ENTREMED INC, 424B3, 2000-03-31

ENTREMED INC
424B3, 2000-03-31
MEDICAL LABORATORIES

Previous: INTERNET COMMERCE CORP, 4, 2000-03-31

Next: VAN KAMPEN MERRITT EQUITY OPPORTUNITY TRUST SERIES 2, 24F-2NT, 2000-03-31

<PAGE> 1
Filed Pursuant to Rule 424(b)3
File Number 333-94665

THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND HAS BEEN
DECLARED EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED
PROSPECTUS ARE NOT AN OFFER
TO SELL THESE SECURITIES AND THEY ARE NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

Prospectus Supplement (Not Complete)
Issued March 31, 2000
(To Prospectus dated January 24, 2000, as amended March 31, 2000)

2,000,000 SHARES

ENTREMED LOGO

COMMON STOCK

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

EntreMed, Inc. is offering 2,000,000 shares of common stock in a firmly
underwritten offering.

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

Our common stock is traded on the Nasdaq National Market under the symbol
"ENMD." The last reported sale price of our common stock on the Nasdaq National
Market on March 30, 2000 was $59.875 per share.

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

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 OF THE ATTACHED PROSPECTUS.

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

<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Offering price $ $
Discounts and Commissions to Underwriters $ $
Offering Proceeds to EntreMed $ $
</TABLE>

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the attached prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

EntreMed has granted the underwriters the right to purchase an additional
300,000 shares of common stock to cover any over-allotments. The underwriters
can exercise this right at any time within thirty days after this offering. Banc
of America Securities LLC expects to deliver the shares of common stock to
investors on , 2000.

Joint Book Running Managers

BANC OF AMERICA SECURITIES LLC WARBURG DILLON READ LLC

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

GERARD KLAUER MATTISON & CO., INC.

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

April , 2000
<PAGE> 2
ANGIOGENESIS AND CANCER

[Picture of growing tumor with feeding blood vessels]

Angiogenesis is the fundamental process by which new blood vessels are
formed. In these illustrations, cancer cells stimulate angiogenesis, which
provides the blood supply that nourishes the tumor and supports its growth.
EntreMed believes that antiangiogenic products, which inhibit the the abnormal
growth of blood vessels, may have significant advantages over traditional
therapies for cancer. We are currently developing several angiogenesis
inhibitors.

All of our product candidates are in the development stage and require
further research, development, testing and regulatory clearances.
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary............................... S- 4
Use of Proceeds............................................. S- 8
Price Range of Common Stock and Dividend Policy............. S- 8
Dilution.................................................... S- 9
Capitalization.............................................. S-10
Selected Consolidated Financial Data........................ S-11
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-12
Business.................................................... S-15
Management.................................................. S-30
Shares Eligible for Future Sale............................. S-32
Underwriting................................................ S-33
Legal Matters............................................... S-35
Experts..................................................... S-35
Index to Consolidated Financial Statements.................. F- 1
PROSPECTUS
About This Prospectus....................................... 3
Risk Factors................................................ 3
The Company................................................. 14
Use of Proceeds............................................. 14
Plan of Distribution........................................ 14
Description of Common Stock................................. 16
Description of Warrants..................................... 17
Incorporation of Certain Documents by Reference............. 17
Where You Can Find More Information......................... 18
Legal Matters............................................... 19
Experts..................................................... 19
</TABLE>

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

In this prospectus supplement and the accompanying prospectus, "EntreMed,"
"we," "us," and "our" refer to EntreMed, Inc.

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

We own, have the right to, or have filed application for, various
trademarks, service marks and trade names used in our business, including THE
ANGIOGENESIS COMPANY, ENDOSTATIN, ANGIOSTATIN, WE'RE NOT MAKING BETTER BLOOD,
WE'RE MAKING BLOOD BETTER, VASCULOSTATIN, DOING WELL BY DOING GOOD, METASTATIN,
THERAMED, and ENTREVEST. THALOMID is a registered trademark of Celgene
Corporation. All other trademarks, service marks and trade names appearing in
this prospectus supplement are the property of their respective holders.

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

THIS PROSPECTUS SUPPLEMENT CONTAINS AND INCORPORATES BY REFERENCE CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG
OTHERS, STATEMENTS REGARDING THE VALUE OF OUR COMMON STOCK; UNCERTAINTIES
RELATING TO OUR TECHNOLOGICAL APPROACH, OUR HISTORY OF OPERATING LOSSES AND
ANTICIPATION OF FUTURE LOSSES; UNCERTAINTY OF OUR PRODUCT DEVELOPMENT; OUR NEED
FOR ADDITIONAL CAPITAL AND UNCERTAINTY OF ADDITIONAL FUNDING; OUR DEPENDENCE ON
COLLABORATORS AND LICENSEES; INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
IN THE BIOPHARMACEUTICAL INDUSTRY; UNCERTAINTIES RELATING TO OUR PATENT AND
PROPRIETARY RIGHTS; UNCERTAINTIES RELATING TO CLINICAL TRIALS; GOVERNMENT
REGULATION AND UNCERTAINTIES OF OBTAINING REGULATORY APPROVAL ON A TIMELY BASIS
OR AT ALL; OUR DEPENDENCE ON KEY PERSONNEL, RESEARCH COLLABORATORS AND
SCIENTIFIC ADVISORS; UNCERTAINTIES RELATING TO HEALTH CARE REFORM MEASURES AND
THIRD-PARTY REIMBURSEMENT; AND RISKS ASSOCIATED WITH PRODUCT LIABILITY.

OUR FORWARD-LOOKING STATEMENTS ARE BASED ON INFORMATION AVAILABLE TO US
TODAY, AND WE WILL NOT UPDATE THESE STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED.

S-3
<PAGE> 4

PROSPECTUS SUPPLEMENT SUMMARY

This summary contains basic information about us and this offering, and
highlights information contained elsewhere in this prospectus supplement and the
attached prospectus. Because it is a summary, it does not contain all the
information you should consider before investing in our common stock. To fully
understand this offering and its consequences to you, you should read the entire
prospectus supplement and attached prospectus carefully, including the "Risk
Factors" section, the financial data and the documents that we incorporate by
reference into this prospectus supplement and the attached prospectus. Except as
otherwise indicated, all information in this prospectus supplement assumes no
exercise of the underwriters' over-allotment option.

ENTREMED, INC.

We are an innovative biopharmaceutical company engaged in the development
of products that address the role of blood and blood vessels in health and
disease. Angiogenesis is the biological process by which new blood vessels are
formed. As The Angiogenesis Company, our primary efforts are focused on
developing antiangiogenic drugs designed to inhibit the abnormal new blood
vessel growth associated with a broad range of diseases, such as cancer, certain
types of blindness and atherosclerosis. Our current portfolio of antiangiogenic
products includes Endostatin, Angiostatin and 2-Methoxyestradiol, or 2ME2. We
began Phase I clinical testing of Endostatin in September 1999. Patient
recruitment is underway for Phase I clinical trials of Angiostatin and 2ME2, and
we plan to commence drug administration in April 2000.

Our core technologies represent one of the new paradigms in medicine.
Traditional cancer treatment involves surgery or radiation therapy to treat the
primary tumor, and follow-up radiation therapy or chemotherapy to eliminate any
remaining cancer and discourage the initiation or spread of metastatic disease.
We are pioneering a different approach, by which we attempt to starve the tumor
rather than directly attack the tumor itself. To support their rapid growth,
tumors are dependent upon newly formed blood vessels to provide nutrients and to
transport cancerous cells to distant sites. In this respect, the blood vessel
network feeding a tumor functions much like the roots of a plant -- when taken
away, or weakened significantly, the plant starves and dies. To date,
preclinical studies have shown our antiangiogenic drug candidates to be
effective in starving cancerous tumors in mice.

Preclinical studies have shown that our antiangiogenic drug candidates have
the potential to not only inhibit new blood vessels from forming, but also break
up and weaken the existing network of blood vessels that feed primary and
metastatic tumors. We believe that these antiangiogenic drugs can be efficacious
without producing the traditional chemotherapy limitations of drug resistance
and toxicity, and may prove effective when used in combination with current
cancer therapies.

Endostatin. Endostatin is a naturally occurring antiangiogenic agent.
Preclinical testing has shown Endostatin to inhibit the growth of primary and
metastatic tumors without apparent toxicity or the development of drug
resistance. Three separate Phase I trials of Endostatin are underway at
Dana-Farber/ Partners CancerCare, the University of Texas M.D. Anderson Medical
Center and the University of Wisconsin Comprehensive Cancer Center. We expect to
complete these trials and proceed to Phase II clinical trials in the fourth
quarter of 2000. To ensure that a sufficient quantity of Endostatin is available
for Phase II trials, we are in the process of completing final negotiations with
Chiron Corporation for the contract manufacturing of bulk Endostatin under Good
Manufacturing Practices, or GMP. We have completed technology transfer, as
demonstrated by Chiron's fermentation of biologically active Endostatin, and
Chiron has begun scale-up production. Chiron's production will add to that of
Covance Biotechnology Services, Inc., our initial contract manufacturer of
Endostatin.

Angiostatin. Angiostatin is a naturally occurring antiangiogenic agent. On
January 31, 2000, the Food and Drug Administration, or FDA, allowed the
initiation of Phase I clinical trials of Angiostatin in cancer patients. We have
selected Thomas Jefferson University Hospital in Philadelphia, Pennsylvania as
our site for the first trial. Patient recruitment is underway, and we plan to
commence drug administration

S-4
<PAGE> 5

in April 2000. We have contracted with Covance for the large-scale production
under GMP of recombinant human Angiostatin using our clones in the Pichia
pastoris yeast expression system and the purification process that we developed.
Covance has completed scale-up production of Angiostatin under GMP and we have
vialed a sufficient quantity in preparation for our Phase I clinical studies.

2ME2. 2ME2 is an orally active, naturally occurring molecule that attacks
not only the growth of new blood vessels, but also the malignant cells that they
support. Once researchers identified 2ME2 as an angiogenesis inhibitor, our
scientists quickly advanced it from the laboratory to the clinic, and invented a
synthetic process to yield an ultrapure form of 2ME2, as well as a
clinical-grade product. We have entered into a contract with Tetrionics, Inc.
for the GMP manufacturing of 2ME2. On February 14, 2000, the FDA allowed Phase I
clinical trials of 2ME2 in breast cancer patients. We have selected the Indiana
University Cancer Center to conduct the first Phase I clinical trial of 2ME2.
Patient recruitment is underway and we plan to commence drug administration in
April 2000.

Thalidomide. We conducted multiple Phase II clinical trials using
thalidomide and have received two orphan drug designations for the use of
thalidomide in the treatment of primary brain cancer and Kaposi's sarcoma. In
December 1998, we sublicensed to Celgene Corporation all of our worldwide rights
to thalidomide in exchange for ongoing royalty payments on sales of thalidomide
(marketed by Celgene under the brand name THALOMID(R)). Celgene is required to
pay us a royalty on all sales of THALOMID(R), regardless of indication, and, in
addition, has the responsibility for all future clinical trials of thalidomide.
Currently, Celgene is conducting ongoing clinical trials of thalidomide for a
variety of cancers, including brain cancer, multiple myeloma, prostate cancer,
breast cancer, non-small cell lung cancer, head and neck cancer, and
inflammatory diseases.

We have a number of other product candidates in preclinical development.
These products include small molecular weight inhibitors of angiogenesis such as
thalidomide analogs and 2ME2 analogs. In addition, proteins such as Metastatin
and Prostate Specific Antigen (PSA) have demonstrated potent antiangiogenic
activity. Our scientists also are working with Tissue Factor Pathway Inhibitor,
or TFPI, a natural inhibitor of clotting that also has demonstrated antitumor
activity. We have identified a mechanism underlying these effects and will seek
additional compounds with similar activity. Further, efforts with vaccines
directed against peptides of angiogenic growth factors, such as basic Fibroblast
Growth Factor (bFGF) and Vascular Endothelial Growth Factor (VEGF), have shown
inhibition of metastatic disease in animal models.

Through our subsidiary, TheraMed, Inc., we also are developing blood cell
permeation technology using flow electroporation. This technology allows us to
deliver drugs, genes or other therapeutic agents that otherwise would not
readily permeate the cell membrane into blood cells while retaining the blood
cell's natural function. Specifically, drugs are inserted into red blood cells
to enhance oxygen delivery, therapeutic agents are inserted into platelets to
target sites of inflammation or injury, and genes are inserted into white blood
cells that migrate to sites of infection or cancer.

EntreMed, Inc. is a Delaware corporation incorporated on September 18,
1991. Our offices are located at 9640 Medical Center Drive, Rockville, Maryland
20850, and our telephone number is (301) 217-9858. Our world wide web site is
www.entremed.com. The information on our web site is not incorporated by
reference into this prospectus supplement or the attached prospectus.

S-5
<PAGE> 6

THE OFFERING

The following information is based on 15,020,740 shares of common stock
outstanding on February 29, 2000 (15,312,407 shares of common stock net of
291,667 shares of treasury stock). This number excludes 3,699,645 shares of
common stock issuable upon the exercise of stock options and warrants
outstanding granted to employees, directors and consultants as of February 29,
2000 and 1,201,544 shares of common stock issuable upon the exercise of our
warrants to purchase common stock outstanding as of February 29, 2000. It also
excludes an additional 26,828 shares of common stock available for future
issuance under our stock option and other employee benefit plans and assumes no
exercise of the underwriters' over-allotment option.

Common stock offered.......... 2,000,000 shares

Common stock to be outstanding
after the offering............ 17,020,740 shares

Use of proceeds............... We intend to use the net proceeds of this
offering for development of current and future
products, working capital and general corporate
purposes. See "Use of Proceeds."

Nasdaq National Market
Symbol........................ ENMD

S-6
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables present a summary of our financial data included
elsewhere in this prospectus supplement. You should read the following data
together with the more detailed information contained in "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
appearing elsewhere in this prospectus supplement.

The summary balance sheet data as of December 31, 1999 is presented on an
actual basis and is also presented to reflect on an adjusted basis, our sale of
2,000,000 shares of common stock in this offering at an assumed public offering
price of $59.875 per share, less estimated underwriting discounts and estimated
offering expenses to be paid by us.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Collaborative research and development....... $ 347,501 $ 4,425,000 $ 4,342,369 $ 4,473,131 $ 3,099,166
License fees................................. 16,667 200,000 200,000 200,000 403,333
Grant revenues............................... 347,001 -- 215,119 472,677 339,087
Royalty revenues............................. -- -- -- -- 1,123,111
Other........................................ -- -- -- 15,675 52,853
----------- ----------- ----------- ------------ ------------
Total revenues................................. 711,169 4,625,000 4,757,488 5,161,483 5,017,550
Expenses:
Research and development..................... 5,939,512 7,553,793 8,998,705 15,084,993 35,529,435
General and administrative................... 2,458,976 3,435,501 4,915,724 5,760,215 8,028,922
Interest expense............................. 65,754 27,267 1,418 -- 22,270
Investment income............................ (44,854) (1,621,729) (2,621,630) (2,169,955) (1,677,361)
----------- ----------- ----------- ------------ ------------
Net loss....................................... $(7,708,219) $(4,769,832) $(6,536,729) $(13,513,770) $(36,885,716)
=========== =========== =========== ============ ============
Net loss per share (basic and diluted)......... $ (1.41) $ (0.50) $ (0.54) $ (1.07) $ (2.67)
Weighted average number of shares
outstanding.................................. 5,485,763 9,532,671 12,158,372 12,681,824 13,801,220
Pro forma net loss per share(1)................ $ (1.03) $ (0.46)
Pro forma weighted average
number of shares outstanding(1).............. 7,485,763 10,422,781
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------
ACTUAL AS ADJUSTED
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 26,027,235 $138,092,235
Working capital............................................. 19,242,907 131,307,907
Total assets................................................ 31,843,625 143,908,625
Accumulated deficit......................................... (82,193,018) (82,193,018)
Total stockholders' equity.................................. 21,984,801 134,049,801
</TABLE>

- ---------------
(1) Pro forma net loss per share and weighted average shares outstanding for the
years ended December 31, 1995 and 1996 give effect to the automatic
conversion of 3,000,000 outstanding shares of preferred stock into 2,000,000
shares of common stock on June 17, 1996, the effective date of our initial
public offering.

S-7
<PAGE> 8

USE OF PROCEEDS

Our net proceeds from the sale of 2,000,000 shares of our common stock in
this offering are estimated to be approximately $112,065,000, after deducting
underwriting discounts and estimated offering expenses, based upon an assumed
public offering price of $59.875 per share. If the underwriters exercise their
over-allotment option in full, we estimate the net proceeds from this offering
will be approximately $128,950,000. We intend to use the net proceeds for
development of current and future products, working capital and general
corporate purposes. Some of these uses may include investments in subsidiaries
and advances to third parties in connection with sponsored research, the
development of future product candidates, in-licensing and other corporate
affiliations. Pending application of the net proceeds as described above, we
intend to invest the net proceeds from this offering in short-term investment
grade instruments.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock began trading publicly on the Nasdaq National Market under
the symbol "ENMD" on June 12, 1996. The following table sets forth the high and
low closing price for our common stock by quarter, as reported by the Nasdaq
National Market, for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997:
First Quarter.......................................... $ 18 1/4 $ 12 1/4
Second Quarter......................................... 14 1/2 8 3/4
Third Quarter.......................................... 12 9 3/8
Fourth Quarter......................................... 15 1/4 6 3/4
1998:
First Quarter.......................................... $ 15 1/8 $ 9 7/8
Second Quarter......................................... 51 13/16 11 3/4
Third Quarter.......................................... 32 9/16 16 15/16
Fourth Quarter......................................... 34 3/4 21
1999:
First Quarter.......................................... $ 33 $ 12 7/8
Second Quarter......................................... 28 1/8 20
Third Quarter.......................................... 25 1/4 20 1/4
Fourth Quarter......................................... 31 11/16 22
2000:
First Quarter (through March 30, 2000)................. $ 98 1/2 $ 27
</TABLE>

On March 30, 2000, the last price of our common stock, as reported by the
Nasdaq National Market, was $59.875 per share. As of March 24, 2000 there were
approximately 797 holders of record of our common stock.

