
a user to define sample and gene sets and to generate extensive reports about
the genes expressed in the samples within the data warehouse. As examples, a
user can ask for a:

- gene signature -- the genes that are consistently expressed in samples of
a given tissue type;

- gene signature differential -- how gene expression changes from one type
of sample to another, for example, from a normal tissue to its diseased
state;

- gene fold-change report -- a quantification of changes, for instance,
from a normal to a diseased tissue, or from various tissues across stages
of disease progression; and

- cluster tree report -- a clustering of genes into functional pathways
based on similar patterns in their gene expression profiles.

Then, through the GeneExpress Index, the user can call up comprehensive
on-screen reports on any or all of the genes of interest.

From their desktops, users of the GeneExpress database suite log on over
secure Internet connections to servers located at Gene Logic's main computer
facility. This brings them to a user-friendly web interface inside their
browsers. Each page offers them a variety of choices for searching the database
and analyzing the data. The results may be saved in a dedicated workspace
management area and may be shared with other members of a team or workgroup
across the globe. Over time, the users in a major pharmaceutical company can
construct and save the results of thousands of electronic experiments, such as
normal gene expression profiles of important cell and tissue types, comparisons
of diseased versus normal samples, animals versus human, pathway maps and sets
of valuable patient data, and integrate these information sets into their
discovery and development programs. We believe that with each use of these
growing sets of legacy information, the value of the database to its users is
increased, strengthening customer loyalty.

FLOW-THRU CHIP PROBE ARRAYS

The GeneExpress database suite allows a researcher to rapidly identify a
subset of genes that may be relevant to a specific disease, research program or
drug discovery effort. The next step is to be able to profile the expression of
that subset of genes under specific experimental conditions. For example, one
might wish to screen a chemical library looking for those compounds that affect
expression of the genes in a beneficial way, or develop a screening system to
assess the toxicological potential of a series of new drug leads.

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<PAGE> 41

To fill this market need, we have developed and received patents on a
three-dimensional chip technology, called the Flow-thru Chip. The Flow-thru Chip
is a glass or silicon wafer traversed by hundreds of thousands of discrete
microscopic channels. Probes for the subset of genes of interest are attached to
the inner surfaces of these channels, and molecules from the samples to be
tested flow through the channels, coming into close proximity with the probes,
thus facilitating binding.

The Flow-thru Chip offers several features that make it well-suited to high
throughput applications:

- Speed. The small channels create a reaction vessel, causing molecules
from the samples to bind rapidly to their complementary probes.

- Sensitivity. Because of its three-dimensional structure, the Flow-thru
Chip has greater surface area for attachment of probes than conventional
flat chips. This allows detection of smaller quantities of molecules.

- Cost. The process by which the Flow-thru Chips are manufactured is
simple and cost-effective for smaller quantities as compared to
high-density chips.

- Versatility. The close proximity of probes and sample molecules may
facilitate, in addition to the binding of DNA to DNA, a wide range of
other reactions. For example, the Flow-thru Chip may be useful in
analyzing interactions between two proteins, between proteins and DNA, or
between proteins and small molecules.

Although we will continue to use the Flow-thru Chip internally, Gene Logic
does not itself intend to manufacture and market the Flow-thru Chip for
commercial sale. We are currently in discussions with third parties to establish
commercialization partnerships through which we could receive technology
transfer payments and profit-sharing or royalties on Flow-thru Chip sales.

INTELLECTUAL PROPERTY

We seek United States and international patent protection for major
components of our technology platform, including elements of our READS,
Flow-thru Chip and bioinformatic technologies. We also rely on trade secret
protection for certain of our confidential and proprietary information, and we
use license agreements both to access external technologies and assets and to
convey certain intellectual property rights to others. Our commercial success
will be dependent in part on our ability to obtain commercially valuable patent
claims and to protect our intellectual property portfolio.

As of December 31, 1999, we had exclusive rights to 13 issued patents, 11
of which are United States patents, and 62 patent applications, 47 of which are
United States patent applications, relating to our technologies. We have
exclusive rights to United States patents covering key aspects of READS gene
expression analysis, gene expression analysis using restriction enzymes, and the
Flow-thru Chip technology.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including ours, are generally uncertain and involve complex legal and
factual questions. Our business could be hurt by any of the following:

- the pending patent applications to which we have exclusive rights may not
result in issued patents;

- the claims of any patents which are issued may not provide meaningful
protection;

- we may not be successful in developing additional proprietary
technologies that are patentable;

- patents licensed or issued to us or our customers may not provide a basis
for commercially viable products or provide us with any competitive
advantages and may be challenged by third parties; and

- others may have patents that relate to our technology or business.

In addition, patent law relating to the scope of claims in the technology
field in which we operate is still evolving. The degree of future protection for
our proprietary rights, therefore, is uncertain. Furthermore, others may
independently develop similar or alternative technologies, duplicate any of our

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<PAGE> 42

technologies, and if patents are licensed or issued to us, design around the
patented technologies licensed to or developed by us. In addition, we could
incur substantial costs in litigation if we are required to defend ourselves in
patent suits brought by third parties or if we initiate such suits.

We are aware of a number of United States patents and patent applications
and related foreign patents and patent applications owned by third parties
relating to the analysis of gene expression or the manufacture and use of DNA
probe arrays. These other technologies may provide third parties with
competitive advantages over us and may hurt our business. In addition, third
party patent applications contain broad claims, and it is not possible to
determine whether or not such claims will be narrowed during prosecution and/or
will be allowed and issued as patents, even if such claims appear to cover prior
art or have other defects. An owner or licensee of a patent in the field may
threaten or file an infringement action and we may or may not prevail in any
such action. The cost of defending an infringement action may be substantial,
which could significantly increase our expenses and increase our losses.
Furthermore, required licenses may not be made available on commercially viable
terms, if at all. Failure to obtain any required license could prevent us from
utilizing or commercializing one or more of our technologies.