Since our initial public offering in 1996, we have not paid cash dividends
on our common stock. We currently anticipate that any earnings will be retained
for the continued development of our business and we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.

S-8
<PAGE> 9

DILUTION

The net tangible book value of our common stock as of December 31, 1999 was
$21,984,801 or $1.52 a share. Net tangible book value per share represents the
amount of our common stock and other stockholders' equity, less intangible
assets, divided by shares of our common stock outstanding. Purchasers of our
common stock will have an immediate dilution of net tangible book value per
share. This dilution excludes the further dilutive effect of options and
warrants granted.

Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of our common stock in
this offering and the pro forma net tangible book value per share of the common
stock immediately after completion of this offering. After giving effect to the
sale by us of 2,000,000 shares of our common stock in this offering at an
assumed public offering price of $59.875 per share, and after deduction of
underwriting discounts and estimated offering expenses, our pro forma net
tangible book value as of December 31, 1999 was $134,049,801 or $8.14 per share
of common stock. This represents an immediate increase in net tangible book
value of $6.62 per share to existing stockholders and an immediate dilution of
net tangible book value of $51.74 per share to purchasers of our common stock in
this offering, as illustrated in the following table:

<TABLE>
<S> <C> <C>
Assumed public offering price per share of common stock..... $59.88
Net tangible book value per share of common stock before
the offering........................................... $ 1.52
Increase per share of common stock attributable to the
offering............................................... $ 6.62
------ ------
Pro forma net tangible book value per share of common
stock after the offering.............................. $ 8.14
Net tangible book value dilution per share............. $51.74
======
</TABLE>

S-9
<PAGE> 10

CAPITALIZATION

The following table sets forth as of December 31, 1999 information about
our cash and cash equivalents:

- on an actual basis; and

- giving effect to our receipt of the estimated net proceeds from the sale
of the 2,000,000 shares of common stock in this offering at an assumed
public offering price per share of $59.875 after deducting underwriting
discounts and estimated offering expenses.

The actual information is based on 14,464,331 shares of common stock
outstanding on December 31, 1999 (14,755,998 shares of common stock net of
291,667 shares of treasury stock). It excludes 3,700,006 shares of common stock
issuable upon the exercise of outstanding stock options and warrants granted to
employees and directors, and 1,667,992 shares of common stock issuable upon the
exercise of common stock purchase warrants. It also excludes an additional
26,828 shares of common stock available for future issuance under our stock
option and other employee benefit plans.

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------
ACTUAL AS ADJUSTED
-------- -----------
IN THOUSANDS, EXCEPT SHARE DATA
<S> <C> <C>
Cash and cash equivalents................................... $ 26,027 $138,092
======== ========
Long-term debt, less current portion........................ $ 1,995 $ 1,995
Stockholders' equity:
Preferred Stock, $1.00 par value, 5,000,000 shares
authorized, no shares issued and outstanding actual and
as adjusted............................................ -- --
Common Stock, $.01 par value, 35,000,000 shares
authorized, 14,755,998 shares issued and outstanding
actual; 16,755,998 shares issued and outstanding as
adjusted............................................... 148 168
Treasury Stock, at cost, 291,667 shares actual and as
adjusted............................................... (3,833) (3,833)
Additional paid-in capital................................ 107,863 219,908
Accumulated deficit....................................... (82,193) (82,193)
-------- --------
Total stockholders' equity........................ 21,985 134,050
-------- --------
Total capitalization.............................. $ 23,980 $136,045
======== ========
</TABLE>

S-10
<PAGE> 11

SELECTED CONSOLIDATED FINANCIAL DATA

In the table below, we provide you with our selected consolidated financial
data. We have prepared this information using our consolidated financial
statements for the five years ended December 31, 1999. The financial statements
for the five fiscal years ended December 31, 1999 have been audited by Ernst &
Young LLP, independent auditors. When you read this selected consolidated
financial data, it is important that you also read the historical financial
statements and related notes in our annual and quarterly reports filed with the
Securities and Exchange Commission, as well as the section of our annual and
quarterly reports titled "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues
Collaborative research and development... $ 347,501 $ 4,425,000 $ 4,342,369 $ 4,473,131 $ 3,099,166
License fees............................. 16,677 200,000 200,000 200,000 403,333
Grant revenues........................... 347,001 -- 215,119 472,677 339,087
Royalty revenues......................... -- -- -- -- 1,123,111
Other.................................... -- -- -- 15,675 52,853
------------ ------------ ------------ ------------ ------------
Total revenues............................. 711,169 4,625,000 4,757,488 5,161,483 5,017,550
Expenses:
Research and development................. 5,939,512 7,553,793 8,998,705 15,084,993 35,529,435
General and administrative............... 2,458,976 3,435,501 4,915,724 5,760,215 8,028,922
------------ ------------ ------------ ------------ ------------
8,398,488 10,989,294 13,914,429 20,845,208 43,558,357
Interest expense......................... 65,754 27,267 1,418 -- 22,270
Investment income........................ (44,854) (1,621,729) (2,621,630) (2,169,955) (1,677,361)
------------ ------------ ------------ ------------ ------------
Net loss................................... $ (7,708,219) $ (4,769,832) $ (6,536,729) $(13,513,770) $(36,885,716)
============ ============ ============ ============ ============
Net loss per share (basic and diluted)..... $ (1.41) $ (0.50) $ (0.54) $ (1.07) $ (2.67)
============ ============ ============ ============ ============
Weighted average number of shares
outstanding.............................. 5,485,763 9,532,671 12,158,372 12,681,824 13,801,220
Pro forma net loss per share(1)............ $ (1.03) $ (0.46)
============ ============
Pro forma weighted average number of shares
outstanding(1)........................... 7,485,763 10,422,781
BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments.............................. $ 6,885,099 $ 52,720,829 $ 45,245,071 $ 35,171,060 $ 26,027,235
Working capital............................ 5,689,810 49,049,124 41,454,371 29,269,715 19,242,907
Total assets............................... 10,146,383 54,146,339 47,838,663 39,574,003 31,843,625
Accumulated deficit........................ (20,486,971) (25,256,803) (31,793,532) (45,307,302) (82,193,018)
Total stockholders' equity................. 3,601,260 47,694,191 41,953,094 33,188,064 21,984,801
</TABLE>

- ---------------
(1) Pro forma net loss per share and weighted average shares outstanding for the
years ended December 31, 1996 and 1995 give effect to the automatic
conversion of 3,000,000 outstanding shares of preferred stock into 2,000,000
shares of common stock on June 17, 1996, the effective date of our initial
public offering.

S-11
<PAGE> 12

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

Before investing in our common stock, you should read this Management's
Discussion and Analysis of Financial Condition and Results of Operations in
conjunction with the "Selected Consolidated Financial Data" and our financial
statements and related notes thereto incorporated by reference into this
prospectus supplement. In addition, this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other parts of this prospectus
supplement and the attached prospectus contain forward-looking statements which
involve risks and uncertainties. Our actual results may differ materially from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" in the attached prospectus.

OVERVIEW

Since our inception in September 1991, we have devoted substantially all of
our efforts and resources to sponsoring and conducting research and development
on our own behalf and through collaborations. Through December 31, 1999, with
the exception of license fees, research and development funding, royalty
payments, and certain research grants, we have not generated any revenue from
operations. We anticipate our primary revenue sources for the next several years
to include royalty payments, research grants and collaboration payments from
collaborators under arrangements entered into in the future. The timing and
amounts of such revenues, if any, will likely fluctuate and depend upon the
achievement of specified research and development milestones, and results of
operations for any period may be unrelated to the results of operations for any
other period.

RESULTS OF OPERATIONS

Years Ended December 31, 1999, 1998 and 1997.

Revenues under collaborative research and development agreements were
approximately $3,099,000, $4,473,000 and $4,342,000 and license fees were
approximately $403,000, $200,000, and $200,000 in the years ended December 31,
1999, 1998, and 1997, respectively. These revenues in 1999 consisted of
recognizing the balance of the Bristol-Myers Squibb Company, or BMS,
collaborative research and development fees, license fees and related deferred
revenue, which declined in comparison to prior periods due to the modification
of the research agreement in February 1999 whereby we assumed all responsibility
for preclinical and clinical work on the Angiostatin protein effective August
1999. Deferred revenue from the collaborative research and development fees
related to the amortization over an initial five year term of a one-time payment
of $2,500,000 ($958,000, $500,000 and $500,000 recognized in 1999, 1998 and
1997, respectively) from BMS received in December 1995 and the amortization of
semi-annual payments of $1,835,000 ($2,141,000, $3,670,000 and $3,670,000
recognized in 1999, 1998 and 1997, respectively) under the BMS collaboration
agreement, both of which were fully amortized in August 1999. The license fee
represented the amortization over five years of a one-time $1,000,000 license
fee received in December 1995 under the BMS collaboration agreement, a portion
of which was paid to Children's Hospital, Boston, which also was fully amortized
in August 1999. In 1998 and 1997, we also recognized revenues of $303,000 and
$172,000, respectively, as reimbursement for clinical studies called for under
the original BMS collaboration agreement. Included in grant revenues are funds
received from a Small Business Innovative Research, or SBIR, program of the
National Institutes of Health of approximately $264,000, $455,000 and $215,000
in 1999, 1998 and 1997, respectively. In accordance with our 1998 collaborative
sublicensing agreement for thalidomide with Celgene, we recognized royalty
revenues from Celgene's sales of thalidomide (THALOMID(R)) of approximately
$1,123,000 for the year ended December 31, 1999.

Research and development expenses increased approximately 135.5% in 1999 to
approximately $35,529,000 from $15,085,000 in 1998, and increased by
approximately 67.6% in 1998 from approximately $8,999,000 in 1997. These
increases resulted primarily from the increased efforts in manufacturing of our
three product candidates, Endostatin, Angiostatin and 2ME2, to support our
clinical trial program, and our

S-12
<PAGE> 13

internal and sponsored research and product development programs related to our
antiangiogenesis and blood cell permeation technologies. Research and
development expenditures included sponsored research payments of approximately
$4,138,000, $5,677,000 and $3,700,000 and internal research and development
expenses of approximately $31,391,000, $9,408,000 and $5,300,000 in 1999, 1998
and 1997, respectively. Sponsored research payments to academic collaborators
include payments to Children's Hospital, Boston of $2,650,000 in 1999,
$2,525,000 in 1998 and $2,000,000 in 1997. Overall, research personnel increased
from 45 as of December 31, 1998 to 55 as of December 31, 1999. Research and
development expenses are expected to continue to increase as we continue to
expand our research and development efforts.

General and administrative expenses increased by 39.4% in 1999 to
approximately $8,029,000 from $5,760,000 in 1998 and increased by 17.2% in 1998
from $4,916,000 in 1997. The increases resulted primarily from increases in
administrative costs associated with adding administrative staff to support the
research and collaborative efforts we are conducting, investigating potential
strategic relationships and obtaining professional services. Investment income
fell approximately 22.7% in 1999 to approximately $1,677,000 from approximately
$2,170,000 in 1998 and fell by 17.2% in 1998 from approximately $2,622,000 in
1997. This decrease in investment income was due to the reduction of our cash,
cash equivalents and short-term investments used to fund our operations.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, we had cash and cash equivalents of approximately
$26,027,000 with working capital of approximately $19,243,000, primarily
representing the net proceeds of our private placements of equity securities and
our initial public offering, payments from BMS which include equity investments,
royalties received from Celgene and various grants.

We anticipate incurring substantial additional losses over at least the
next several years due to, among other factors, the need to expend substantial
amounts on our ongoing and planned clinical trials, additional research and
development activities, and related business development and general corporate
expenses. From inception through December 31, 1999, we have financed our
operations from:

- the net proceeds of private placements of equity securities prior to our
Initial Public Offering, or IPO, which raised approximately $17,000,000;

- payments from Bristol-Myers Squibb, including $9,700,000 received in
December 1995 (of which $6,500,000 was an equity investment), $11,535,000
received in 1996 (of which $5,000,000 was an equity investment),
$3,670,000 in each of the years 1997 and 1998, $611,667 in 1999;

- various grants from the World Health Organization and SBIR grants
totaling approximately $1,371,000;

- our June 1996 IPO, which raised net proceeds of approximately
$43,541,000;

- proceeds of approximately $654,000 under capital leases;

- a private offering completed on July 27, 1999 of 1,478,118 shares of our
common stock, Series 1 Warrants to purchase a total of 739,059 shares of
common stock at an exercise price of $33.02 and Series 2 Warrants to
purchase a total of 739,059 shares of common stock at an exercise price
of $25.45, resulting in gross proceeds to us, prior to the deduction of
fees and commissions, of approximately $30,100,000 (net proceeds of
$28,400,000), before redeemable warrants issued in connection with the
private offering which have resulted in additional proceeds to us of
approximately $12,000,000 through March 15, 2000; and

- proceeds of $3,000,000 from a borrowing in December 1999 secured by
substantially all of our furniture and equipment.

In connection with the private offering completed on July 27, 1999
described above, the Series 2 Warrants are terminable by us at any time after
April 22, 2000 if our common stock trades at a per share price greater than
$38.18 for ten consecutive trading days and such Warrants are not exercised
within a

S-13
<PAGE> 14

specified period after our delivery of a written notice. The Series 1 Warrants
are terminable by us at any time after January 27, 2002 if our common stock
trades at a per share price greater than $61.91 for ten consecutive trading days
and such Warrants are not exercised within a specified period after our delivery
of a written notice. If the Series 2 Warrants were fully exercised, they would
result in us receiving $18,800,000 in aggregate exercise proceeds. If the Series
1 Warrants were fully exercised, they would result in us receiving $24,400,000
in aggregate exercise proceeds.

In December 1999, we exercised our option to repurchase 291,667 of our
common shares from BMS for $13.143 a share or a total repurchase price of
$3,833,000 which is reflected as treasury stock in our financial statements as
of December 31, 1999. BMS's remaining 583,332 shares held in connection with the
collaborative research and development agreement are subject to certain
restrictions, including future repurchase rights which expire in December 2000
and 2001.

Our cash resources have been used to finance research and development,
including sponsored research, capital expenditures, including leasehold
improvements to our new facility, and general and administrative expenses. Over
the next several years, we expect to incur substantial additional research and
development costs, including costs related to early-stage research, preclinical
and clinical trials, product manufacturing, increased administrative expenses to
support our research and development operations and increased capital
expenditures for expanded research capacity, various equipment needs and
facility improvements.

We are a party to sponsored research agreements requiring us to fund an
aggregate of approximately $2,853,000 through 2001 (including $2,250,000 to
Children's Hospital, Boston); a materials production agreement of an estimated
$6,000,000 for clinical trials; license agreements requiring future milestone
payments of up to $3,535,000; and additional payments upon attainment of
regulatory milestones.

On February 9, 1999, the original BMS collaboration was modified such that
the final payment of $611,667 under the agreement was paid on June 5, 1999. As
amended, BMS has no further funding obligation to us after August 9, 1999.

We believe that our existing resources will be sufficient to meet our
planned expenditures over the next twelve months, although there can be no
assurance we will not require additional funds. Our working capital requirements
will depend upon numerous factors including:

- the progress of our research and development programs;

- preclinical testing and clinical trials;

- achievement of regulatory milestones;

- our potential corporate partners fulfilling their obligations to us;

- the timing and cost of seeking regulatory approvals;

- the level of resources that we devote to the development of
manufacturing, marketing and sales capabilities, if any;

- technological advances;

- the status of competing products; and

- our ability to maintain existing and establish new collaborative
arrangements with other companies to provide us with funding to support
these activities.

We will require substantial funds in addition to the present existing
working capital to develop our product candidates and to meet our business
objectives.

INFLATION

Management does not believe that inflation has a material impact on our
results of operations.

S-14
<PAGE> 15

BUSINESS

OVERVIEW

We are an innovative biopharmaceutical company engaged in the development
of products that address the role of blood and blood vessels in health and
disease. Angiogenesis is the biological process by which new blood vessels are
formed. As The Angiogenesis Company, our primary efforts are focused on
developing antiangiogenic drugs designed to inhibit the abnormal new blood
vessel growth associated with a broad range of diseases, such as cancer, certain
types of blindness and atherosclerosis. Our current portfolio of antiangiogenic
products includes Endostatin, Angiostatin and 2ME2. We began Phase I clinical
testing of Endostatin in September 1999. Patient recruitment is underway for
Phase I clinical trials of Angiostatin and 2ME2, and we plan to commence drug
administration in April 2000.

ANGIOGENESIS

Within the human body, a network of arteries, capillaries and veins, known
as the vasculature, functions to transport blood throughout the tissues. The
basic network of the vasculature is developed through angiogenesis, a
fundamental process by which new blood vessels are formed.

Mounting evidence indicates that the abnormal growth of new blood vessels
plays a key role in many diseases such as cancer, arthritis, blindness caused by
diabetes or macular degeneration, and more recently, atherosclerotic disease.
Over the last year, the critical role of angiogenesis in these diseases has been
significantly reinforced by an increasing number of scientific publications
reporting a direct link between the abnormal growth of blood vessels and disease
progression. Typically, angiogenesis involves the growth of tiny blood vessels,
called capillaries, which extend from an existing blood vessel into the body's
tissues to provide nutrients and to remove waste products. In humans,
angiogenesis is essential during the first three months of embryonic
development, where cytokines and growth factors, which are normally suppressed
in adults, are activated to stimulate the growth of new blood vessels required
to form organs and limbs in the developing fetus. In addition, during adulthood,
angiogenesis occurs as a normal physiological process in menstrual cycling,
fetal development and wound healing.

Angiogenesis also occurs during disease states, as is the case with cancer
(where the growth of new blood vessels is necessary to sustain tumor growth),
certain types of blindness (where the newly formed blood vessels block vision)
and atherosclerosis (where plaque formation appears to involve angiogenesis). As
described below, we believe that antiangiogenic products, which inhibit this
abnormal growth of blood vessels in these diseases, may have significant
advantages over traditional therapies for these indications.

Angiogenesis in Cancer

Cancer is the second leading cause of death in the United States. Recently,
the American Cancer Society estimated that approximately 1,200,000 new cases of
cancer would be diagnosed annually. Existing cancer treatments include surgery,
radiation therapy and chemotherapy. Surgery is an invasive method of removing
tumors, and some tumors currently are inoperable due to their location, extent
of organ infiltration or size. Radiation therapy produces ionized molecules
within the body that attack cancer cells but may also damage surrounding healthy
cells. Chemotherapy involves the administration of toxic substances (cytotoxins)
designed to kill cancer cells, and usually produces severe side effects. Due to
its
S-15
<PAGE> 16

lack of specificity, chemotherapeutics do not differentiate between rapidly
growing healthy cells and cancer cells. In addition, resistance to chemotherapy
occurs over time. We believe that our antiangiogenic therapeutics, which are
intended to inhibit the growth of tumor-feeding blood vessels, may prove
effective in treating certain cancers, and may also prove to have significant
advantages over traditional cancer therapies. These advantages may include a
reduced likelihood of resistance, fewer side effects and the potential to be
administered in combination with other antiangiogenic and/or traditional
therapies.

Cancer includes many different types of uncontrolled cellular growth.
Clusters of cancer cells, referred to as tumors, may destroy surrounding organs,
impair physiological function, and often lead to patient death. In order to
survive, cancer cells require blood vessels to supply the nutrients and oxygen
carried by the body's blood supply. To initiate the growth of these blood
vessels and thus feed the rapidly proliferating cancer cells, the cancerous
tumor stimulates angiogenesis by recruiting the production of a variety of
angiogenic factors including basic Fibroblast Growth Factor (bFGF) and Vascular
Endothelial Growth Factor (VEGF). This series of events results in an increased
supply of blood from the sprouting of hundreds of newly formed blood vessels and
provides the tumor with the constant supply of nutrients and growth factors that
it needs to grow.

Angiogenesis is also involved in the spread, or metastasis, of tumor cells.
Metastasis is the process by which tumor cells escape from the tumor and enter
the body's circulation where they reach a new site and begin to grow, thereby
affecting other organs in the body. These tumor cells may either be released by
a growing primary tumor or be released into circulation during surgical removal
of the primary tumor.

Although surgeons generally remove significant amounts of healthy tissue
surrounding a tumor, in many cases "seed cancer cells" have already escaped the
primary tumor, circulated through the body and become embedded elsewhere. As
cancer cells metastasize, they require continuous angiogenesis if these
secondary tumors are to grow. It has been observed that in certain cases, these
seed cells, or metastases, do not vascularize or grow while the primary tumor is
in place. However, after the primary tumor is removed, metastatic tumors often
grow rapidly. This observation prompted Drs. Judah Folkman and Michael O'Reilly
of Children's Hospital, Boston, to investigate whether the primary tumor
produces proteins that inhibit angiogenesis. As a result of these efforts,
Angiostatin and Endostatin were discovered at Children's Hospital.

Angiogenesis in Blindness

Angiogenesis within the eye, which is often a condition associated with
diabetes and age-related macular degeneration, is a major cause of blindness.
Both macular degeneration and diabetic retinopathy (a secondary effect of
diabetes) involve the formation of new blood vessels that grow behind, or in
front of, the retina, respectively. These newly formed blood vessels often
hemorrhage or cause the detachment of the retina, which, in both cases,
eventually leads to blindness. It is further estimated that approximately eight
million people in the United States have diabetic retinopathy, and that
twenty-five thousand of these cases result in blindness each year. Prevent
Blindness America(R) estimates that approximately thirteen million people in the
United States suffer from macular degeneration, and that nearly two million of
these people will develop vision impairment, of which one hundred thousand will
develop blindness each year. Current treatments for diabetic retinopathy and, to
a more limited extent, macular degeneration involve laser-based photocoagulation
therapy, which often causes additional damage to the retina and surrounding
cells.

Angiogenesis and Other Disease Indications

Angiogenesis also appears to play a role in a variety of other diseases,
including rheumatoid arthritis, atherosclerosis and psoriasis. We believe that
our antiangiogenic technologies may be applicable to these diseases. To date,
however, we have not conducted clinical research using antiangiogenic therapy in
diseases outside of cancer or macular degeneration. We may not pursue research
outside these two indications or commercialize any products for other
indications.

S-16
<PAGE> 17

STRATEGY

We were founded in 1991 to create a link between scientists and
institutions developing promising technologies and large companies that could
provide the resources necessary to carry these technologies through clinical
trials to the marketplace. Our business objective and strategy is to accelerate
the development of our antiangiogenic agents and future technologies with
clinical and commercial potential by:

- focusing our resources on the clinical development of our current core
technologies;
- broadening our product and technology portfolio through internal
discovery and sponsored research collaborations with academic
institutions, federal agencies and private enterprises;
- developing marketing and sales capabilities; and
- leveraging our resources through strategic partnerships to minimize
clinical trial and manufacturing costs and accelerate effective product
commercialization.

OUR ANTIANGIOGENESIS PROGRAM

We believe that certain drugs, genes or proteins that exhibit
antiangiogenic effects may be used as treatments for diseases involving
angiogenesis. In the case of cancer, we believe that our antiangiogenic drugs
may have significant advantages over traditional cancer therapies, including a
reduced likelihood of resistance, fewer side effects and the ability to be
administered in conjunction with other therapies. Currently, we are primarily
focused on angiogenesis inhibition as a treatment for cancer through the
research, development and preclinical and clinical testing of the following
drugs. In addition, we have preclinical development programs relating to
blindness and cardiovascular disease.

<TABLE>
<CAPTION>
COMMERCIALIZATION
PRODUCT CANDIDATE DEVELOPMENT STATUS RIGHTS
----------------- ------------------ -----------------
<S> <C> <C>
Endostatin........................................ Phase I. Phase II trials EntreMed
planned for 4Q 2000.
Angiostatin....................................... Phase I trials planned for EntreMed
April 2000. Patient
recruitment underway.
2-Methoxyestradiol (2ME2)......................... Phase I trials planned for EntreMed
April 2000. Patient
recruitment underway.
Growth Factor Vaccines (bFGF, VEGF)............... Preclinical EntreMed
Thalidomide analogs............................... Preclinical EntreMed
Metastatin........................................ Discovery EntreMed
Prostate Specific Antigen (PSA)................... Discovery EntreMed
Tissue Factor Pathway Inhibitor (TFPI)............ Discovery EntreMed
2ME2 analogs...................................... Discovery EntreMed
Thalidomide....................................... Phase II/III. FDA approval Celgene
for Erythema Nodosum
Leprosum (ENL).
</TABLE>

S-17
<PAGE> 18

Endostatin

In 1996, researchers at Children's Hospital, Boston, isolated and
identified Endostatin. We have since cloned and expressed the gene for
Endostatin. In preclinical studies, Endostatin has been shown to reduce the size
of primary rodent carcinomas, including murine Lewis lung, melanoma and rat
glioma, as well as human prostate, breast and colon cancer grown in
immunodeficient mice. Additional preclinical studies demonstrated that mouse and
human sequences of Endostatin inhibited the growth of metastatic tumors. We
emphasize, however, that mouse versions of Endostatin are not the same as human
versions of this protein.

In November 1997, Children's Hospital researchers published results showing
that treatment with mouse Endostatin did not lead to acquired resistance in
preclinical models of lung cancer, fibrosarcoma and melanoma. These studies also
showed that after six, four or two treatment cycles of mouse Endostatin,
respectively, no tumors recurred even though therapy was stopped. We believe
that this distinction may make human Endostatin unique among conventional cancer
drugs, which normally become less effective as drug resistance occurs with each
treatment.

Our scientists initiated the production of recombinant human Endostatin
using the Pichia pastoris yeast expression system, and developed a purification
process. Covance is our contract manufacturer of the GMP recombinant human
Endostatin being used in our clinical studies. Covance's large-scale GMP
production with the Pichia pastoris yeast expression system has produced enough
human recombinant Endostatin to last through our early clinical trials.

In April 1999, we presented data at the American Association for Cancer
Research, or AACR, in which human Endostatin was seen to inhibit the metastases
of early stage melanoma in mice by 90% and late stage melanoma by 70-90%. In
July 1999, the FDA allowed our IND application for the human testing of
recombinant human Endostatin, and shortly thereafter we began Phase I clinical
trials -- taking Endostatin from first publication to clinical trials in less
than three years.

Our scientists have recently discovered that the mechanism of action of
Endostatin may be to inhibit angiogenesis by binding and interfering with an
endothelial cell motility protein called tropomyosin. We believe that this
discovery is a significant step in understanding Endostatin's mechanism of
action and its effects on the angiogenesis process.

Three separate Phase I trials of Endostatin are presently underway. In
September 1999, the first patients received Endostatin at Dana-Farber/Partners
CancerCare, the joint venture between Dana-Farber Cancer Institute, Brigham and
Women's Hospital, Massachusetts General Hospital and Beth Israel Deaconess
Medical Center. The two other Phase I studies are being performed in
collaboration with the NCI and are underway at the University of Texas M.D.
Anderson Medical Center and the University of Wisconsin Comprehensive Cancer
Center. These Phase I studies, designed to test the drug's safety, are conducted
by administering increasing doses of Endostatin to cohorts of patients who have
failed conventional therapy and have advanced, progressive cancer. Testing at
the lowest doses have been completed, and tests of higher doses are underway or
will follow shortly. Each dose range is given for 28 days before the next cohort
begins receiving the next higher dosage, and patients are allowed to stay on
protocol to receive their starting dose only with physician's discretion. As of
yet, no serious adverse effects have been reported. We plan to begin Phase II
clinical trials of Endostatin in the fourth quarter of 2000.

In order to meet the increasing requirements for clinical testing and
trials of Endostatin, we are in the process of completing final negotiations
with Chiron Corporation for scale-up manufacturing of recombinant human
Endostatin under GMP. We have completed technology transfer, as shown by
Chiron's fermentation of biologically active Endostatin, and Chiron has begun
scale-up production. Once completed, large-scale fermentation runs for the
production of recombinant human Endostatin are expected to begin shortly
thereafter. Chiron's manufacturing efforts will augment those currently
undertaken by Covance and help to ensure that a sufficient quantity of
Endostatin is available to us for our expanded clinical trials.

S-18
<PAGE> 19

Angiostatin

In research we sponsored at Children's Hospital, Boston, Drs. Michael
O'Reilly and Judah Folkman first identified a substance associated with primary
tumors which appeared to prevent vascularization and the growth of metastatic
tumors. Based upon this research and subsequent studies, we believe that primary
tumors secrete an enzyme that cleaves the parent molecule, plasminogen, a known
protein associated with blood clotting, into a smaller, previously undiscovered
protein that keeps other metastatic tumors from developing elsewhere in the
body. The Children's Hospital team isolated and identified this protein in 1995,
which they named Angiostatin. We since have cloned and expressed the gene that
codes Angiostatin, and are now pursuing large-scale recombinant production of
Angiostatin in anticipation of beginning clinical trials. By the end of 1999,
over 175 publications had highlighted the antiangiogenic effects of Angiostatin
in various preclinical experiments, a majority of which were conducted by
researchers independent of us.

In preclinical studies, mouse Angiostatin inhibited the growth of human
breast cancer by 95%, colon cancer by 97%, and prostate cancer by almost 100% in
immunodeficient mice. We believe that Angiostatin regressed cancerous tumors in
mice to a dormant state through the inhibition of angiogenesis. In other
preclinical studies, mice with melanoma were treated with recombinant
Angiostatin produced from the yeast, Pichia pastoris, for a total of eleven days
and then examined for metastases in the lungs. In these experiments, the number
of lung metastases decreased by 60-80% in mice treated with recombinant human
Angiostatin. In addition, we conducted subacute (28-day) safety studies in
monkeys using doses of recombinant human Angiostatin that were multiples of
anticipated human doses, with no adverse effects observed. We also have
contracted with Covance for the large-scale GMP production of recombinant human
Angiostatin using the Pichia pastoris yeast expression system and purification
process that we developed. Covance has completed scale-up production of
Angiostatin under GMP, and we have vialed a sufficient quantity in preparation
for our upcoming Phase I clinical studies.

In December 1999, we submitted an IND application for Phase I clinical
trials with Angiostatin, and on January 31, 2000, the FDA allowed clinical
studies in cancer patients. As our first Phase I clinical trial sites for
Angiostatin, we have selected the Thomas Jefferson University Hospital in
Philadelphia, Pennsylvania. As with the Phase I clinical trial of Endostatin,
the Phase I trial of Angiostatin will use a dose escalation method to determine
its safety in cancer patients. Patient recruitment is underway, and we plan to
commence drug administration in April 2000.

Further Phase I and Phase II studies will be based upon pharmacology and
biologic data obtained in the initial Phase I studies. They will include dose
scheduling, routes of administration and combination studies with currently used
chemotherapeutic agents and radiotherapy.

Combination studies using Endostatin and Angiostatin in mice. In addition
to the standalone preclinical results of Endostatin and Angiostatin, researchers
from Children's Hospital and elsewhere have presented data from other studies
that show potentially synergistic effects when mouse Endostatin and mouse
Angiostatin are combined to treat tumors. The results of these studies
demonstrated the complete eradication of lung tumors in mice, and the tumors did
not recur several months after treatment stopped. We believe that there may be
benefits in using these two proteins in combination with each other or in
combination with conventional chemotherapy and radiation.

Gene expression of Endostatin and Angiostatin. Several investigators have
reported that the genes that code Endostatin and Angiostatin, when introduced
into mice, effectively produce sufficient quantities of these antiangiogenic
proteins to decrease tumor growth. We have entered into a research collaboration
with Cell Genesys, Inc. to evaluate gene transfer viral vectors and are
continuing to evaluate the best strategies for a gene therapy using our
antiangiogenic proteins.

2-Methoxyestradiol (2ME2)

2ME2 is an orally active, naturally occurring antiangiogenic and
antiproliferative agent discovered by Dr. Robert D'Amato while working in Dr.
Judah Folkman's laboratory at Children's Hospital, Boston. We

S-19
<PAGE> 20

licensed this natural estrogen metabolite from Children's Hospital in January
1997 as part of our sponsored research agreement with them.

In preclinical studies of 2ME2, researchers at Children's Hospital have
demonstrated its dual mechanism of action -- antiangiogenic by inhibiting
endothelial cells and antiproliferative by directly killing cancer cells. The
antiangiogenic activity of 2ME2 appears to prevent the growth of new blood
vessels by inhibiting angiogenic factors such as bFGF and VEGF. The
antiproliferative activity of the drug has been extensively studied by our
scientists and involves the induction of apoptosis, or programmed cell death.

Other preclinical studies have demonstrated that breast cancer cells are
extremely sensitive to 2ME2, even those cells that already have developed
resistance to established drugs like Tamoxifen and Taxol. Moreover, 2ME2 has
been shown to inhibit the growth of human breast tumor cells in vivo and to
produce a sharp decrease in the microvessel density associated with tumors while
exhibiting minimal toxicity.

We signed a collaborative agreement with the NCI for the preclinical and
clinical development of 2ME2 in August 1997. We expanded this relationship in
April 1999 when we signed a four-year Cooperative Research and Development
Agreement with the NCI for collaborative studies in preclinical pharmacology and
toxicology in anticipation of our clinical trials. Our scientists have invented
a synthetic process to yield an ultrapure form of 2ME2. A clinical-grade GMP
form of that product, manufactured under contract by Tetrionics, has completed
preclinical safety studies without remarkable side effects. Preparations for
clinical trials of 2ME2 are already completed or well under way, including
encapsulation of the drug and the selection of study sites. We have selected
Indiana University Cancer Center to conduct the first Phase I clinical trials of
2ME2 in cancer patients. On February 14, 2000, we received FDA allowance to test
2ME2 in cancer patients. Patient recruitment is underway, and we plan to
commence drug administration in April 2000.

Thalidomide

Thalidomide originally was introduced in the 1950s as a sedative and,
because of its then perceived safety, became the third largest prescription drug
in Europe. Although the drug never was approved for use in the United States, it
was widely used in other countries until it was found to cause birth defects in
children born to expectant mothers who took thalidomide for morning sickness.
This discovery resulted in the withdrawal of thalidomide as a drug in the early
1960s. Drs. Robert D'Amato and Judah Folkman at Children's Hospital later
reasoned that thalidomide caused these birth defects by blocking the growth of
new blood vessels in human embryos. The two researchers further hypothesized
that thalidomide could be safely used to block angiogenesis in adults and
potentially improve the treatment of cancer and blindness.