We have applied, and intend to make additional applications, for patent
protection for methods relating to gene expression, for the disease-specific
patterns of gene expression we identify and for the individual disease genes and
targets we discover. Such patents may include claims relating to novel genes and
gene fragments and to novel uses for known genes or gene fragments identified
through our discovery programs. We may not be able to obtain meaningful patent
protection for our discoveries; even if patents are issued, the scope of the
coverage or protection they would afford is uncertain. Failure to secure such
meaningful patent protection would endanger our competitive position.

Several groups are attempting to identify and patent gene fragments and
full-length genes, the functions of which have not been characterized, as well
as fully characterized genes. There is substantial uncertainty regarding the
possible patent protection for gene fragments or genes without known function or
correlation with specific diseases. To the extent any patents issue to other
parties on such partial or full-length genes, the risk increases that our
potential products and processes and those of our customers may give rise to
claims of patent infringement. The public availability of partial or full
sequence information or the existence of patent applications related thereto,
even if not accompanied by relevant function or disease association, prior to
the time we apply for patent protection on a corresponding gene could hinder our
ability to obtain patent protection with respect to such gene or to the related
expression patterns. Furthermore, others may have filed, and in the future are
likely to file, patent applications covering genes or gene products that are
similar, or identical to, any for which we may seek patent protection. These
patent applications may have priority over patent applications filed by us. Any
legal action against us or our customers claiming damages and seeking to enjoin
commercial activities relating to the affected products and processes could, in
addition to subjecting us to potential liability for damages, require us and our
customers to obtain a license in order to continue to manufacture or market the
affected products and processes. We and our customers may not prevail in any
such action and any license required under any patent may not be available on
commercially acceptable terms, if at all. We believe that there is likely to be
significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in such litigation, it could consume a
substantial portion of our managerial and financial resources and negatively
impact our financial results.

Enactment of legislation implementing the General Agreement on Tariffs and
Trade has resulted in certain changes to United States patent laws that became
effective on June 8, 1995. Most notably, the term of patent protection for
patent applications filed on or after June 8, 1995 is no longer a period of 17
years from the date of grant. The new term of United States patents will
commence on the date of issuance and terminate 20 years from the earliest
effective filing date of the application. Because the time from filing to
issuance of biotechnology patent applications is often more than three years, a
20-year term from the effective date of filing may result in a substantially
shortened period of patent protection which may harm our patent position. If
this change results in a shorter period of patent coverage, our business could
be harmed to the extent that the duration and level of the royalties we are
entitled to receive from

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<PAGE> 43

our partners are based on the existence of a valid patent covering the product
subject to the royalty obligation.

With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our interests. We believe
that several elements of our drug discovery system involve proprietary know-how,
technology or data that are not covered by patents or patent applications. In
addition, we have developed a proprietary index of gene and gene fragment
sequences which we update on an ongoing basis. Some of this data will be the
subject of patent applications, whereas other data will be maintained as
proprietary trade secret information. We have taken security measures to protect
our proprietary know-how and technologies and confidential data and continue to
explore further methods of protection. While we require all employees,
consultants and customers to enter into confidentiality agreements, we cannot be
certain that proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets, or that we can
meaningfully protect our trade secrets. In the case of arrangements with our
customers that require the sharing of data, our policy is to make available to
our customers only such data as is relevant to our agreements with such
customers, under controlled circumstances, and only during the contractual term
of those agreements, and subject to a duty of confidentiality on the part of our
customer. However, such measures may not adequately protect our data. Any
material leak of confidential data into the public domain or to third parties
may cause our business, financial condition and results of operations to be
harmed.

We are a party to various license agreements that give us rights to use
technologies and biological materials in our research and development processes.
We may not be able to maintain such rights on commercially reasonable terms, if
at all. Failure by us to maintain such rights could harm our business.

COMPETITION

Competition among entities attempting to identify the genes associated with
specific diseases and to develop products based on such discoveries is intense.
We face, and will continue to face, competition from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions, and
government agencies, both in the United States and abroad. Several entities are
attempting to identify and patent randomly sequenced genes and gene fragments,
while others are pursuing a gene identification, characterization and product
development strategy based on positional cloning. We are aware that certain
entities, including Incyte Pharmaceuticals, Inc. and the Celera Genomics Group
of PE Corporation, are using a variety of gene expression analysis
methodologies, including the use of chip-based systems, to attempt to identify
disease-related genes. In addition, numerous pharmaceutical companies are
developing genomic research programs, either alone or in partnership with our
competitors. Competition among such entities is intense and is expected to
increase. In order to compete against existing and future technologies, we will
need to demonstrate to potential customers that our technologies and
capabilities are superior to competing technologies.

Many of our competitors have substantially greater capital resources,
research and development staffs, facilities, manufacturing and marketing
experience, distribution channels and human resources than we do. These
competitors may discover, characterize or develop important genes, drug targets
or drug leads, drug discovery technologies or drugs in advance of us or our
customers or which are more effective than those developed by us or our
customers, or may obtain regulatory approvals of their drugs more rapidly than
we do or our customers do, any of which could have a material adverse effect on
any of our similar programs. Moreover, our competitors may obtain patent
protection or other intellectual property rights that could limit our rights or
our customers' ability to use our technologies or commercialize therapeutic,
diagnostic or agricultural products. We also face competition from these and
other entities in gaining access to cells, tissues and nucleic acid samples used
in our discovery programs.