In April 1996, in collaboration with the NCI, we initiated Phase II
clinical trials of thalidomide in patients with brain tumors, breast cancer,
prostate cancer, and Kaposi's sarcoma, and shortly thereafter, initiated Phase
II trials of thalidomide in patients with blindness due to macular degeneration.

Patients with recurring brain cancer that fails to respond to chemotherapy
or radiation usually live about 3 to 6 months after receiving such failed
treatment methods. However, in thalidomide trials conducted with Dr. Howard Fine
at the Dana-Farber Cancer Institute, a 50% response rate was observed by either
failure of their cancer to progress or tumor shrinkage during the two-month
clinical trial, and 11 of the 31 patients were still alive and receiving the
drug after approximately one year. We received orphan drug designation from the
FDA for the use of thalidomide in brain cancer in March 1998.

In addition, patients with late-stage prostate cancer also have shown a
positive response to thalidomide. In Phase II trials conducted by us along with
Dr. William D. Figg at the NCI, over half the patients showed significant
declines in the PSA marker and in many the disease had stabilized. In other
Phase II clinical trials conducted by Dr. Robert Yarchuan at the NCI, patients
with Kaposi's sarcoma demonstrated a 60% response rate to thalidomide, and
results from a separate trial conducted in the United Kingdom showed a 45%
therapeutic effect. We received orphan drug designation from the FDA for the use
of thalidomide in Kaposi's sarcoma in August 1998.

S-20
<PAGE> 21

In July 1998, Celgene received approval from the FDA for the use of
thalidomide in erythema nodosum leprosum, an inflammatory skin condition in
patients with leprosy. Later that year, we signed a collaborative sublicensing
agreement for thalidomide with Celgene. Under the terms of that agreement,
Celgene acquired exclusive worldwide rights to our patents and technology for
thalidomide, as well as to the orphan drug designations we already received for
its use in brain cancer and Kaposi's sarcoma. In exchange for those rights,
Celgene is required to pay us a royalty on all sales of thalidomide
(THALOMID(R)), regardless of indication, and also has assumed responsibility for
all clinical trials of thalidomide. Ongoing clinical trials of thalidomide are
further investigating its effect on a variety of cancers (brain cancer, multiple
myeloma, prostate cancer, breast cancer, non-small cell lung cancer, head and
neck cancer) and chronic inflammatory diseases.

In the fourth quarter of 1999, clinical trial results for THALOMID(R) were
featured at major medical meetings and in prestigious peer-review journals.
These results validated the potential use of THALOMID(R) in the treatment of
multiple myeloma and its potential use in the treatment of a broad range of
cancer and immunological diseases.

Preclinical and Discovery Program

We continue to develop a leading role in the field of angiogenesis
research. Our scientists are exploring the complex events associated with
angiogenesis at both the cellular and molecular levels. This research, as well
as research performed through our collaborations with investigators at
prestigious institutions, has resulted in the identification of a number of new
molecules that are currently under evaluation as potential product candidates.
These include small molecular weight inhibitors of angiogenesis such as analogs
of thalidomide and 2ME2. In addition, other proteins such as Metastatin and PSA
have demonstrated potent antiangiogenic activity. Our scientists also are
working with Tissue Factor Pathway Inhibitor, or TFPI, a natural inhibitor of
clotting that also has antitumor activity. We have identified a mechanism
underlying these effects and will seek additional compounds with similar
activity. Research efforts with vaccines directed against peptides of angiogenic
growth factors bFGF and VEGF also have shown inhibition of metastatic disease in
animal models.

COLLABORATIVE RELATIONSHIPS

A key strength of our business strategy is the ongoing relationships we
have developed with, among others, the following institutions, agencies, and
corporations:

Children's Hospital, Boston

Through our sponsored research agreement with Children's Hospital, Boston,
an affiliate of Harvard Medical School, we have sustained a strong, valuable
scientific collaboration with Dr. Judah Folkman, a pioneer in the field of
angiogenesis. We believe this relationship has reinforced our present leadership
position in the antiangiogenesis field. Through our licensing agreement with
Children's Hospital, we obtained exclusive worldwide rights to novel
angiogenesis inhibitors discovered in Dr. Folkman's Surgical Research
Laboratory, including Endostatin, Angiostatin, 2ME2 and thalidomide. In January
2000, we extended our relationship with Children's Hospital by entering into a
two-year sponsored research collaboration with Dr. Karen Moulton, also of Dr.
Folkman's Surgical Research Laboratory. Dr. Moulton will study the relationship
between angiogenesis inhibitors, such as Endostatin, and the reduction of
coronary artery plaques. Based on Dr. Moulton's early work in this area, it is
hypothesized that coronary artery plaques may also be angiogenesis-dependent.
When ruptured, these plaques can trigger heart attack, stroke or hemorrhage. We
believe that our antiangiogenic product candidates may play an important role in
the future treatment and prevention of heart disease, in addition to their
effects in treating cancer.

National Cancer Institute

We also have a relationship with the National Cancer Institute of the
National Institutes of Health, or NIH. In 1997, the NCI signed a collaborative
research and development agreement with us to assist us

S-21
<PAGE> 22

through clinical trials of thalidomide. This agreement was transferred to
Celgene Corporation along with four Phase II clinical trials. Subsequently, the
NCI signed additional agreements with us for the collaborative preclinical and
clinical development of Endostatin and 2ME2, and a letter of intent for the
development of Angiostatin.

Celgene Corporation

We licensed our rights to thalidomide as an angiogenesis inhibitor to
Celgene, along with four Phase II clinical trials underway at the NCI and two
orphan drug designations (primary brain cancer and Kaposi's sarcoma). Effective
as of the date of that transaction, December 10, 1998, we began receiving
royalty payments from Celgene on all worldwide sales of thalidomide, regardless
of indication. Thalidomide is currently marketed by Celgene under the trade name
THALOMID(R) for the treatment of erythema nodosum leprosum (ENL) and is being
studied in a broad range of cancers in Phase II and III trials.

CONTRACT MANUFACTURING

We currently outsource manufacturing for all of our products to United
States suppliers. We expect to continue to outsource manufacturing in the near
term. We believe our current suppliers will be able to manufacture our products
efficiently in sufficient quantities and on a timely basis, while maintaining
product quality. We seek to maintain quality control over manufacturing through
ongoing inspections, rigorous review, control over documented operating
procedures and thorough analytical testing by our own and outside laboratories.
We believe that our current strategy of outsourcing manufacturing is cost-
effective since we avoid the high fixed costs of plant, equipment and large
manufacturing staffs and conserve our resources.

Covance Biotechnology Services, Inc.

In November 1998 and March 1999, we entered into manufacturing agreements
with Covance under which Covance assumed responsibility for the scale-up
production of recombinant human Endostatin and Angiostatin under GMP conditions
and the maximization of product yields necessary to begin clinical trials and
testing.

Chiron Corporation

We are in the process of completing final negotiations with Chiron
Corporation for the scale-up contract manufacturing of GMP recombinant human
Endostatin. We have completed technology transfer, as shown by Chiron's
fermentation of biologically active Endostatin, and Chiron has begun scale-up
for production. Once completed, large-scale fermentation runs for the production
of recombinant human Endostatin are expected to begin shortly thereafter.
Chiron's manufacturing efforts will augment those currently undertaken by
Covance and help to ensure that a sufficient quantity of Endostatin is available
to us for our expanded clinical trials.

Tetrionics, Inc.

We also have a production agreement with Tetrionics, Inc., Madison,
Wisconsin, for the GMP production of 2ME2. This product was encapsulated for
oral use at the University of Iowa.

MARKETING AND SALES

We continue to explore opportunities for corporate alliances and partners
to help us develop, commercialize and market our products, although we are
prepared to develop and commercialize each product candidate independently, if
necessary. Our strategy is to enter into collaborative arrangements with
pharmaceutical and other companies for the development, manufacturing, marketing
and sales of our products that will require broad marketing capabilities. These
collaborators are generally expected to be responsible for funding or
reimbursing all or a portion of the development costs, including the costs of
clinical testing necessary to obtain regulatory clearances and for commercial
scale manufacturing, in
S-22
<PAGE> 23

exchange for exclusive or semi-exclusive rights to market specific products in
particular geographic territories. We licensed our rights for the development
and commercialization of thalidomide to Celgene in December 1998.

We presently have all rights to Endostatin, Angiostatin, 2ME2 and
thalidomide analogs. Additionally, we have entered into an agreement with the
NCI for the preclinical and clinical development of Endostatin and 2ME2, and a
letter of intent for the development of Angiostatin. This agreement provides
useful support for these programs while preserving our opportunities for
commercialization, either alone or with a corporate partner. We may, in the
future, consider manufacturing or marketing certain products directly and
co-promoting certain products if we believe it is appropriate under the
circumstances.

OTHER TECHNOLOGIES

In addition to our core antiangiogenic technologies, we are developing
blood cell permeation technology to add drugs and genes to blood cells. We also
are conducting research into an antimalaria vaccine.

Cell Permeation Technology

We formed a subsidiary, TheraMed, Inc., to more aggressively pursue the
research, development and commercialization of our blood cell permeation
technology. This technology allows us to deliver drugs, genes or other
therapeutic agents that otherwise would not readily permeate the cell membrane
into blood cells while retaining the blood cell's natural functions.

Human blood is made up of cellular components and plasma. The cellular
components are red blood cells, white blood cells and platelets. Red blood cells
transport oxygen to the body's tissues and organs. White blood cells are a
heterogeneous group and include cells that support the immune function by
migrating to sites of infection and cancer and propagating into mature cell
lines. The platelets, with specialized markers on their membranes, are attracted
to sites of hemorrhage, infection, inflammation and metastasis, where they
participate in complex biological functions.

The oxygen transport function is principally carried out by hemoglobin in
the red blood cells. Hemoglobin is a protein-iron based molecule that carries
oxygen from the lungs to the tissues. The body's tissues require oxygen in order
to function properly, and several diseases such as heart attacks, strokes, and
peripheral vascular disease are a direct result of inadequate oxygen supply to
the tissues. In human blood, each hemoglobin molecule carries four molecules of
oxygen. However, when oxygenated blood reaches the tissues, hemoglobin typically
releases only one of these four molecules of oxygen. Extensive evidence
indicates that a naturally occurring plant chemical called inositol
hexaphosphate, or IHP, enhances the oxygen releasing capabilities of human
hemoglobin by allowing the release to oxygen-starved peripheral tissue of two to
three oxygen molecules instead of only one. In this way, the efficiency of
hemoglobin could be increased and diseased tissues that result from oxygen
depletion could receive additional oxygen therapeutically.

IHP cannot be administered as a drug since it cannot get into red blood
cells and bind to hemoglobin by itself. Previous techniques to introduce IHP
into red blood cells have resulted in damage to the cells. However, using
TheraMed's cell permeation technology, the red blood cell membrane can be made
permeable to IHP, allowing IHP to bind with hemoglobin and potentially enhance
red blood cell's oxygen delivery to tissues.

TheraMed has designed a series of prototype instruments capable of
inserting drugs into blood cells without damaging the cells. The original
concept was licensed from investigators at the Centers for Blood Research
Laboratories, or CBRL, at Harvard University. The problem of the impermeable red
blood cell membrane is overcome by passing an electric charge across the red
blood cell membrane, rendering the membrane permeable to IHP using TheraMed's
flow electroporation technology. IHP then passes through the membrane and
combines with hemoglobin. The IHP-treated blood could then be infused into the
patient or stored for later infusion. Published studies show that IHP-treated
red blood cells have a

S-23
<PAGE> 24

biological life span equivalent to that shown by normal cells. No apparent
toxicity has been demonstrated with IHP-treated red blood cells in animals.

Perhaps an even more valuable use of TheraMed's cell permeation technology
is the possible insertion of drugs into platelets, or genes into white blood
cells, for targeted drug delivery. Platelets migrate to sites of internal
bleeding, neoplasia and inflammation. TheraMed is seeking to use this natural
function to deliver compounds such as a thrombolytic, antiproliferative, or
pharmaceutical, at levels that are therapeutically beneficial while minimizing
toxicity. The function of white blood cells as a group is to protect against
systemic disease by recruiting and producing cytokines and therapeutic proteins.
TheraMed is inserting genes into white blood cells to produce a protein or
enzyme on a sustained basis. For example, TheraMed is pursuing gene-based
therapies in order to produce Endostatin and Angiostatin through sustained
release from white blood cells or stem cells.

Malaria Vaccine

We have been developing a vaccine against the Erythrocyte Binding Antigen
175 (EBA175), a protein that is expressed by the malaria parasite to enable its
invasion of the red blood cell. Dr. Kim Lee Sim, our Vice President for
Preclinical Research and Development, first discovered EBA175 and its role in
malaria infection while working at the NIH. In 1998, we obtained an exclusive,
worldwide license for this technology from the NIH. We receive financial support
for development of this vaccine through the SBIR grant program, which provides
substantially all of the funding for this program. At present, a naked DNA
vaccine and a protein boost vaccine are being tested in monkeys in Peru and
Panama in collaboration with the United States Navy.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

Our success will depend in part on our ability to obtain patent protection
for our products, both in the United States and abroad. The patent position of
biotechnology and pharmaceutical companies, in general, is highly uncertain and
involves complex legal and factual questions.

To date, we own or have licensed on an exclusive basis a total of 62
pending patent applications in the United States for our products and product
candidates. We also have 19 issued patents in the United States and 13 issued
patents in foreign countries. We have a total of 151 patent applications pending
in the United States and other countries.

We have exclusively licensed from Children's Hospital, Boston, 18 pending
United States patent applications and one issued patent covering Endostatin,
fragments of Endostatin, nucleic acid coding for Endostatin, the use of
Endostatin as a therapeutic agent, and the use of Endostatin as a diagnostic
agent. The patent applications also cover the combination of Endostatin and
other chemotherapeutic agents, such as Angiostatin, as a therapeutic
composition. We have a United States patent application directed to the
production of Endostatin.

We have licensed exclusively from Children's Hospital, Boston, seven
pending United States patent applications and nine issued patents covering
Angiostatin, nucleic acid coding for Angiostatin, the use of Angiostatin as a
therapeutic agent and the use of Angiostatin as a diagnostic agent. We also have
two United States patent applications directed to peptides and proteins that
bind specifically to Angiostatin. We have a United States patent application
directed to the production of Angiostatin.

In addition, we have exclusively licensed technology from Children's
Hospital, Boston, which covers the use of steroid-derived small molecular weight
compounds such as 2ME2 that are antimitotic agents and antiangiogenic compounds.
A patent application has been filed covering purified 2ME2 as a composition of
matter. There are five pending United States patent applications and three
issued United States patents covering this technology. Patent applications also
cover estrogen-related compounds with anti-fungal activity and antiplaque
activities in atherosclerosis.

We also have an exclusive, worldwide license from Children's Hospital,
Boston, which includes six pending United States patent applications and three
issued patents covering the thalidomide molecule and
S-24
<PAGE> 25

thalidomide analogs as antiangiogenic agents for the treatment of a wide variety
of diseases that are caused by abnormal angiogenesis. These patent applications
also include composition of matter coverage for certain thalidomide analogs.
Composition of matter patent protection is not available for the molecule
thalidomide. We are aware of several other issued patents covering certain
non-antiangiogenic uses of thalidomide. Although we believe that the claims in
such patents will not interfere with our proposed uses of thalidomide, there can
be no assurance that the holders of such patents will not be able to exclude us
from using thalidomide for other non-antiangiogenic uses of thalidomide. We have
entered into a license agreement with Celgene under which we licensed to Celgene
the use of thalidomide for treatment of antiangiogenic-mediated diseases.

We have five United States patent applications pending and two issued
patents covering our cell permeation technology. One of these patents has been
licensed from the CBRL. These patent applications and patents cover the overall
electroporation device, the electroporation chamber in the device and the
treatment of a wide variety of diseases using cells that have been treated in
the electroporation device.

Patent applications corresponding to the above-described United States
patent applications have been filed in Europe, Japan, Canada and other selected
countries.

GOVERNMENT REGULATION

Our development, manufacture, and potential sale of therapeutics are
subject to extensive regulation by United States and foreign governmental
authorities.

Regulation of Pharmaceutical Products

Our products currently being developed may be regulated by the FDA as drugs
or biologics or, in some cases, as medical devices. New drugs and medical
devices are subject to regulation under the Federal Food, Drug, and Cosmetic
Act, and biological products, in addition to being subject to certain provisions
of that Act, are regulated under the Public Health Service Act. We believe that
drug products developed by us or our collaborators will be regulated either as
biological products or as new drugs. Both statutes and the regulations
promulgated thereunder govern, among other things, the testing, manufacturing,
safety, efficacy, labeling, storage, record keeping, advertising and other
promotional practices involving biologics or new drugs, as the case may be. FDA
approval or other clearances must be obtained before clinical testing, and
before manufacturing and marketing of biologics, drugs and devices.

Obtaining FDA approval has historically been a costly and time-consuming
process. Generally, in order to gain FDA premarket approval, a developer first
must conduct preclinical studies in the laboratory and in animal model systems
to gain preliminary information on an agent's effectiveness and to identify any
safety problems. The results of these studies are submitted as a part of an
investigational new drug, or IND, application, which the FDA must review before
human clinical trials of an investigational drug can start. The IND application
includes a detailed description of the clinical investigations to be undertaken.

In order to commercialize any products, we or our collaborators must
sponsor and file an IND and be responsible for initiating and overseeing the
clinical studies to demonstrate the safety, effectiveness, and potency that are
necessary to obtain FDA approval of any such products. For INDs sponsored by us
or our collaborators, we or our collaborators will be required to select
qualified investigators (usually physicians within medical institutions) to
supervise the administration of the products, and ensure that the investigations
are conducted and monitored in accordance with FDA regulations, including the
general investigational plan and protocols contained in the IND. Clinical trials
are normally done in three phases, although the phases may overlap. Phase I
trials are concerned primarily with the safety and preliminary effectiveness of
the drug, involve fewer than 100 subjects, and may take from six months to over
one year to complete. Phase II trials normally involve a few hundred patients
and are designed primarily to demonstrate effectiveness in treating or
diagnosing the disease or condition for which the drug is intended, although
short-term side effects and risks in people whose health is impaired may also be
examined. Phase III trials are expanded clinical trials with larger numbers of
patients which are intended to evaluate the overall benefit-risk relationship of
the drug and to gather additional information for proper dosage and
S-25
<PAGE> 26

labeling of the drug. Clinical trials generally take two to five years to
complete, but may take longer. The FDA receives reports on the progress of each
phase of clinical testing, and it may require the modification, suspension, or
termination of clinical trials if it concludes that an unwarranted risk is
presented to patients, or, in Phase II and III, if it concludes that the study
protocols are deficient in design to meet their stated objectives.

If clinical trials of a new product are completed successfully, the sponsor
of the product may seek FDA marketing approval. If the product is regulated as a
biologic, the FDA will require the submission and approval of a Biologics
License Application (BLA) before commercial marketing of the biologic. If the
product is classified as a new drug, an applicant must file a New Drug
Application (NDA) with the FDA and receive approval before commercial marketing
of the drug. The NDA or BLA must include detailed information about the drug and
its manufacture and the results of product development, preclinical studies and
clinical trials. The testing and approval processes require substantial time and
effort and there can be no assurance that any approval will be granted on a
timely basis, if at all. NDAs and BLAs submitted to the FDA can take up to two
to five years to receive approval. If questions arise during the FDA review
process, approval can take more than five years. Notwithstanding the submission
of relevant data, the FDA may ultimately decide that the NDA or BLA does not
satisfy its regulatory criteria for approval and deny approval or require
additional clinical studies. In addition, the FDA may condition marketing
approval on the conduct of specific post-marketing studies to further evaluate
safety and effectiveness. Even if FDA regulatory clearances are obtained, a
marketed product is subject to continual review, and later discovery of
previously unknown problems or failure to comply with the applicable regulatory
requirements may result in restrictions on the marketing of a product or
withdrawal of the product from the market as well as possible civil or criminal
sanctions.

Thalidomide is regulated by the FDA's Center for Drug Evaluation and
Research. Although only recently approved for sale in the United States for
limited indications, thalidomide has been used as an investigational agent to
treat thousands of patients for leprosy and other diseases. Pursuant to our
agreement with Celgene discussed above, all future clinical trials with
thalidomide will be the responsibility of Celgene.

Analogs of thalidomide and 2ME2 may be regulated as new chemical entities
by the FDA's Center for Drug Evaluation and Research. Generally, as new chemical
entities are discovered, formal IND-directed toxicology studies will be required
prior to human testing. The remainder of the developmental and regulatory
requirements will be similar to that of any new drug.

Angiostatin and Endostatin, each a naturally occurring substance, are
considered biologics and will be regulated by the FDA's Center for Biologics
Evaluation and Research. As genetically engineered and endogenous proteins,
Angiostatin and Endostatin will face unique and specific regulation hurdles,
such as those related to the manufacture of the products and the behavior of the
products in the body. The regulatory requirements for recombinant proteins have
been developed for other endogenous molecules and Angiostatin and Endostatin are
expected to follow these established guidelines. Successful preclinical studies
and Phase I, II and III clinical trials will be necessary to form the basis for
a BLA. We have assumed primary responsibility, in collaboration with the NCI,
for conducting these studies and trials.

The cell permeation technology, and specifically IHP-treated red blood
cells, will be regulated by the FDA's Center for Biologics Evaluation and
Research. In 1997, the FDA responded to a letter from us requesting a product
jurisdiction determination, designating the Center for Biologics Evaluation and
Research as the agency with primary jurisdiction for the premarket review and
regulation of the product. The product will be reviewed as a medical device
under the Premarket Application (PMA) provisions of the Federal Food, Drug and
Cosmetic Act. Historically, the FDA's Office of Blood Research and Review has
had the most expertise and experience in regulating blood apheresis equipment
and disposables associated with the processing of human blood. Further
development for TheraMed's products is expected to follow a similar path to that
of any therapeutic biologic, with successful completion of Phase I, Phase II and
Phase III trials required to precede the filing of a PMA. As the cell permeation
technology requires the use of red blood cells produced from humans, we will be
required to comply with, or to contract with

S-26
<PAGE> 27

suppliers that comply with, stringent regulation of blood component collection.
That regulation is designed to protect both donors and recipients of blood
products and involves significant record-keeping and other burdens.

Regulation of Devices

Any additional device products which we may develop are likely to be
regulated by the FDA as medical devices rather than drugs. In addition, the
device used to insert drugs and genes in blood cells will be regulated as a
medical device. The nature of the FDA requirements applicable to such products
depends on their classification by the FDA. A device developed by us would be
automatically classified as a Class III device, requiring premarket approval,
unless the device was substantially equivalent to an existing device that has
been classified in Class I or Class II or to a pre-1976 device that has not yet
been classified or we could convince the FDA to reclassify the device as Class I
or Class II. If we were unable to demonstrate such substantial equivalence and
unable to obtain reclassification, we would be required to undertake the costly
and time-consuming process, comparable to that for new drugs, of conducting
preclinical studies, obtaining an investigational device exemption to conduct
clinical tests, filing a premarket approval application, and obtaining FDA
approval.

If the device were a Class I product, the "general controls" of the Federal
Food, Drug, and Cosmetic Act, chiefly adulteration, misbranding, and GMP
requirements, would nevertheless apply. If substantial equivalence to a Class II
device could be shown, the general controls plus "special controls" such as
performance standards, guidelines for safety and effectiveness, and post-market
surveillance would apply. While demonstrating substantial equivalence to a Class
I or Class II product is not as costly or time-consuming as the premarket
approval process for Class III devices, it can in some cases also involve
conducting clinical tests to demonstrate that any differences between the new
device and devices already on the market do not affect safety or effectiveness.
If substantial equivalence to a pre-1976 device that has not yet been classified
has been shown, it is possible that the FDA would subsequently classify the
device as a Class III device and call for the filing of premarket approval
applications at that time. If the FDA took that step, then filing an application
acceptable to the FDA would be a prerequisite to remaining on the market.

It is likely that the review process for additional devices that we may
develop will occur in the Center for Biologics Evaluation and Research. It is
possible, however, that the Center would consult with relevant officials in the
FDA's Center for Devices and Radiological Health and Center for Drug Evaluation
and Research. Such a consultation might further delay approval of the device and
thus of this technology.

Other

In addition to the foregoing, our business is and will be subject to
regulation under various state and federal environmental laws, including the
Occupational Safety and Health Act, the Resource Conservation and Recovery Act
and the Toxic Substance Control Act. These and other laws govern our use,
handling and disposal of various biological, chemical and radioactive substances
used in and wastes generated by our operations. We cannot predict whether new
regulatory restrictions on the marketing of biotechnology products will be
imposed by state or federal regulators and agencies.

COMPETITION

Competition in the pharmaceutical, biotechnology and biopharmaceutical
industries is intense and based significantly on scientific and technological
factors, the availability of patent and other protection for technology and
products, the ability and length of time required to obtain governmental
approval for testing, manufacturing and marketing and the ability to
commercialize products in a timely fashion. Moreover, the biopharmaceutical
industry is characterized by rapidly evolving technology that could result in
the technological obsolescence of any products that we develop. We compete with
many specialized biopharmaceutical firms, as well as a growing number of large
pharmaceutical companies that are applying biotechnology to their operations.
Many biopharmaceutical companies have focused their development

S-27
<PAGE> 28

efforts in the human therapeutics area, and many major pharmaceutical companies
have developed or acquired internal biotechnology capabilities or made
commercial arrangements with other biopharmaceutical companies. These companies,
as well as academic institutions, governmental agencies and private research
organizations, also compete with us in recruiting and retaining highly qualified
scientific personnel and consultants.

Our competition will be determined in part by the potential indications for
which our compounds may be developed and ultimately approved by regulatory
authorities. We may rely on third parties to commercialize our products, and
accordingly, the success of these products will depend in significant part on
these third parties' efforts and ability to compete in these markets. The
success of any collaboration will depend in part upon our collaborative
partners' own competitive, marketing and strategic considerations, including the
relative advantages of alternative products being developed and marketed by our
collaborative partners and our competitors.

Many other companies and research institutions are investigating the role
of angiogenesis generally and specifically as it may be useful in developing
therapeutics to treat various diseases associated with abnormal blood vessel
growth. In studies available to date, these angiogenic inhibitors have shown
varying effectiveness in inhibiting angiogenesis and differing degrees of
bioavailability and toxicity. Significant further preclinical and clinical
development of these products is needed prior to an assessment of the more
significant competitive product candidates in the antiangiogenic disease
indications targeted by us.

We are aware of other companies developing thalidomide and certain of its
chemical analogs for various disease indications, including our collaborative
partner, Celgene, for the treatment of ENL, AIDS-related cachexia (or wasting)
and mouth ulcers. Celgene has received approval from the FDA for the use of
thalidomide in ENL. In 1997, two patents licensed to us were issued to
Children's Hospital by the United States Patent and Trademark Office covering
the use of thalidomide to treat angiogenic-mediated diseases including cancer,
macular degeneration and rheumatoid arthritis. These patents have, in turn, been
sublicensed by us to Celgene. Although we believe that these patent rights would
preclude any company other than Celgene from marketing thalidomide for
antiangiogenic indications, there can be no assurance that any patent will issue
or afford meaningful protection. If a competitor of Celgene or us receives
approval to market thalidomide for a particular disease indication, "off-label"
use of thalidomide could adversely affect our business and operations. Although
the FDA does not permit a manufacturer or distributor to market or promote an
approved drug for an unapproved off-label use or dosage level, under its
"practice of medicine" policy, the FDA generally does not prohibit a physician
from prescribing an approved drug product for an unapproved use or dosage. In
addition, pharmaceutical companies may provide certain information concerning
off-label uses of their drug in compliance with statutory provisions or as
permitted by court orders in a pending court challenge to the FDA's authority to
regulate the dissemination of such information.

Although one of our focuses is on blood cell permeation research, a number
of companies utilize or are developing cell permeation or drug delivery
technologies and competition for the development of gene and drug delivery
products is intense. We also anticipate that IHP-treated blood will compete for
use in blood transfusions with readily available products, including whole human
blood or packed red blood cells, and products under development, such as blood
substitutes or allosteric effectors of hemoglobin function.

Many of our existing or potential competitors have substantially greater
financial, technical and human resources than us and may be better equipped to
develop, manufacture and market products. In addition, many of these competitors
have extensive experience in preclinical testing and human clinical trials and
in obtaining regulatory approvals. The existence of competitive products,
including products or treatments of which we are not aware, or products or
treatments that may be developed in the future, may adversely affect the
marketability of products which we may develop.

EMPLOYEES

As of March 15, 2000, we had 88 full-time employees, of which 57 were
employed in research and development positions, 25 were employed in general and
administrative positions and 6 were employed by
S-28
<PAGE> 29

our subsidiary TheraMed. We intend to hire additional personnel in addition to
utilizing part-time or temporary consultants on an as-needed basis. None of our
employees is represented by a labor union and we believe our relations with our
employees are satisfactory.

PROPERTIES

We currently lease approximately 46,000 square feet of laboratory and
office space (approximately 32,000 square feet of which is laboratory space) in
Rockville, Maryland. The lease expires in October 2008. We believe that our
existing facilities will be adequate to accommodate the implementation of our
current business plan.

LEGAL PROCEEDINGS

We are a defendant in a lawsuit initiated in August 1995 in the United
States District Court for the Eastern District of Tennessee by Bolling, McCool &
Twist (BMT), a consulting firm. In the suit, BMT asserts that we breached an
agreement between BMT and us by failing to pay BMT certain fees it asserts are
owed under the agreement. More specifically, BMT has asserted a claim for the
payment of services rendered in the approximate amount of $50,000 and seeks a
success fee in an unspecified amount in connection with the Bristol-Myers Squibb
Company Collaboration (BMS Collaboration). The judge in the case bifurcated the
proceeding into two phases: an adjudication of whether we breached our agreement
with BMT and then a damage phase. After a trial on the merits, the jury found in
favor of BMT on the breach of contract claim. A trial to determine damages had
been scheduled for April 14, 1998. However, on April 6, 1998, the court issued
an Order pursuant to which damages were limited to those arising during the term
of the Agreement, which terminated on November 1, 1995. On May 6, 1999, the
court confirmed its decision by granting our motion for summary judgment and
limiting our damages to approximately $50,000 plus interest. Thus, this
litigation at the trial level has been concluded. BMT has filed an appeal and we
have cross-appealed. We cannot predict the outcome of such appeal. However, we
intend to continue to contest any further action vigorously and believe that
this proceeding will not have a material adverse effect on us or on our
financial condition, although there can be no assurance that this will be the
case.

S-29
<PAGE> 30

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of our
executive officers and directors as of February 29, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John W. Holaday, Ph.D................. 54 Chairman of the Board, President,
Chief Executive Officer and Director
Edward R. Gubish, Ph.D................ 51 Executive Vice President, Research and
Development
Joanna C. Horobin, M.D................ 45 Executive Vice President of Commercial
Development
R. Nelson Campbell.................... 35 Chief Financial Officer
Donald S. Brooks...................... 63 Vice President, Legal Affairs and
Director
Lee F. Meier.......................... 53 Director
Mark C.M. Randall..................... 37 Director
Wendell M. Starke..................... 56 Vice Chairman and Director
Jerry Finkelstein..................... 83 Director
</TABLE>

John W. Holaday, Ph.D. is our co-founder and has served as our President and
Chief Executive Officer and one of our directors since August 1992 and our
Chairman of the Board since November 1995. Prior thereto, from May 1989 to
August 1992, he was a co-founder of Medicis Pharmaceutical Corp. where he served
as Scientific Director, Senior Vice President for Research and Development and
director. Dr. Holaday also serves as a director for CytImmune Sciences, Inc., a
privately held research diagnostics company. From 1968 to 1989, he served at the
Walter Reed Army Institute of Research, where he founded the Neuropharmacology
Branch in 1980. He serves as an officer and fellow in several biomedical
societies and has authored and edited numerous scientific articles in journals
and books. His current academic positions include Associate Professor of
Anesthesiology and Critical Care Medicine and Senior Lecturer in Medicine at The
Johns Hopkins University of Medicine, Baltimore, Maryland; and Adjunct Professor
of Psychiatry at the Uniformed Services University School of Medicine, Bethesda,
Maryland.

Edward R. Gubish, Ph.D. has served as our Executive Vice President of Research
and Development since January 2000 and Senior Vice President of Research and
Development between January 1997 and December 1999. Prior to that he served as
our Vice President-Regulatory and Clinical Development since November 1995 and
has been employed by us since October 1993. From 1990 to September 1993, Dr.
Gubish served as senior director of Regulatory Affairs for Baker Norton
Pharmaceuticals (IVAX) and Fujisawa Pharmaceuticals. From 1986 to 1990, Dr.
Gubish served as Chief of Regulatory Affairs for the AIDS Division at the
National Institutes of Health and as a scientific and administrative contact for
sponsors of new biological products and IND submissions for the Center for Drugs
and Biologics at the FDA.

Joanna C. Horobin, M.D. has served as our Executive Vice President of Commercial
Development since January 2000 and Senior Vice President of Commercial
Development between February 1999 and December 1999. Prior to joining us, Dr.
Horobin served as Vice President of Corporate Marketing, Oncology at
Rhone-Poulenc Rorer (RPR) from March 1994 to December 1998. Dr. Horobin has also
served as General Manager of RPR's joint-venture with the Chugai Pharmaceutical
Company of Japan, which led to the development and European launch of the
recombinant human protein, Granocyte (rhu-GCSF); Medical Director for RPR, (UK);
and Head of Clinical Investigations for Beecham Pharmaceuticals (UK), where she
achieved regulatory approvals of Augmentin(R), Timentin(R), and

S-30
<PAGE> 31

Relafen(R). Dr. Horobin spent several years in hospital and general family
practice in London before entering the pharmaceutical industry.

R. Nelson Campbell has served as our Chief Financial Officer since January 1997.
From November 1991 to June 1996, Mr. Campbell was employed by OsteoArthritis
Sciences, Inc., a venture capital financed drug discovery company where he was a
co-founder and served as Vice President of Business Development and Treasurer.
From 1986 to 1991, he was with the international investment banking firms of
Merrill Lynch Capital Markets, Nomura Securities International and lastly Daiwa
America Securities, Inc., where he was engaged in corporate finance and merger
transactions.

Donald S. Brooks has been one of our directors since April 1996 and Vice
President, Legal Affairs since 1998. Between 1993 and 1998, Mr. Brooks was a
practicing attorney with the law firm Carella Byrne Bain Gilfillan Cecchi
Stewart & Olstein, Roseland, New Jersey, which represents the Company on certain
matters. Mr. Brooks continues to be of counsel to the firm. Prior thereto, Mr.
Brooks was employed by Merck & Co., Inc. for 27 years, most recently, from 1986
to 1993, as Senior Counsel. From 1980 to 1985, Mr. Brooks served as a U.S.
employer delegate to the Chemical Industries Committee, International Labor
Organization in Geneva, Switzerland.