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and marketing of these products. Each of our customers is conducting multiple
product development efforts within each disease area that is the subject of its
agreement with us. Generally, our agreements with customers do not preclude the
customer from pursuing development efforts utilizing approaches distinct from
that which is the subject of our agreement with them. Any of our product
candidates, therefore, may be subject to competition with a potential product
under development by a customer.

Future competition will come from existing competitors as well as other
companies seeking to develop new technologies for drug discovery based on gene
sequencing, target gene identification, bioinformatics and related technologies.
In addition, certain pharmaceutical and biotechnology companies have significant
needs for genomic information and may choose to develop or acquire competing
technologies to meet such needs. Our agreement with Affymetrix provides us with
nonexclusive access to GeneChip probe arrays for our use in generating gene
expression databases for license to multiple third parties and custom databases
for license to a single third party. Accordingly, our competitors could obtain
licenses to use GeneChip probe arrays to develop their own gene expression
databases for internal use or may use other technologies to develop competitive
products and services.

GOVERNMENT REGULATION

Regulation of Drug Development and Commercialization

We do not plan to conduct clinical trials in humans or commercialize
therapeutic products discovered as a result of our gene, drug target and drug
lead discovery programs but intend to rely on our customers to conduct such
activities. Any new drug developed by the efforts of our customers as a result
of their use of our GeneExpress database suite or other products must undergo an
extensive regulatory review process in the United States and other countries
before it can be marketed. This regulatory process, which includes preclinical
studies and clinical trials, and may include post-marketing surveillance of each
compound to establish its safety and efficacy, can take many years and require
the expenditure of substantial resources. Data obtained from preclinical studies
and clinical trials are subject to varying interpretations that could delay,
limit or prevent marketing. Delays or rejections may also be encountered based
on changes in United States Food and Drug Administration policies for drug
review during the period of product development and FDA regulatory review of
each submitted new drug application, or NDA, in the case of new pharmaceutical
agents; or product license application, or PLA, or biologics license
application, or BLA, in the case of biological therapeutics. Delays may also be
encountered in the regulatory review of any diagnostic or agricultural product,
where such review is required, and in obtaining regulatory clearance in foreign
countries. Delays in obtaining marketing clearance could delay the
commercialization of any drugs or diagnostic or agricultural products developed
by our customers, impose costly procedures on our customers' activities,
diminish any competitive advantages that our customers may attain and lessen our
potential royalties.

Even if regulatory clearance is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the market,
which could reduce our revenue sources and hurt our financial results.
Violations of regulatory requirements at any stage during the process, including
preclinical studies and clinical trials, the review process, post-marketing
approval or in good manufacturing practices or manufacturing requirements, may
result in various adverse consequences to us, including:

- the FDA's delay in granting marketing clearance of or refusal to grant
marketing clearance a product;

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<PAGE> 45

- withdrawal of a product from the market; or

- the imposition of criminal penalties against the manufacturer and NDA,
PLA or BLA holder.

No product resulting from the use of our databases has been released for
commercialization in the United States or elsewhere. In addition, no
investigational new drug application has been submitted for any such product
candidate. We expect to rely on our customers to file such applications and
generally direct the regulatory review process. We cannot be certain if or when
our customers will submit an application for regulatory review, or whether our
customers will be able to obtain marketing approval for any products on a timely
basis, if at all. If our customers fail to obtain required governmental
approvals, it will prevent us from marketing drugs or diagnostic products. The
occurrence of any of these events may cause our business, financial condition
and results of operations to suffer.

Regulation of Use of Human Tissue

Our access to and use of human or other tissue samples in the expansion of
our GeneExpress database suite and the creation of custom databases may become
subject to government regulation, both in the United States and abroad. U.S. and
foreign government agencies may also impose restrictions on the use of data
derived from human or other tissue samples. If our access to or use of human
tissue samples, or our customers' use of data derived from such samples, is
restricted, our business will suffer.

Environmental Regulation

Our research and development activities in some cases involve the
controlled use of biological and other hazardous materials, chemicals and
various radioactive materials. We are subject to federal, state and local laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. The risk of accidental contamination or
injury from these materials cannot be eliminated. In the event of an accident,
we could be held liable for any damages that result, and any liability could
exceed our resources. Other than such laws and regulations governing the
generation, use and disposal of hazardous materials and wastes, and limiting
workplace exposures to these materials, we do not believe our current and
proposed activities are subject to any specific government regulation other than
regulations affecting the operations of companies generally.

Regulation of the Internet

There is an increasing body of law and regulation pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, on-line content regulation, user privacy, taxation and quality of
products and services. Moreover, it may take years to determine whether and how
existing laws such as those governing issues such as intellectual property
ownership and infringement, privacy, copyright, trademark, trade secret,
taxation and the regulation of the sale of other specified goods and services
apply to the Internet. The requirement that we comply with any new legislation
or regulation, or any unanticipated application or interpretation of existing
laws, may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our products, increase our cost of doing business or
otherwise have a material adverse effect on our business, results of operations
and financial condition.

Due to the global reach of the Internet, it is possible that, although our
transmissions over the Internet originate primarily in the State of Maryland,
the governments of other states and foreign countries might attempt to regulate
Internet activity and our transmissions or take action against us for violations
of their laws. There can be no assurance that violations of such laws will not
be alleged or charged by state or foreign governments and that such laws will
not be modified, or new laws enacted, in the future. Any of the foregoing could
have a material adverse effect on our business, results of operations and
financial condition.