Lee F. Meier has been one of our directors since July 1997. Mr. Meier has over
twenty years of experience in the equipment financing industry. He has been
affiliated with US Leasing Corporation, The Chemical Bank of New York and
Steiner Financial Corporation, a privately held, tax motivated lessor. Since
1984 Mr. Meier has served as founder and managing director of Meier Mitchell &
Company, an investment banking firm specializing in providing innovative debt
and lease financing products. Meier Mitchell & Company targets clients in the
biotechnology and electronics industries and has arranged or provided over $1
billion in financing to both private and public companies in these sectors.

Mark C.M. Randall has been one of our directors since April 1996. Since 1985,
Mr. Randall has been associated with Sarasin International Securities Limited,
London, England, a wholly owned subsidiary of Bank Sarasin & Cie, a private bank
based in Switzerland, where he has been Director since 1994 and Managing
Director since 1999. Mr. Randall also serves as Chairman of Acorn Alternative
Strategies (Overseas) Ltd., an investment fund company.

Wendell M. Starke has been Vice Chairman of the Board since June 1998 and one of
our directors since April 1994. Mr. Starke is a Chartered Financial Analyst and
a Chartered Investment Counselor. Mr. Starke was President of INVESCO Capital
Management, Inc. and Chief Investment Officer from 1979 to 1991. From 1992 to
1999, he served as Chairman of INVESCO, Inc., the parent company of INVESCO
Capital Management and other INVESCO money management subsidiaries in the United
States. Mr. Starke retired from INVESCO in June 1999.

Jerry Finkelstein has been one of our directors since April 1998. Mr.
Finkelstein has been a senior advisor to Apollo Advisors, L. P., a fund manager,
since March 1994, and the Chairman of the Board of News Communications, Inc., a
consortium of 23 publications, since August 1993. Mr. Finkelstein has been the
former publisher of the New York Law Journal, a daily newspaper. He has been a
member of the Boards of Rockefeller Center, Chicago Milwaukee Corporation,
Chicago Milwaukee Railroad Corporation, Bank of North America, Struthers Wells
Corporation, The Hill, and PATH Railroad. Mr. Finkelstein has also held the
following positions: member of Task Force Committee on the sale of the World
Trade Center; Chairman of the New York City Planning Commission, and
Commissioner of the Port Authority of New York and New Jersey, as well as
numerous civic, social and political appointments.

S-31
<PAGE> 32

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have 17,020,740 shares of common
stock outstanding, based on common stock outstanding on February 29, 2000. This
number excludes shares of common stock issuable upon the exercise of stock
options and warrants outstanding. Of these shares, the 2,000,000 shares sold in
this offering and 15,020,740 of the already outstanding shares will be available
for immediate sale in the public market as of the date of this prospectus
supplement. These shares will be freely tradeable without restriction by persons
other than "affiliates" of EntreMed, Inc., as that term is defined in Rule 144
of the Securities Act of 1933.

As of February 29, 2000, approximately 1,201,544 shares of common stock
underlying warrants and 3,699,645 shares underlying stock options outstanding
under our employee and director stock option plans will be available for
immediate sale in the public market. In addition, certain affiliates will be
able to sell up to 953,751 shares of common stock pursuant to a resale
registration prospectus. We also have 26,828 additional shares of our common
stock available for future option grants under our stock options plans.

We, our directors and officers, and certain other stockholders have entered
into "lock-up agreements" with the underwriters under which we and they have
agreed not to offer, sell, pledge, purchase any option to sell, grant any option
for the purchase of, lend or otherwise dispose of, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock,
for a period of 90 days after the date of this prospectus supplement, without
the prior consent of Banc of America Securities LLC, subject to limited
exceptions, such as issuances of shares of our common stock to persons in
connection with business acquisitions and strategic alliances provided that such
persons agree to the lock-up referred to in the preceding sentence, or pursuant
to employee stock option plans existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date of this
prospectus supplement. Banc of America Securities LLC, may, in its sole
discretion, at any time without notice, release all or a portion of the shares
subject to the lock-up agreements.

S-32
<PAGE> 33

UNDERWRITING

We are offering the shares of common stock described in this prospectus
supplement through a number of underwriters. Banc of America Securities LLC,
Warburg Dillon Read LLC and Gerard Klauer Mattison & Co., Inc. are the
representatives of the underwriters. Subject to the terms and conditions set
forth in the underwriting agreement dated April , 2000, we have agreed to sell
to the underwriters, and the underwriters have severally agreed to purchase from
us the number of shares of common stock listed next to their respective names in
the following table. The underwriting agreement provides that the obligations of
the underwriters are subject to certain conditions precedent, and that the
underwriters are committed to purchase all of such shares of common stock if any
are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Banc of America Securities LLC..............................
Warburg Dillon Read LLC.....................................
Gerard Klauer Mattison & Co., Inc...........................

---------
Total............................................. 2,000,000
=========
</TABLE>

The underwriters initially propose to offer the common stock to the public
on the terms set forth on the cover page of this prospectus supplement. The
underwriters may allow to selected dealers a concession of not more than $ per
share, and the underwriters may allow, and such dealers may reallow, a
concession of not more than $ per share to certain other dealers. After the
offering, the offering price and other selling terms may be changed by the
underwriters. The shares of common stock are offered subject to receipt and
acceptance by the underwriters, and to other conditions, including the right to
reject an order in whole or in part. The underwriters may offer the common stock
through a selling group.

We have granted the underwriters an option to buy up to 300,000 shares of
common stock. These additional shares would cover sales of shares by the
underwriters that exceed the number of shares specified in the table above. The
underwriters may exercise this option at any time within 30 days after the date
of this prospectus supplement. If the underwriters exercise this option, they
will each purchase, subject to a number of terms and conditions, additional
shares approximately in proportion to the amounts specified above. If purchased,
the underwriters will offer such additional shares on the same terms as those on
which the 2,000,000 shares are being offered.

S-33
<PAGE> 34

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters. These amounts are shown assuming
no exercise and full exercise of the underwriters' option to purchase additional
shares:

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share underwriting discounts and commissions............ $ $
Total underwriting discounts and commissions to be
paid by us................................................ $ $
</TABLE>

The underwriting agreement provides that EntreMed, Inc. will indemnify the
underwriters and their controlling persons against liabilities, including civil
liabilities, under the Securities Act of 1933, or will contribute to payments
the underwriters may be required to make in respect of these liabilities.

EntreMed, Inc., our directors, executive officers and some other
stockholders have entered into lock-up agreements with the underwriters. Under
those agreements, EntreMed, Inc. and those holders of stock, options or warrants
may not, without the prior written consent of Banc of America Securities LLC
(which consent may be withheld in its sole discretion), directly or indirectly,
sell, offer, contract or grant any option to sell (including without limitation
any short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934,
as amended, or otherwise dispose of any shares of common stock, options or
warrants to acquire shares of common stock currently or hereafter owned either
of record or beneficially by them, or publicly announce the intention to do any
of the foregoing, for a period commencing on the date of this prospectus
supplement and continuing through the close of trading on the date 90 days after
such date. The restrictions described above do not apply to any bona fide gift
of stock or issuances of stock in connection with business acquisitions and
strategic alliances to a person or entity that agrees in writing to be bound by
the same terms as the grantor. Banc of America Securities LLC may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to those lock-up agreements.

In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include:

- short sales;

- stabilizing transactions; and

- purchases to cover positions created by short sales.

Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while this offering
is in progress.

The underwriters may also impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.

The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common stock, including:

- over-allotment;

- stabilization;

- syndicate covering transactions; and

- imposition of penalty bids.

S-34
<PAGE> 35

As a result of these activities, the price of the common stock may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National Market,
in the over-the-counter-market or otherwise.

In connection with this offering, some underwriters and any selling group
members who are qualified market makers on the Nasdaq National Market may engage
in passive market making transactions in the common stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M, under the Securities
Exchange Act of 1934, as amended, during the business day before the pricing of
the offering, before the commencement of offers or sales of the common stock.
Passive market makers must comply with applicable volume and price limitations
and must be identified as passive market makers. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid for the security; if all independent bids are lowered below the passive
market maker's bid, however, the bid must then be lowered when purchase limits
are exceeded.

LEGAL MATTERS

The validity of the shares of common stock offered hereby has been passed
upon for us by Arnold & Porter, Washington, D.C. The statements included in this
prospectus supplement under the caption "Patents, Licenses and Proprietary
Rights" and other references herein and in the attached prospectus to
intellectual property matters have been passed upon for us by Jones & Askew,
LLP, Atlanta, Georgia. Certain legal matters in connection with this offering
are being passed upon for the underwriters by Cahill Gordon & Reindel, New York,
New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is included in this
prospectus supplement and elsewhere in the registration statement. Our financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

S-35
<PAGE> 36

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors.............................. F- 2
Consolidated Balance Sheets at December 31, 1999 and 1998... F- 3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.......................... F- 4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999, 1998 and 1997.............. F- 5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.......................... F- 6
Notes to Consolidated Financial Statements.................. F- 7
</TABLE>

F-1
<PAGE> 37

REPORT OF INDEPENDENT AUDITORS

Board of Directors
EntreMed, Inc.

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

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

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

ERNST & YOUNG LLP

Atlanta, Georgia
February 11, 2000

F-2
<PAGE> 38
ENTREMED, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $26,027,235 $30,818,689
Short-term investments.................................... -- 4,352,371
Accounts receivable....................................... 618,598 112,383
Interest receivable....................................... 105,482 186,927
Prepaid expenses and other................................ 336,443 170,877
----------- -----------
Total current assets........................................ 27,087,758 35,641,247
Furniture and equipment, net................................ 4,013,785 2,979,237
Other assets................................................ 742,082 953,519
----------- -----------
Total assets...................................... $31,843,625 $39,574,003
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,887,693 $ 2,093,017
Accrued liabilities....................................... 1,756,538 1,332,682
Deferred revenue (Note 5)................................. 75,000 2,945,833
Notes payable............................................. 1,125,620 --
----------- -----------
Total current liabilities................................... 7,844,851 6,371,532
Note payable, less current portion.......................... 1,995,327 --
Minority interest........................................... 18,646 14,407
Stockholders' Equity:
Convertible preferred stock, $1.00 par and $1.50
liquidation value:
5,000,000 shares authorized, none issued and
outstanding at December 31, 1999 and 1998,
respectively........................................... -- --
Common stock, $.01 par value:
35,000,000 shares authorized, 14,755,998 and 13,123,031
shares issued and outstanding at December 31, 1999 and
1998, respectively..................................... 147,560 131,230
Treasury stock, at cost: 291,667 and 0 shares held at
December 31, 1999 and 1998, respectively............... (3,833,379) --
Additional paid-in capital................................ 107,863,638 78,364,136
Accumulated deficit....................................... (82,193,018) (45,307,302)
----------- -----------
Total stockholders' equity........................ 21,984,801 33,188,064
----------- -----------
Total liabilities and stockholders' equity........ $31,843,625 $39,574,003
=========== ===========
</TABLE>

See accompanying notes.
F-3
<PAGE> 39

ENTREMED, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Revenues:
Collaborative research and development (Note
5)........................................... $ 3,099,166 $ 4,473,131 $ 4,342,369
Licensing (Note 5).............................. 403,333 200,000 200,000
Grants.......................................... 339,087 472,677 215,119
Royalties....................................... 1,123,111 -- --
Other........................................... 52,853 15,675 --
------------ ------------ -----------
5,017,550 5,161,483 4,757,488
Costs and expenses:
Research and development........................ 35,529,435 15,084,993 8,998,705
General and administrative...................... 8,028,922 5,760,215 4,915,724
------------ ------------ -----------
43,558,357 20,845,208 13,914,429
Interest expense.................................. (22,270) -- (1,418)
Investment income................................. 1,677,361 2,169,955 2,621,630
------------ ------------ -----------
Net loss.......................................... $(36,885,716) $(13,513,770) $(6,536,729)
============ ============ ===========
Net loss per share (basic and diluted)............ $ (2.67) $ (1.07) $ (0.54)
============ ============ ===========
Weighted average number of shares outstanding
(basic and diluted)............................. 13,801,220 12,681,824 12,158,372
============ ============ ===========
</TABLE>

See accompanying notes.
F-4
<PAGE> 40

ENTREMED, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- TREASURY PAID-IN ACCUMULATED
SHARES AMOUNT STOCK CAPITAL DEFICIT TOTAL
---------- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ 12,009,598 $120,096 $ -- $ 72,830,898 $(25,256,803) $ 47,694,191
Issuance of common stock for
options and warrants
exercised....................... 244,170 2,442 -- 502,190 -- 504,632
Warrants issued for consulting
services........................ -- -- -- 291,000 -- 291,000
Net loss.......................... -- -- -- -- (6,536,729) (6,536,729)
---------- -------- ----------- ------------ ------------ ------------
Balance at December 31, 1997........ 12,253,768 $122,538 -- $ 73,624,088 $(31,793,532) $ 41,953,094
Issuance of common stock for
options and warrants
exercised....................... 869,263 8,692 -- 4,740,048 -- 4,748,740
Net loss.......................... -- -- -- -- (13,513,770) (13,513,770)
---------- -------- ----------- ------------ ------------ ------------
Balance at December 31, 1998........ 13,123,031 $131,230 -- $ 78,364,136 $(45,307,302) $ 33,188,064
Issuance of common stock for
options and warrants
exercised....................... 154,849 1,549 -- 1,091,987 -- 1,093,536
Sale of common stock at $20.362
per share, net of offering costs
of approximately $1,675,143..... 1,478,118 14,781 -- 28,407,515 -- 28,422,296
Purchase of treasury shares at
$13.143 per share............... (291,667) -- (3,833,379) -- -- (3,833,379)
Net loss.......................... -- -- -- -- (36,885,716) (36,885,716)
---------- -------- ----------- ------------ ------------ ------------
Balance at December 31, 1999........ 14,464,331 $147,560 $(3,833,379) $107,863,638 $(82,193,018) $ 21,984,801
========== ======== =========== ============ ============ ============
</TABLE>

See accompanying notes.
F-5
<PAGE> 41

ENTREMED, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.......................................... $(36,885,716) $(13,513,770) $(6,536,729)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization................... 902,131 740,847 336,668
Loss on equity investment....................... 232,000 100,000 --
Stock and warrants issued for compensation and
consulting expense........................... -- -- 291,000
Minority interest............................... 4,239 (48,093) 18,358
Changes in assets and liabilities:
Accounts receivable.......................... (506,215) (28,232) (84,151)
Interest receivable.......................... 81,445 333,530 (118,784)
Prepaid expenses and other................... 29,653 (234,193) 9,075
Accounts payable............................. 2,794,676 998,059 82,898
Accrued liabilities.......................... 423,856 66,777 308,187
Deferred revenue (Note 5).................... (2,870,833) (928,130) (871,870)
------------ ------------ -----------
Net cash used by operating activities............. (35,794,764) (12,513,205) (6,565,348)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments............... -- (12,257,054) (32,014,130)
Maturities of short-term investments.............. 4,352,371 34,917,263 24,671,173
Other investments................................. -- (500,000) (300,000)
Purchases of furniture and equipment.............. (1,936,679) (1,809,546) (1,010,890)
------------ ------------ -----------
Net cash provided (used) by investing
activities...................................... 2,415,692 20,350,663 (8,653,847)

CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock............................. 29,515,832 4,748,740 504,632
Proceeds from note payable........................ 3,000,000 -- --
Purchase of treasury stock........................ (3,833,379) -- --
Payment on note payable........................... (94,835)
Payment of lease obligation....................... -- -- (104,152)
------------ ------------ -----------
Net cash provided by financing activities......... 28,587,618 4,748,740 400,480
------------ ------------ -----------
Net increase (decrease) in cash and cash
equivalents..................................... (4,791,454) 12,586,198 (14,818,715)
Cash and cash equivalents at beginning of year.... 30,818,689 18,232,491 33,051,206
------------ ------------ -----------
Cash and cash equivalents at end of year.......... $ 26,027,235 $ 30,818,689 $18,232,491
============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid..................................... $ -- $ -- $ 1,418
============ ============ ===========
</TABLE>

See accompanying notes.
F-6
<PAGE> 42

ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

EntreMed, Inc. (the "Company") operates in a single segment and is engaged
primarily in the research and development of biopharmaceutical products that
address the role of blood and blood vessels in the prevention and treatment of a
broad range of diseases. The Company's core technologies include (i) an
antiangiogenesis program focused on the development of proprietary products
intended to inhibit the abnormal growth the new blood vessels associated with
cancer and certain causes of blindness and (ii) a blood cell permeation device
designed to enhance the ability of red blood cells to deliver oxygen to organs
and tissues and which may also be used to deliver drugs, genes or other
therapeutic agents that otherwise would not readily diffuse through blood cell
membranes.

The Company's strategy is to accelerate development of its antiangiogenesis
and cell permeation technologies as well as other promising technologies which
the Company perceives to have clinical and commercial potential. The principal
elements of the Company's strategy are (i) to focus its resources on current
core technologies, (ii) to deepen its product and technology portfolio through
sponsored research collaborations with academic institutions, government
organizations and private enterprises, (iii) to augment product development with
its in-house research and development capabilities and (iv) to leverage its
resources through corporate partnerships in order to minimize the cost to the
Company of late-stage clinical trials and to accelerate effective product
commercialization. All of the Company's product candidates are in the
development stage and require further research, development, testing and
regulatory clearances.