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<PAGE> 46

LEGAL PROCEEDINGS

On October 19, 1999 a lawsuit was filed in the Circuit Court of Cook
County, Illinois against Oncormed, Inc. and Gene Logic Inc. alleging that
Oncormed was negligent in determining and reporting laboratory test results of a
genetic test conducted by Oncormed. Oncormed sold its testing business to a
third-party company prior to our acquisition of Oncormed. We are not engaged in
any type of genetic testing, nor do we have plans to enter such markets. We
maintain insurance coverage against such claims, and do not believe this action
will have a material adverse impact on our business, financial condition or
results of operations.

EMPLOYEES

As of December 31, 1999, we had 176 full-time employees, 57 of whom hold
doctoral degrees and 36 of whom hold other advanced degrees. Of these, 148 were
engaged in research and development, including bioinformatics, and 28 were
engaged in business development, finance, and general administration. None of
our employees is represented by a labor union or covered by a collective
bargaining agreement. We have not experienced any work stoppages and consider
our relations with our employees to be good. Our future success depends in
significant part on the continued service of our key scientific, technical and
senior management personnel and our continuing ability to attract and retain
highly qualified technical and managerial personnel. There is intense
competition for such qualified personnel in the areas of our activities and we
may not be able to continue to attract and retain the personnel necessary for
the development of our business. Failure to attract and retain key personnel
could cause our business, financial condition and results of operations to be
harmed.

FACILITIES

Gene Logic's headquarters consist of approximately 50,000 square feet of
office and research laboratory space located in Gaithersburg, Maryland under a
lease which expires in 2007. Gene Logic also leases approximately 19,000 square
feet of additional office and research laboratory space in Gaithersburg,
Maryland and 8,000 square feet of office space in Berkeley, California under
lease agreements with terms expiring in 2001 and 2004, respectively. During
early 2000, we expect to evaluate several alternatives for additional space to
meet our current and projected needs.

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<PAGE> 47

MANAGEMENT

Our executive officers and directors, and their ages and positions as of
January 11, 2000, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael J. Brennan, M.D., 41 Chief Executive Officer and Director
Ph.D. ...........................
Mark D. Gessler.................. 37 President and Chief Operating Officer
Douglas Dolginow, M.D. .......... 45 Senior Vice President, Pharmacogenomics
Gregory G. Lennon, Ph.D. ........ 42 Senior Vice President, Research and
Development and Chief Scientific Officer
Victor M. Markowitz, D.Sc. ...... 46 Senior Vice President, Data Management Systems
David S. Murray.................. 52 Senior Vice President, Marketing and Sales
Philip L. Rohrer, Jr. ........... 43 Chief Financial Officer
Alan G. Walton, Ph.D., D.Sc. .... 64 Chairman of the Board of Directors
Jules Blake, Ph.D. .............. 75 Director
Charles L. Dimmler III........... 58 Director
G. Anthony Gorry, Ph.D. ......... 59 Director
Jeffrey D. Sollender............. 40 Director
</TABLE>

Michael J. Brennan, M.D., Ph.D., has served as our Chief Executive Officer
and as a director since December 1995. From December 1995 through January 1999,
Dr. Brennan also served as our President. From October 1993 to November 1995, he
was Vice President, Business Development for Corange International Limited's
worldwide therapeutics business, Boehringer Mannheim Therapeutics. From June
1990 to October 1993, Dr. Brennan was a director and the general manager of
Boehringer Mannheim, South Africa. Dr. Brennan received a Ph.D. in neurobiology
and an M.D. from the University of the Witwatersrand, Johannesburg, South
Africa. In 1985, he completed his residency in neurology at Boston City
Hospital.

Mark D. Gessler has served as our President and Chief Operating Officer
since January 1999. From June 1996 to October 1999, Mr. Gessler served as our
Chief Financial Officer and, from June 1996 to January 1999, was our Senior Vice
President, Corporate Development. From February 1993 to June 1996, he was with
GeneMedicine Inc., a gene therapy company, most recently as Vice President,
Corporate Development. From 1988 until January 1993, he was Director of Business
Development at BCM Technologies Inc., the venture and technology subsidiary of
Baylor College of Medicine. While in that position, Mr. Gessler co-founded three
biotechnology companies and a software company. Mr. Gessler holds an MBA from
the University of Tennessee and was an Adjunct Professor of Business
Administration at Rice University from 1991 to 1996.

Douglas Dolginow, M.D., joined us as Senior Vice President,
Pharmacogenomics in September 1998. Dr. Dolginow served as President and Chief
Operating Officer of Oncormed Inc. from October 1993 and as a director of
Oncormed from May 1994 until joining us. Dr. Dolginow was Vice President of
Regional Operations for Nichols Institute, a clinical laboratory company, from
May 1991 to October 1993. From 1983 to 1991, he served as medical director for
multiple clinical laboratories including Highland General Hospital, Oakland,
California and Mt. Zion Hospital, San Francisco, California. Since 1984, he has
been an active member of the Clinical Faculty at the University of California,
San Francisco. Dr. Dolginow received an M.D. from the University of Kansas.