The Company was organized in September 1991 as a Delaware Corporation and
from inception through December 1995 was in the development stage. In December
1995, the Company and Bristol-Myers Squibb Company ("Bristol-Myers Squibb")
entered into a collaboration to develop and commercialize certain
antiangiogenesis therapeutics (see Note 5). The Company received 68%, 92% and
95% of its revenues from Bristol-Myers Squibb in 1999, 1998 and 1997,
respectively.

The accompanying consolidated financial statements include the accounts of
the Company's 85% owned subsidiary, Cytokine Sciences, Inc. Cytokine was formed
in June 1996 for the purpose of acquiring the assets of Innovative Therapeutics,
Inc. in July 1996 in exchange for 15% of the common stock of Cytokine valued at
approximately $44,000. All intercompany balances and transactions have been
eliminated in consolidation. Minority interest expense (income) of $4,239,
$(48,093) and $18,358 is included in general and administrative expenses for the
years ended December 31, 1999, 1998 and 1997, respectively.

RESEARCH AND DEVELOPMENT

Research and development expenses consist of independent proprietary
research and development costs, the costs associated with work performed under
collaborative research agreements and the Company's sponsored funding of
research programs performed by others. Research and development costs are
expensed as incurred.

PATENT COSTS

Costs incurred in filing, defending and maintaining patents are expensed as
incurred. Such costs aggregated approximately $1,068,000, $778,000 and $409,000
in 1999, 1998 and 1997, respectively.

F-7
<PAGE> 43
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS

The Company invests in various debt securities. These investments are
accounted for in accordance with Statement of Financial Accounting Standards No.
115, Accounting for Certain Investments in Debt and Equity Securities, which
requires certain debt securities to be reported at amortized cost, certain debt
and equity securities to be reported at market with current recognition of
unrealized gains and losses, and certain debt and equity securities to be
reported at market with unrealized gains and losses as a separate component of
stockholders' equity.

Management determines the appropriate classification of investments as
held-to-maturity or available-for-sale at the time of purchase and re-evaluates
such designation as of each balance sheet date. The Company has classified all
investments as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, reported in
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for the amortization of premiums and accretion of discounts to
maturity. Such amortization is included as investment income. Realized gains and
losses and declines in value judged to be other-than-temporary on the
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
investment income.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost and are depreciated over their
expected useful lives. Depreciation is provided on a straight-line basis.
Amortization associated with capitalized leases is included in depreciation
expense. Substantially all of the Company's furniture and equipment serves as
collateral for a note (see Note 7). Furniture and equipment are summarized as
follows:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Furniture and equipment................................... $ 6,335,897 $ 4,432,566
Less: accumulated depreciation............................ (2,322,112) (1,453,329)
----------- -----------
$ 4,013,785 $ 2,979,237
=========== ===========
</TABLE>

CASH EQUIVALENTS

Cash equivalents include cash and short-term investments with original
maturities of less than 90 days.

INCOME TAXES

Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.

REVENUE RECOGNITION

Revenue from the collaborative research and development agreement with
Bristol-Myers Squibb is recorded when earned as defined under the terms of the
agreement. Nonrefundable fees received upon contract signing are recorded as
deferred revenue and recognized over the term of the agreement mentioned in Note
5. Revenues related to grants received for specific project proposals are
recognized in revenue as earned in accordance with specified provisions,
including performance requirements, in the

F-8
<PAGE> 44
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
contracts. Other periodic research funding payments received which are related
to future performance are deferred and recognized as income when earned.

NET LOSS PER SHARE

Net loss per share (basic and diluted) was computed by dividing net loss by
the weighted average number of shares of common stock outstanding. Common stock
equivalents were anti-dilutive and therefore were not included in the
computation of weighted average shares used in computing diluted loss per share.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1998 and 1997 consolidated
financial statements in order to conform to the 1999 presentation.

COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"). SFAS 130 establishes new standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. These new standards require that all
items recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company has not presented a statement of comprehensive
income as there are no additional components of comprehensive income to be
presented.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") sets forth accounting and reporting
standards for stock-based employee compensation plans (see Note 9). As permitted
by SFAS 123, the Company continues to account for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations. Under APB No. 25, no compensation expense is
recognized for stock or stock options issued to employees at fair market value.
Accordingly, adoption of SFAS 123 has not affected the Company's results of
operations or financial position.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.

2. RELATED PARTY TRANSACTIONS

The Company receives legal services from two law firms in which two of the
Company's directors are partners. The cost of these services were negotiated on
an arm's length basis and amounted to $338,000, $363,000 and $559,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.

As of December 31, 1999 and 1998, the Company maintained approximately 84%
and 51%, respectively, of its cash, cash equivalents and short-term investments
under the management of a

F-9
<PAGE> 45
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. RELATED PARTY TRANSACTIONS (CONTINUED)
registered investment advisory firm for which a Company director served as
chairman of the board. Such assets under management are maintained by a high
quality, third party financial institution custodian.

The Company has an agreement with one of its directors under which the
director provides consulting services. During 1997, the Company paid $180,000
under this agreement.

3. INVESTMENTS

As of December 31, 1999, the Company did not hold any short-term
investments. All of the Company's investments as of December 31, 1998 are
classified as available-for-sale and are summarized as follows:

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities................... $2,847,036 $ -- $ -- $2,847,036
U.S. corporate securities.................. 1,505,335 -- -- 1,505,335
---------- -------- -------- ----------
Total securities........................... $4,352,371 $ -- $ -- $4,352,371
========== ======== ======== ==========
</TABLE>

The Company had no realized gains or losses from the sale of short-term
investments for the years ended December 31, 1999, 1998 and 1997. All U.S.
Treasury and U.S. corporate securities have maturity dates of less than one year
as of December 31, 1998.

4. SPONSORED RESEARCH PROGRAM AGREEMENTS

The Company has entered into several agreements to sponsor external
research programs. The Company's primary external research program agreement was
entered into in September 1993 with the Children's Hospital, in Boston,
Massachusetts, an entity affiliated with Harvard Medical School ("Children's
Hospital, Boston"). Under this sponsored research agreement the Company agreed
to pay Children's Hospital, Boston $11,000,000 over a six year period to support
research on the role of angiogenesis in pathological conditions. In accordance
with the terms of this sponsored research agreement, the total $11,000,000 was
fully paid in March 1999.

In June 1999, the Company signed a new agreement with Children's Hospital,
Boston. Under this sponsored research agreement, the Company agreed to pay
Children's Hospital, Boston $1,400,000 to continue the research on the role of
angiogenesis in pathological conditions. In accordance with the terms of this
sponsored research agreement, $700,000 has been paid as of December 31, 1999,
and the remaining $700,000 is due on March 29, 2000. This sponsored research
agreement gives the Company an option to negotiate a worldwide, royalty-bearing
license for technology resulting from the research at Children's Hospital,
Boston in areas covered by the agreement. Amounts due under the sponsored
research agreement with Children's Hospital, Boston, which is cancelable by the
Company at any time or by Children's Hospital, Boston upon one year prior
written notice, are paid in advance every six months and are expensed as
incurred as research and development costs. See also Note 12.

F-10
<PAGE> 46
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. SPONSORED RESEARCH PROGRAM AGREEMENTS (CONTINUED)

As of December 31, 1999, the Company's total commitments for external
research programs are as follows:

<TABLE>
<S> <C>
2000........................................................ $2,428,772
2001........................................................ 682,624
----------
Total commitments........................................... $3,111,396
==========
</TABLE>

5. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT

In December 1995, the Company and Bristol-Myers Squibb entered into a
collaboration to develop and commercialize certain antiangiogenic therapeutics
("Original BMS Collaboration"). The Original BMS Collaboration provided for
Bristol-Myers Squibb to fund the Company's research, provided for milestone
payments to the Company, and provided for the payments to the Company of
royalties on net sales of any products developed under the Original BMS
Collaboration. In return, the Company granted Bristol-Myers Squibb exclusive
worldwide rights held by the Company, to antiangiogenic applications of
thalidomide, thalidomide analogs and the Angiostatin protein and a five-year
right of first refusal to negotiate for commercial rights with respect to the
development of any technology licensed, or to be licensed, by the Company from
Children's Hospital, Boston, in the field of antiangiogenic therapeutics. In
August 1997, the Company reacquired the commercial rights to thalidomide in
exchange for renewing Bristol-Myers Squibb's warrant to purchase an additional
$10,000,000 of the Company's common stock as described below. In October 1998,
Bristol-Myers Squibb relinquished the rights to thalidomide analogs. In February
1999, the Company assumed all responsibility for preclinical and clinical work
on the Angiostatin protein.

Bristol-Myers Squibb was obligated under the Original BMS Collaboration to
fund $18.35 million over five years for costs to be incurred by the Company
related to specified research and development. The Company was eligible to
receive an additional $32 million if the Company attained certain late-stage
clinical development and regulatory filing milestones under the Original BMS
Collaboration, a portion of which could be credited against royalties. In
addition to this funding, Bristol-Myers Squibb reimbursed the Company $730,000
for clinical studies and ophthalmological trials. Bristol-Myers Squibb could
terminate the Original BMS Collaboration for any reason with six months notice
and on February 9, 1999, the Original BMS Collaboration was modified such that
the final payment under the agreement was due on June 5, 1999 (see below). As
amended, Bristol-Myers Squibb has no further funding obligation to the Company
after August 9, 1999.

The Company also received a nonrefundable, non-creditable licensing fee of
$1 million in 1995 under the Original BMS Collaboration and an additional $2.5
million on March 31, 1996 in recognition of certain research and development
efforts of the Company. These amounts were recorded as deferred revenue and were
being recognized over five years, the initial term of the Original BMS
Collaboration agreement. On June 9, 1999, the due date of the final payment
under the Original BMS Collaboration, the remaining unamortized balance of such
deferred revenue was recognized as revenue.

Concurrent with the signing of the Original BMS Collaboration, the Company
issued Bristol-Myers Squibb 541,666 shares of common stock for aggregate cash
proceeds of $6,500,000. Bristol-Myers Squibb also purchased 333,333 shares of
additional common stock of the Company at the initial public offering price of
$15 per share, or a total of $5,000,000, at the time the Company completed its
initial public offering in June 1996 and was granted the right to purchase an
additional $10,000,000 of the Company's common stock at $22.50 per share, or
444,444 shares from the Company at any time up to June 19, 1997. This warrant
was renewed and expired without exercise in November 1997.

F-11
<PAGE> 47
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT (CONTINUED)

During 1999, 1998 and 1997, the Company recognized approximately
$3,482,000, $4,673,000, and $4,542,000 in revenue, respectively, and incurred
costs of approximately $3,482,000, $5,800,000 and $5,200,000 related to the
Original BMS Collaboration.

On February 9, 1999, as noted above, the Company and Bristol-Myers Squibb
agreed to modify the Original BMS Collaboration as follows:

- The Company will assume all responsibility for preclinical,
pharmaceutical development and clinical work on the Angiostatin protein.
Bristol-Myers Squibb has agreed to provide the Company with advice on
structuring its clinical program but otherwise will have no direct
involvement with the development of the Angiostatin protein.

- Upon completion of Phase II clinical trials of Angiostatin, except as
described below, Bristol-Myers Squibb will have the option to review all
of the Company's data and exercise an option to reacquire further
development and marketing rights to the product. If Bristol-Myers Squibb
elects to do so, it will pay the Company a $1 million option exercise fee
and the financial terms applicable to commercialization will remain the
same as those in the existing research agreement, except that the
Company's worldwide royalty will be substantially increased and will not
be subject to any offsetting credits.

- If a third party wishes to license Angiostatin protein and fund and
conduct development of Angiostatin protein and commercialize it upon FDA
approval on terms satisfactory to the Company, or the Company decides to
proceed with the development and commercialization of Angiostatin protein
without a corporate partner (in either case prior to the completion of
Phase II clinical trials and Bristol-Myers Squibb's exercise of its
option), Bristol-Myers Squibb's option will be terminated effective with
the signing of the Company's collaboration with such third party or its
giving of written notice to Bristol-Myers Squibb that it intends to
proceed without a corporate partner.

- Bristol-Myers Squibb's current rights of first offer/refusal with respect
to products or technology arising out of the Company's agreement with
Children's Hospital, Boston have terminated, including those rights with
respect to Endostatin protein.

- Bristol-Myers Squibb is licensed, on a royalty free basis, to conduct
further internal research with regard to the Angiostatin protein and will
exchange with the Company any data it obtains on Angiostatin protein per
se. This license will continue for a minimum of one year and thereafter
until the termination of Bristol-Myers Squibb's option as described
above.

- Bristol-Myers Squibb will retain its equity interest in the Company but
has agreed to certain restrictions on its ability to sell its interest.
These restrictions will prevent Bristol-Myers Squibb from selling its
full interest in the Company until at least December 1, 2001, without the
Company's consent. See also Note 9.

- The semi-annual research support payment made on June 5, 1999 to the
Company from Bristol-Myers Squibb was prorated to cover the period from
June 5 to August 9, 1999 and was the final research payment under the
agreement. All patent and related costs incurred by the Company prior to
August 9, 1999 were reimbursed to the Company by Bristol-Myers Squibb.

6. LICENSE AGREEMENTS

On December 9, 1998, the Company entered into a license agreement with
Celgene Corporation ("Celgene") whereby the Company granted Celgene an exclusive
license to certain of the Company's

F-12
<PAGE> 48
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LICENSE AGREEMENTS (CONTINUED)

thalidomide patents. In exchange for this license, Celgene agreed to pay
royalties to the Company on sales of any product which contains thalidomide. The
royalties vary based on the volume of Celgene's sales. Celgene also assumed
certain milestone payment obligations to Children's Hospital, Boston related to
the license of thalidomide.

On July 1, 1999, the Company entered into two license agreements with
Calbiochem-Novabiochem Corp ("Calbiochem") whereby the Company granted
non-exclusive rights and licenses to sell Endostatin protein and Angiostatin
protein for non-commercial research purposes for two years. In exchange for
these licenses, Calbiochem agreed to pay a total of $20,000 in nonrefundable,
non-creditable fees and royalties based on net sales of the licensed products.

7. NOTES PAYABLE

In July 1999, the Company entered into a note payable with a financing
company for approximately $216,000 related to insurance premiums. The note bears
interest at a rate of 6.26% per annum and is due in full in January 2000.

In December 1999, the Company entered into a $3,000,000 note payable with a
financing company secured by substantially all of the Company's furniture and
equipment. The term of the note is three years and bears interest at a rate of
5.06% per annum. Maturities under this note are as follows: $909,838 in 2000,
$997,245 in 2001 and $998,082 in 2002.

8. INCOME TAXES

The Company has net operating loss carryforwards for income tax purposes of
approximately $94,350,000 at December 31, 1999 ($53,149,000 as of December 31,
1998) that expire in years 2007 through 2019. The Company also has research and
development tax credit carryforwards of approximately $4,002,000 as of December
31, 1999 that expire in years 2008 through 2014. These net operating loss
carryforwards include approximately $14,007,000 and $12,300,000 as of December
31, 1999 and 1998, respectively, related to exercises of stock options for which
the income tax benefit, if realized, would increase additional paid-in capital.
The utilization of the net operating loss and research and development
carryforwards may be limited in future years due to changes in ownership of the
Company pursuant to Internal Revenue Code Section 382. For financial reporting
purposes, a valuation allowance has been recognized to reduce the net deferred
tax assets to zero due to uncertainties with respect to the Company's ability to
generate taxable income in the future sufficient to realize the benefit of
deferred income tax assets.

Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

F-13
<PAGE> 49
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)

Significant components of the Company's deferred income tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred income tax assets (liabilities):
Net operating loss carryforwards........................ $ 35,853,000 $ 20,196,000
Research and development credit carryforward............ 4,002,000 2,379,000
Deferred revenues....................................... 29,000 1,119,000
Equity investment....................................... 126,000 38,000
Other................................................... 396,000 373,000
Depreciation............................................ 73,000 96,000
Valuation allowance for deferred income tax assets...... (40,479,000) (24,201,000)
------------ ------------
Net deferred income tax assets.......................... $ -- $ --
============ ============
</TABLE>

A reconciliation of the provision for income taxes to the federal statutory
rate is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Tax benefit at statutory rate.............. $(14,017,000) $(5,135,000) $(2,484,000)
Tax credits................................ (1,623,000) (660,000) (389,000)
Other...................................... 23,000 18,000 12,000
Valuation allowance........................ 15,617,000 5,777,000 2,861,000
------------ ----------- -----------
$ -- $ -- $ --
============ =========== ===========
</TABLE>

9. STOCKHOLDERS' EQUITY

On July 27, 1999, the Company completed a private offering of 1,478,118
shares of its common stock, Series 1 Warrants to purchase a total of 739,059
shares of common stock at an exercise price of $33.02 and Series 2 Warrants to
purchase a total of 739,059 shares of common stock at an exercise price of
$25.45, resulting in gross proceeds, prior to the deduction of fees and
commissions, of approximately $30.1 million (net proceeds of $28.4 million). All
such warrants remained outstanding at December 31, 1999.

In December 1999, the Company exercised its option to repurchase 291,667 of
its common shares from Bristol-Myers Squibb for $13.143 a share or at a total
repurchase price of $3,833,379. As described in Note 5, Bristol-Myers Squibb's
remaining shares held in connection with the collaborative research and
development agreement are subject to certain restrictions, including future
repurchase rights by the Company which terminate in December 2000 and 2001.