Gregory G. Lennon, Ph.D., has served as our Senior Vice President, Research
and Development and Chief Scientific Officer since June 1998. From September
1997 to June 1998, he was our Vice President, Genomics Research. Prior to
joining us, Dr. Lennon was a senior scientist of the Human Genome Center at
Lawrence Livermore National Laboratory from October 1991 to August 1997 and
manager of the functional genomics research portfolio for the Department of
Energy's Joint Genome Institute from January 1997 to August 1997. Dr. Lennon is
a founder and the director of the I.M.A.G.E. (Integrated Molecular Analysis of
Gene Expression) Consortium funded by the Department of Energy. He was a

46
<PAGE> 48

participant in both the Merck Gene Index project and the National Cancer
Institute's Cancer Genome Anatomy Project. Dr. Lennon holds a Ph.D. in genetics
from the University of Pennsylvania. He is an adviser to the National Cancer
Institute of the National Institutes of Health.

Victor M. Markowitz, D.Sc., has served as our Senior Vice President, Data
Management Systems, since September 1998. He joined us in September 1997 as Vice
President, Data Management Systems. Prior to joining us, Dr. Markowitz was a
staff scientist at Lawrence Berkeley National Laboratory and project leader in
the laboratory's Data Management Research and Development Group. He is the
principal architect of the Object Protocol Model software. Dr. Markowitz
received his M.Sc. and D.Sc. degrees in computer science from Technion, the
Israel Institute of Technology.

David S. Murray has served as our Senior Vice President, Marketing and
Sales, since January 2000. From 1968 until January 2000, Mr. Murray held various
positions with Dun & Bradstreet Corporation, a business information provider,
including Executive Vice President, U.S., from 1994 until January 2000, and
President, Asia/Pacific-Latin America, from 1991 until 1994. Mr. Murray served
as Senior Vice President, Asia/Pacific-Latin America, from 1990 until 1991,
President, Japan, from 1989 until 1990, and Managing Director, Hong Kong, from
1987 until 1989. Mr. Murray holds a B.S. in business administration from Murray
State University.

Philip L. Rohrer, Jr., has served as our Chief Financial Officer since
October 1999. From May 1978 until August 1999, Mr. Rohrer held various positions
with BioWhittaker Inc., a biotechnology supply company, including Chief
Financial Officer from 1988 until December 1992 and again from September 1993
until 1999. Mr. Rohrer served as Vice President and General Manager for
Diagnostic Products from September 1992 to September 1993. Mr. Rohrer holds an
A.B. in biology from Hood College and an M.S.M. from Frostburg State University.

Alan G. Walton, Ph.D., D.Sc., has served as Chairman of the Board of
Directors of the Company since its inception in September 1994. He has been a
General Partner of Oxford Bioscience Partners, a private equity investment firm,
since 1991 and a member of the Board of Directors of Collaborative Clinical
Research since 1994 and Alexandria Real Estate Equities, Inc., a public company,
since 1998. In 1981, Dr. Walton co-founded University Genetics Co., a public
corporation specializing in technology transfer from academic institutions to
industry and in the seed financing of high-technology start-ups, and served as
its President and Chief Executive Officer until 1987. He has lectured
extensively at various universities, including Harvard Medical School, Indiana
University and Case Western Reserve University, where he was Professor of
Macromolecular Science and Director of the Laboratory for Biological
Macromolecules. Dr. Walton received a Ph.D. in chemistry and a D.Sc. in
biological chemistry from Nottingham University, England.

Jules Blake, Ph.D., has served as a director of the Company since its
inception in September 1994. From 1973 until his retirement in 1989, Dr. Blake
served as Vice President of Research and Development and Vice President,
Corporate Scientific Affairs, for Colgate-Palmolive, Inc., a consumer products
company. Dr. Blake was appointed as an Industrial Research Institute Fellow at
the United States Office of Science and Technology Policy, Executive Office of
the President, where he served until 1991. Dr. Blake serves on the boards of
directors of the public companies Martek Biosciences Corporation and ProCyte
Corporation. Dr. Blake holds a Ph.D. in organic chemistry from the University of
Pennsylvania.

Charles L. Dimmler III has served as a director of the Company since May
1996. Since 1994, Mr. Dimmler has been an investment officer of Cross Atlantic
Partners Funds, an equity investment firm, and an operating officer of Cross
Atlantic Partners, Inc. (formerly Hambro Health International, Inc.), an
affiliate of Hambros Bank Limited, a global merchant bank based in London. From
1988 to 1998, Mr. Dimmler was a General Partner of Hambro International Equity
Partners, an equity investment firm. Mr. Dimmler serves as a director of
SunPharm Corporation, a public company, and various private companies. He holds
an honors degree from the University of California at Davis.

G. Anthony Gorry, Ph.D., has served as a director of the Company since
January 1997. Since April 1992, Dr. Gorry has been Vice President, Information
Technology and Professor of Computer

47
<PAGE> 49

Science at Rice University. Presently he is also Professor of Management and
Director of the Center for Technology in Teaching and Learning at Rice. Dr.
Gorry is also a Director of the W.M. Keck Center for Computational Biology, a
joint endeavor of Rice, Baylor College of Medicine and the University of
Houston. He directs a training grant on computational biology funded by the
National Library of Medicine. He is also Adjunct Professor of Neuroscience at
Baylor College of Medicine. Dr. Gorry holds a B.Eng. from Yale University, an
M.S. in chemical engineering from the University of California (Berkeley) and a
Ph.D. in computer science from the Massachusetts Institute of Technology. He is
a Member of the Institute of Medicine of the National Academy of Sciences and a
Fellow of the American College of Medical Informatics.

Jeffrey D. Sollender has served as a director of the Company since July
1997. Mr. Sollender is a founder of and advisor to Biotechvest L.P., a venture
capital investment firm formed in 1993. From 1994 through December 1995, Mr.
Sollender served as an advisor to Forward Ventures, a venture capital investment
firm. Mr. Sollender became a venture partner of Forward Ventures in 1996 and a
general partner in September 1997. Mr. Sollender co-founded Triangle
Pharmaceuticals, Inc., a biopharmaceutical company, in 1995, CombiChem Inc., a
combinatorial chemistry company, in 1994 and GenQuest, Inc., a functional
genomics company, in 1995. He served as Vice President of Operations and
Business Development for CombiChem Inc. and GenQuest, Inc. until January 1995
and February 1996, respectively. Mr. Sollender co-founded AriZeke
Pharmaceuticals, an oral drug delivery company, in 1997 and continues to serve
as Chairman and Chief Executive Officer of the company. Mr. Sollender received
his MBA from the University of Chicago Graduate School of Business.

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<PAGE> 50

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of common stock as of December 31, 1999 by:

- each person who is known by us to own beneficially more than five percent
of the outstanding shares of our common stock;

- each of our directors;

- each of our executive officers; and

- all directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENT OF
COMMON
STOCK(1)
AMOUNT AND -------------------
NATURE OF BENEFICIAL BEFORE AFTER
NAME AND ADDRESS OWNERSHIP(1) OFFERING OFFERING
---------------- -------------------- -------- --------
<S> <C> <C> <C>
Wellington Management Company, LLP(2)....................... 1,359,400 6.8% 5.8%
Alan G. Walton, Ph.D., D.Sc.(3)............................. 1,015,571 5.1% 4.3%
Michael J. Brennan, M.D., Ph.D.(4).......................... 773,561 3.8% 3.3%
Charles L. Dimmler III(5)................................... 687,568 3.4% 2.9%
Mark D. Gessler(6).......................................... 413,847 2.1% 1.8%
Gregory G. Lennon, Ph.D.(7)................................. 228,476 1.1% *
Victor M. Markowitz, D.Sc.(8)............................... 149,773 * *
David S. Murray(9).......................................... -- * *
Y. Douglas Dolginow, M.D.(10)............................... 141,679 * *
G. Anthony Gorry, Ph.D.(11)................................. 61,688 * *
Jules Blake, Ph.D.(12)...................................... 30,750 * *
Jeffrey D. Sollender(13).................................... 29,500 * *
Philip L. Rohrer, Jr.(14)................................... 13,020 * *
All directors and executive officers as a group (12 3,545,433 16.9% 14.5%
persons)(15)..............................................
</TABLE>

- ---------------
* Less than 1%.

(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D, 13F and 13G filed with the SEC.
Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 20,005,688 shares of Common Stock outstanding as of December 31,
1999 and 23,505,688 shares of Common Stock outstanding after the completion
of this offering.
(2) Wellington Management Company, LLP's offices are located at 75 State
Street, Boston, Massachusetts 02109.

(3) Includes an aggregate of 947,577 shares held of record by Oxford Bioscience
Partners, of which Dr. Walton is a general partner, and by entities related
thereto. Also includes 30,000 shares subject to options held by Dr. Walton
exercisable within 60 days of December 31, 1999. Oxford Bioscience
Partners' offices are located at 315 Post Road West, Westport, Connecticut
06880.

(4) Includes 100,000 shares held of record by the Brennan Family Limited
Partnership and 228,561 shares subject to options held by Dr. Brennan
exercisable within 60 days of December 31, 1999. If the underwriters'
over-allotment option is exercised in full, Dr. Brennan will sell 60,000
shares in the offering, in which case he would beneficially own 713,561
shares or 3.0% of the common stock after the offering.

49
<PAGE> 51

(5) Includes 346,507 shares held of record by Cross Atlantic Partners K/S,
193,738 shares held of record by Cross Atlantic Partners II K/S and 104,154
shares held of record by Cross Atlantic Partners III K/S. Also includes
30,000 shares subject to options held by Mr. Dimmler exercisable within 60
days of December 31, 1999. Mr. Dimmler is an operating officer of Cross
Atlantic Partners, Inc. and an investment officer of Cross Atlantic
Partners Funds. Mr. Dimmler disclaims beneficial ownership of the 644,399
shares held of record by Cross Atlantic Partners K/S and related entities.

(6) Includes 30,000 shares held of record by the Gessler Family Limited
Partnership, and 137,822 shares subject to options held by Mr. Gessler
exercisable within 60 days of December 31, 1999. If the underwriters'
over-allotment option is exercised in full, Mr. Gessler will sell 40,000
shares in the offering, in which case he would beneficially own 373,847
shares or 1.6% of the common stock after the offering.

(7) Includes 172,635 shares subject to options held by Dr. Lennon exercisable
within 60 days of December 31, 1999.

(8) Includes 149,773 shares subject to options held by Dr. Markowitz
exercisable within 60 days of December 31, 1999.

(9) Mr. Murray joined our company in January 2000.

(10) Includes 72,917 shares subject to options held by Dr. Dolginow exercisable
within 60 days of December 31, 1999.

(11) Includes 59,688 shares subject to options held by Dr. Gorry exercisable
within 60 days of December 31, 1999.

(12) Includes 30,750 shares subject to options held by Dr. Blake exercisable
within 60 days of December 31, 1999.

(13) Includes 27,500 shares subject to options held by Mr. Sollender exercisable
within 60 days of December 31, 1999.

(14) Includes 13,020 shares subject to options held by Mr. Rohrer exercisable
within 60 days of December 31, 1999.

(15) Includes 952,666 shares subject to options held by all directors and
executive officers as a group exercisable within 60 days of December 31,
1999.

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<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, who are represented by ING Barings LLC, Hambrecht &
Quist LLC, FleetBoston Robertson Stephens Inc. and Dain Rauscher Incorporated,
have severally agreed to purchase from us the following respective number of
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
ING Barings LLC.............................................
Hambrecht & Quist LLC.......................................
FleetBoston Robertson Stephens Inc. ........................
Dain Rauscher Incorporated..................................
---------
Total............................................. 3,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all shares of the common stock offered hereby if any
of such shares are purchased.

We have been advised by the underwriters that the underwriters propose to
offer the shares of common stock to the public at the public offering price set
forth on the cover page of this prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the public offering, the public offering price and
other selling terms may be changed by the underwriters.

The following table shows the fees to be paid to the underwriters by us
and, if the underwriters' over-allotment option is exercised, by the selling
stockholders in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of common stock.

<TABLE>
<CAPTION>
PER NO FULL
SHARE EXERCISE EXERCISE
------- ------------- -------------
<S> <C> <C> <C>
Payable by Gene Logic Inc........................... $ $ $
Payable by the selling stockholders................. $ $ 0 $
</TABLE>

Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) to be paid by us are
expected to be approximately $400,000.

We and the selling stockholders have granted the several underwriters an
option, exercisable not later than 30 days after the date of this prospectus, to
purchase up to 525,000 additional shares of common stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus (consisting of up to 425,000 shares offered by us and up
to 100,000 shares offered by certain selling stockholders). To the extent that
the underwriters exercise such option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage of the additional
shares that the number of shares of common stock to be purchased by it shown in
the table above bears to 3,500,000. To the extent the underwriters exercise such
option, we and the selling stockholders will be obligated, pursuant to the
option, to sell the additional shares to the underwriters. The underwriters may
exercise such option only to cover over-allotments, if any, made in connection
with the sale of the common stock offered hereby. If purchased, the underwriters
will offer such additional shares on the same terms as those on which the
3,500,000 shares of common stock are being offered.

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<PAGE> 53

In connection with this offering, certain underwriters may engage in
passive market making transactions in the common stock on Nasdaq immediately
prior to the commencement of sales in this offering in accordance with Rule 103
of Regulation M. Passive market making consists of displaying bids on Nasdaq
limited by the bid prices of independent market makers and making purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the common stock during a
specified period and must be discontinued when such limit is reached. Passive
market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.

Subject to applicable limitations, the underwriters, in connection with
this offering, may place bids for or make purchases of the common stock in the
open market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the common
stock, which may be higher than the price that might otherwise prevail in the
open market. We cannot assure you that the price of the common stock will be
stabilized, or that stabilizing, if commenced, will not be discontinued at any
time. Subject to applicable limitations, the underwriters may also place bids,
or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with this offering. The underwriters are not
required to engage in these activities and may end these activities at any time.

The underwriting agreement contains covenants of indemnity among the
underwriters, us and the selling stockholders against certain civil liabilities,
including liabilities under the Securities Act.

We and each of our directors and executive officers and certain of our
security holders, who in the aggregate will beneficially own, following this
offering (assuming no exercise of the underwriters' over-allotment option),
1,233,367 shares of common stock and options and warrants to purchase 952,666
shares of common stock, have agreed that they will not directly or indirectly,
without the prior written consent of ING Barings LLC, offer, sell, offer to
sell, contract to sell, or otherwise dispose of any shares of common stock or
securities exchangeable for or convertible into common stock for a period of 90
days after the date of this prospectus, except that we may issue, and grant
options to purchase, shares of common stock under our current stock option and
purchase plans and other currently outstanding options and warrants.

LEGAL MATTERS

The validity of the shares of common stock being sold in this offering and
other legal matters relating to the offering will be passed upon for us by
Cooley Godward LLP, San Diego, California. Certain legal matters relating to the
offering will be passed upon for the underwriters by Winthrop, Stimson, Putnam &
Roberts, Stamford, Connecticut.

EXPERTS

The audited financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

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<PAGE> 54

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC. Certain information in the registration statement has been
omitted from this prospectus in accordance with the rules of the SEC. We file
proxy statements and annual, quarterly and special reports and other information
with the SEC. You can inspect and copy the registration statement as well as the
reports, proxy statements and other information we have filed with the SEC at
the public reference room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. We are also required to file
electronic versions of these documents with the SEC, which may be accessed from
the SEC's World Wide Web site at http://www.sec.gov. Reports, proxy and
information statements and other information concerning Gene Logic Inc. may be
inspected at The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.

The SEC requires us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC after the effective date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until we terminate the
effectiveness of this registration statement.

The following documents filed with the SEC are incorporated by reference in
this prospectus:

1. Our Annual Report on Form 10-K for the year ended December 31,
1998, as amended on April 20, 1999.

2. Our definitive Proxy Statement dated May 6, 1999, filed in
connection with our 1999 Annual Meeting of Stockholders.

3. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999.

4. The description of our common stock in our Registration Statement
on Form 8-A filed with the SEC on November 4, 1997 including any amendments
or reports filed for the purpose of updating such description.

5. All of the filings pursuant to the Exchange Act after the date of
filing the original Registration Statement and prior to the effectiveness
of the Registration Statement.

We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, other than exhibits to
those documents. You should direct any requests for documents to the following
address: Gene Logic Inc., 708 Quince Orchard Road, Gaithersburg, Maryland 20878,
Attention: Robert Burrows, Director of Corporate Communications.

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

YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT
IS LEGAL TO SELL THESE SECURITIES.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 18
Dividend Policy....................... 18
Price Range of Common Stock........... 19
Capitalization........................ 20
Dilution.............................. 21
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 29
Management............................ 46
Principal Stockholders................ 49
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Where You Can Find More Information... 53
</TABLE>

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

3,500,000 SHARES

GENE LOGIC INC.

COMMON STOCK
--------------------

PROSPECTUS
--------------------

ING BARINGS

CHASE H&Q

ROBERTSON STEPHENS

DAIN RAUSCHER WESSELS

, 2000

------------------------------------------------------
------------------------------------------------------
<PAGE> 56

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Securities being registered. All the amounts
shown are estimates except for the SEC registration fee and the Nasdaq National
Market listing fee.

<TABLE>
<S> <C>
SEC Registration fee........................................ $ 30,019
NASD filing fee............................................. 11,871
Nasdaq National Market listing application fee.............. 17,500
Blue sky qualification fees and expenses.................... 5,000
Legal fees and expenses..................................... 135,000
Accounting fees and expenses................................ 70,000
Printing and engraving expenses............................. 70,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 50,610
--------
Total............................................. $400,000
========
</TABLE>

- ---------------
* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended.

The Registrant's By-laws provide that the Registrant will indemnify its
directors and executive officers and may indemnify its other officers, employees
and other agents to the fullest extent permitted by Delaware law. The Registrant
believes that indemnification under its By-laws covers at least negligence and
gross negligence by indemnified parties, and may require the Registrant to
advance litigation expenses in the case of stockholder derivative actions or
other actions, against an undertaking by the indemnified party to repay such
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.

In addition, the Registrant's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty of care to the Registrant and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of nonmonetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.

The Registrant has entered into separate indemnification agreements with
its officers and directors. These agreements may require the Registrant, among
other things, to indemnify the directors against certain liabilities that may
arise by reason of their status or service as directors (other than liabilities
arising from willful misconduct of a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified and to obtain directors' insurance if available on reasonable terms.
The Registrant maintains director and officer liability insurance.

II-1
<PAGE> 57

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of underwriting agreement.*
4.1 Amended and Restated Certificate of Incorporation.(1)
4.2 By-laws, as amended and restated.(1)
4.3 Specimen stock certificate.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>

- ---------------
* To be filed by amendment.

(1) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
333-37317), filed October 7, 1997, as amended, and incorporated herein by
reference.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and executive officers of the Registrant pursuant
to provisions described in Item 15 or otherwise, the Registrant has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director or
executive officer of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director or executive officer in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;

(2) (i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective;

(ii) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;

(3) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.

II-2
<PAGE> 58

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized on January 13, 2000.

GENE LOGIC INC.

By: /s/ MICHAEL J. BRENNAN
--------------------------------------
Michael J. Brennan, M.D., Ph.D.
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael J. Brennan, Mark D. Gessler and
Philip L. Rohrer, Jr., jointly and severally, his attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign any
amendments to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes may do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. BRENNAN Chief Executive Officer and Director January 13, 2000
- ------------------------------------ (Principal Executive Officer)
Michael J. Brennan, M.D., Ph.D.

/s/ PHILIP L. ROHRER, JR. Chief Financial Officer (Principal January 13, 2000
- ------------------------------------ Financial and Accounting Officer)
Philip L. Rohrer, Jr.

/s/ ALAN G. WALTON Chairman of the Board of Directors January 13, 2000
- ------------------------------------
Alan G. Walton, Ph.D., D.Sc.

/s/ JULES BLAKE Director January 13, 2000
- ------------------------------------
Jules Blake, Ph.D.

/s/ CHARLES L. DIMMLER III Director January 13, 2000
- ------------------------------------
Charles L. Dimmler III

/s/ G. ANTHONY GORRY Director January 13, 2000
- ------------------------------------
G. Anthony Gorry, Ph.D.

/s/ JEFFREY SOLLENDER Director January 13, 2000
- ------------------------------------
Jeffrey Sollender
</TABLE>

II-3
<PAGE> 59

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of underwriting agreement.*
4.1 Amended and Restated Certificate of Incorporation.(1)
4.2 By-laws, as amended and restated.(1)
4.3 Specimen stock certificate.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP.
Consent of Cooley Godward LLP. Reference is made to Exhibit
23.2 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>

- ---------------
* To be filed by amendment.

(1) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
333-37317), filed October 7, 1997, as amended, and incorporated herein by
reference.

<PAGE> 1
Exhibit 5.1

[COOLEY GODWARD LLP LETTERHEAD]

January 12, 2000

GENE LOGIC INC.
708 Quince Orchard Road
Gaithersburg, Maryland 20878

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by GENE LOGIC INC., a Delaware corporation (the "Company"), of a
Registration Statement on Form S-3 (the "Registration Statement"), with the
Securities and Exchange Commission, covering an underwritten public offering of
up to 4,025,000 shares of Common Stock (the "Shares"), including 525,000 shares
subject to the Underwriters' over-allotment option.

In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, as amended, and the originals or copies certified to
our satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.

On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.

We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.

Sincerely,

Cooley Godward LLP

By: /s/ D. BRADLEY PECK
------------------------------
D. Bradley Peck

<PAGE> 1

EXHIBIT 23.1

[ARTHUR ANDERSEN LLP LETTERHEAD]

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
included in this registration statement and to the incorporation by reference in
this registration statement of our report dated March 26, 1999 included in
Gene Logic Inc.'s Form 10-K for the year ended December 31, 1998 and to all
references to our Firm included in this registration statement.

Baltimore, Maryland
January 12, 2000