10. STOCK OPTIONS AND WARRANTS

In 1992, 1996 and 1999, the Company adopted incentive and nonqualified
stock option plans whereby 3,733,333 shares of the Company's common stock were
reserved for grants to various executive, scientific and administrative
personnel of the Company as well as outside directors and consultants, of which
26,828 shares remain available for grant as of December 31, 1999. These options
vest over periods varying from immediately to four years and generally expire 10
years from the date of grant.

F-14
<PAGE> 50
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS AND WARRANTS (CONTINUED)
Pro forma information regarding net income and loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method subsequent to December 31,
1994. Because SFAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect is not fully reflected prior to 1999.
The fair values for these options were estimated at the dates of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of
6.0%, 5.38% and 5.97%; no dividend yields; volatility factors of the expected
market price of the Company's common stock of 1.04, 1.04 and 0.80; and a
weighted-average expected life of an option of 6 years, 6 years and 7 years.

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

For purposes of pro forma disclosures, the estimated fair values of the
options and warrants granted to employees, directors and consultants are
amortized to expense over the vesting period. The weighted average fair value
per option granted in 1999, 1998 and 1997 was $18.60, $14.47 and $7.90,
respectively. The weighted average fair value per warrant granted to employees
during 1997 was $13.00. The Company's pro forma information follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Pro forma net loss........................ $(45,705,251) $(19,986,293) $(9,493,464)
Pro forma loss per share.................. $ (3.31) $ (1.58) $ (0.78)
</TABLE>

F-15
<PAGE> 51
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS AND WARRANTS (CONTINUED)

A summary of the Company's stock options and warrants granted to employees,
directors and consultants and related information for the years ended December
31 follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1997.............................. 2,579,944 $ 6.68
Exercised................................................. (235,836) $ 1.93
Granted................................................... 761,575 $10.31
Canceled.................................................. (5,734) $14.00
---------
Outstanding at December 31, 1997............................ 3,099,949 $ 7.92
Exercised................................................. (697,828) $ 5.20
Granted................................................... 325,250 $17.82
Canceled.................................................. (76,682) $ 7.79
---------
Outstanding at December 31, 1998............................ 2,650,689 $ 9.85
Exercised................................................. (80,849) $ 9.56
Granted................................................... 1,176,406 $22.10
Canceled.................................................. (46,240) $18.76
---------
Outstanding at December 31, 1999............................ 3,700,006 $13.64
=========
Exercisable at December 31, 1999............................ 2,758,683 $11.47
=========
</TABLE>

The following summarizes information about stock options and warrants
granted to employees outstanding at December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE ----------------------
REMAINING WEIGHTED NUMBER WEIGHTED
NUMBER CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING LIFE IN EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/99 YEARS PRICE 12/31/99 PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.50........................................ 355,040 2.6 $ 1.50 355,040 $ 1.50
$6.50 - $9.50................................ 665,164 5.6 $ 6.38 663,289 $ 6.37
$10.00 - $14.00.............................. 1,280,425 7.6 $11.67 1,077,546 $11.88
$15.00 - $19.13.............................. 458,071 8.2 $17.48 233,703 $16.39
$20.75 - $31.94.............................. 941,306 9.6 $24.16 429,105 $23.91
--------- ---------
3,700,006 7.4 $13.64 2,758,683 $11.47
========= =========
</TABLE>

The Company also granted 50,000 and 83,334 options to purchase common stock
at $6.38 and $6.00 per share during 1995 and 1993, respectively, to Children's
Hospital, Boston in connection with a sponsored research agreement (see Note 4).
These options are not covered by the incentive and nonqualified stock option
plan and are included in the table below.

F-16
<PAGE> 52
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS AND WARRANTS (CONTINUED)

In addition, the Company has granted warrants to consultants and certain
third parties. Warrants granted generally expire after 10 years from the date of
grant. Stock warrant activity to non-employees is as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1997.............................. 277,336 $ 6.47
Granted................................................... 100,000 $13.00
Exercised................................................. (8,334) $ 6.00
---------
Outstanding at December 31, 1997............................ 369,002 $ 8.23
Exercised................................................. (171,435) $ 8.15
---------
Outstanding at December 31, 1998............................ 197,567 $ 8.30
Granted................................................... 1,544,425 $28.85
Exercised................................................. (74,000) $ 7.34
---------
Outstanding at December 31, 1999............................ 1,667,992 $27.37
=========
Exercisable at December 31, 1999............................ 1,667,992 $27.37
=========
</TABLE>

The Company also granted warrants to Bristol-Myers Squibb in connection
with the Original BMS Collaboration described in Note 5 which expired in
November 1997.

11. FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investments, accounts receivable, accounts payable and notes payable.
As of December 31, 1999 and 1998, the Company maintained approximately 84% and
51%, respectively, of its cash, cash equivalents and short-term investments
(short-duration, high quality debt securities) under the management of a
registered investment advisory firm for which a Company director served as
chairman of the board. Such assets under management are maintained by a high
credit quality, third party financial institution custodian.

The carrying amounts reported in the balance sheet for cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
notes payable approximate their fair values.

12. COMMITMENTS AND CONTINGENCIES

The Company is a defendant in a lawsuit initiated in August 1995 in the
United States District Court for the Eastern District of Tennessee by Bolling,
McCool & Twist ("BMT"), a consulting firm. In the suit, BMT asserts that the
Company breached an agreement between BMT and the Company by failing to pay BMT
certain fees it asserts are owed under the agreement. More specifically, BMT has
asserted a claim for the payment of services rendered in the approximate amount
of $50,000 and seeks a success fee in an unspecified amount in connection with
the Original BMS Collaboration. The judge in the case bifurcated the proceeding
into two phases: an adjudication of whether the Company breached its agreement
with BMT and then a damage phase. After a trial on the merits, the jury found in
favor of BMT on the breach of contract claim. A trial to determine damages had
been scheduled for April 14,

F-17
<PAGE> 53
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)

1998. However, on April 6, 1998, the court issued an Order pursuant to which
damages were limited to those arising during the term of the agreement, which
terminated on November 1, 1995. On May 6, 1999, the court confirmed its decision
by granting the Company's motion for summary judgment and limiting the Company's
damages to approximately $50,000 plus interest. Thus, this litigation at the
trial level has been concluded. BMT has filed an appeal and the Company has
cross-appealed. The Company cannot predict the outcome of such appeal. However,
the Company intends to continue to contest any further action vigorously and
believes that this proceeding will not have a material adverse effect on the
Company or on its financial condition, although there can be no assurance that
this will be the case.

In May 1994, the Company entered into two license agreements, whereby the
Company acquired the exclusive, worldwide, royalty-bearing licenses to make,
use, and sell Angiostatin, thalidomide and thalidomide analogs, all inhibitors
of angiogenesis developed by Children's Hospital, Boston. In consideration for
receiving the rights, the Company must pay a royalty on any sublicensing fees,
as defined in the agreements, to Children's Hospital, Boston. The Company is
also required to pay certain amounts upon the attainment of certain milestones.
The milestone payments aggregate $2,650,000, of which $815,000 has been paid to
date, and are based upon license fees and achievement of regulatory approvals.

In addition, in 1996, the Company entered into two license agreements with
Children's Hospital, Boston for the exclusive, worldwide, royalty-bearing
licenses to make, use and sell Endostatin and 2-Methoxyestradiol, both
inhibitors of angiogenesis. In consideration for receiving the rights, the
Company must pay a royalty on any sublicensing fees, as defined in the
agreements, to Children's Hospital, Boston. Each agreement obligates the Company
to pay up to $1,000,000 "upon the attainment of certain milestones." As of
December 31, 1999, the Company has paid $200,000 under these agreements.

These license agreements require the Company to pay Children's Hospital,
Boston a specified percentage of the royalty income received on the first $100
million in net sales of the licensed products, and an increased percentage
thereafter, with a minimum payment based on a percentage of net sales of the
licensed products by any sublicensees.

The Company has also entered into an agreement with a bioprocessing
services firm for the production of materials to be used in the Company's
research activities, including its clinical trials. As of December 31, 1999, the
Company is committed to materials production costs due in the year 2000 of an
estimated $6,000,000.

The Company leases its primary facilities through 2010. The lease agreement
provides for escalation of the lease payments over the term of the lease,
however, rent expense is recognized under the straight-line method.
Additionally, the Company leases office equipment under an operating lease. The
future minimum payments under its facilities and equipment leases as of December
31, 1999 are as follows:

<TABLE>
<S> <C>
2000........................................................ $ 852,700
2001........................................................ 841,200
2002........................................................ 855,300
2003........................................................ 881,000
2004........................................................ 907,400
Thereafter.................................................. 3,739,000
----------
Total minimum payments............................ $8,076,600
==========
</TABLE>

Rental expense for the years ended December 31, 1999, 1998 and 1997 was
$751,000, $253,000 and $241,000, respectively.

F-18
<PAGE> 54
ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. EMPLOYEE RETIREMENT PLAN

The Company sponsors the EntreMed, Inc. 401(k) and Trust. The plan covers
substantially all employees and enables participants to contribute a portion of
salary and wages on a tax-deferred basis. Contributions to the plan by the
Company are discretionary. No employer contributions were made in 1999, 1998 or
1997.

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial information for the years ended December 31,
1999 and 1998 is as follows:

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
1999
Revenues............................. $ 1,444,039 $ 1,329,031 $ 1,786,317 $ 458,163
Research and development costs....... 7,107,455 7,619,140 6,959,576 13,843,264
General and administrative
expenses........................... 1,895,838 2,003,069 2,223,748 1,906,267
Net loss............................. (7,148,840) (8,008,305) (6,895,717) (14,832,854)
Net loss per share................... $ (0.55) $ (0.61) $ (0.48) $ (1.01)
1998
Revenues............................. $ 1,154,971 $ 1,165,485 $ 1,343,437 $ 1,497,590
Research and development costs....... 3,499,431 2,345,299 4,481,485 4,758,778
General and administrative
expenses........................... 1,305,890 1,221,010 1,380,387 1,852,928
Net loss............................. (3,112,126) (1,812,631) (3,959,309) (4,629,704)
Net loss per share................... $ (0.25) $ (0.15) $ (0.31) $ (0.35)
</TABLE>

F-19
<PAGE> 55

PROSPECTUS

ENTREMED, INC.

3,000,000 SHARES OF COMMON STOCK
AND
WARRANTS TO PURCHASE THE SHARES OF COMMON STOCK

We may offer from time to time in one or more offerings an aggregate of up
to 3,000,000 shares of our common stock and warrants to purchase such shares. We
may offer the common stock and warrants (collectively, the "securities")
separately or together, in separate series in amounts, at prices and on terms to
be set forth in one or more supplements to this prospectus (each, a "prospectus
supplement"). When we decide to issue securities, we will provide you with the
specific terms and the public offering price of the securities in prospectus
supplements. You should read this prospectus and the prospectus supplements
carefully before you invest. This prospectus may not be used to offer or sell
securities unless accompanied by a prospectus supplement.

Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "ENMD."

Our principal executive offices are located at 9640 Medical Center Drive,
Rockville, Maryland 20850 and our telephone number is (301) 217-9858.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN OUR
SECURITIES.
------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is January 24, 2000,
as amended March 31, 2000
<PAGE> 56

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 3
Risk Factors................................................ 3
The Company................................................. 14
Use of Proceeds............................................. 14
Plan of Distribution........................................ 14
Description of Common Stock................................. 16
Description of Warrants..................................... 17
Incorporation of Certain Documents by Reference............. 17
Where You Can Find More Information......................... 18
Legal Matters............................................... 19
Experts..................................................... 19
</TABLE>

THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG
OTHERS, STATEMENTS REGARDING THE VALUE OF OUR COMMON STOCK; UNCERTAINTIES
RELATING TO OUR TECHNOLOGICAL APPROACH, OUR HISTORY OF OPERATING LOSSES AND
ANTICIPATION OF FUTURE LOSSES; UNCERTAINTY OF OUR PRODUCT DEVELOPMENT; OUR NEED
FOR ADDITIONAL CAPITAL AND UNCERTAINTY OF ADDITIONAL FUNDING; OUR DEPENDENCE ON
COLLABORATORS AND LICENSEES; INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
IN THE BIOPHARMACEUTICAL INDUSTRY; UNCERTAINTIES RELATING TO OUR PATENT AND
PROPRIETARY RIGHTS; UNCERTAINTIES RELATING TO CLINICAL TRIALS; GOVERNMENT
REGULATION AND UNCERTAINTIES OF OBTAINING REGULATORY APPROVAL ON A TIMELY BASIS
OR AT ALL; OUR DEPENDENCE ON KEY PERSONNEL, RESEARCH COLLABORATORS AND
SCIENTIFIC ADVISORS; UNCERTAINTIES RELATING TO HEALTH CARE REFORM MEASURES AND
THIRD-PARTY REIMBURSEMENT; AND RISKS ASSOCIATED WITH PRODUCT LIABILITY.

OUR FORWARD-LOOKING STATEMENTS ARE BASED ON INFORMATION AVAILABLE TO US
TODAY, AND WE WILL NOT UPDATE THESE STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED.

2
<PAGE> 57

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time sell any number of the shares of
common stock described in this prospectus in one or more offerings up to a total
of 3,000,000 shares and an indeterminate number of warrants to purchase such
shares.

This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described below
under the heading "Where You Can Find More Information."

The registration statement that contains this prospectus, including the
exhibits to the registration statement and the information incorporated by
reference, contains additional information about the securities offered under
this prospectus. That registration statement can be read at the Securities and
Exchange Commission, or SEC, web site or at the SEC offices mentioned below
under the heading "Where You Can Find More Information."

You should rely only on the information provided in this prospectus and in
any prospectus supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information. You
should not assume that the information in this prospectus, or any supplement to
this prospectus, is accurate at any date other than the date indicated on the
cover page of these documents.

RISK FACTORS

You should carefully consider the risks described below together with all
of the other information provided and incorporated by reference in this
prospectus before making an investment decision. The risks and uncertainties
described below are not the only ones facing our Company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.

If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.

WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES

To date, we have been engaged primarily in research and development
activities. Although we have received license fees and research and development
funding from our former collaboration with Bristol-Myers Squibb Company, limited
revenues from Celgene as royalties on the sale of THALOMID(R), and certain
research grants, we have not derived significant revenues from operations.

At December 31, 1999, we had an accumulated deficit of approximately
$82,193,000. Significant losses have continued since December 31, 1999. We also
will be required to conduct substantial research and development and clinical
testing activities for all of our proposed products. We expect that these
activities will result in operating losses for the foreseeable future,
particularly due to the extended time period before we expect to commercialize
any products, if ever. In addition, to the extent we rely upon others for
development and commercialization of our products, our ability to achieve
profitability will depend upon the success of these other parties. To support
our research and development of certain product candidates, we also rely to a
significant extent on grants and cooperative agreements from governmental and
other organizations as a source of revenues and clinical support. If our grant
revenue or cooperative agreements were to be reduced to any substantial extent,
it may impair our ability to continue our research and development efforts. We
cannot assure you that we will be able to generate revenues from operations or
achieve profitability on a sustained basis, if at all.

3
<PAGE> 58

DEVELOPMENT OF OUR PRODUCTS IS AT AN EARLY STAGE AND IS UNCERTAIN

Our proposed products and research programs are in the early stage of
development and require significant, time-consuming and costly research and
development, testing and regulatory clearances. In developing our products, we
are subject to risks of failure that are inherent in the development of products
and therapeutic procedures based on innovative technologies. For example, it is
possible that any or all of these proposed products or procedures will be
ineffective or toxic, or otherwise will fail to receive necessary FDA
clearances. There is a risk that the proposed products or procedures will be
uneconomical to manufacture or market or will not achieve broad market
acceptance. There also is a risk that third parties may hold proprietary rights
that preclude us from marketing our proposed products or that others will market
a superior or equivalent product. The failure of our research and development
activities to result in any commercially viable products would materially
adversely affect our business.

Angiostatin and Endostatin, 2-Methoxyestradiol (2ME2) and thalidomide
analogs are at the preclinical and early clinical stages of development. Until
very recently, these product candidates had only been tested on animals and not
on humans. Although these product candidates have demonstrated some success in
preclinical studies in combating tumors in mice, there is absolutely no
assurance that the agents will prove to be similarly effective in combating
tumors in humans during clinical trials and testing. Mice are not people, and
although the scientific community considers the study of mice useful, we cannot
say whether agents that are successful in treating tumors in mice will be
non-toxic to humans, let alone beneficial. In the cancer context, testing on
mice may occur under different conditions than testing in people, including the
manner in which tumors are introduced into mice, the genetic make-up of
laboratory mice populations (homogeneity as opposed to diversity), tumor type or
location or other unidentified factors. There are many regulatory steps that
must be taken before any of these product candidates will be eligible for FDA
approval and subsequent sale, including the completion of preclinical (animal)
and clinical (human) trials. We do not expect that these product candidates will
be commercially available for several years, if ever.

WE MUST SUBJECT POTENTIAL PRODUCTS TO CLINICAL TRIALS, THE RESULTS OF WHICH ARE
UNCERTAIN

Before obtaining regulatory approvals for the commercial sale of our
products, we or our collaborative partners will be required to demonstrate
through preclinical studies (animal testing) and clinical trials (human testing)
that our proposed products are safe and effective for use in each target
indication. The majority of our product candidates, including Angiostatin, 2ME2
and thalidomide analogs, have only been subjected to preclinical studies on mice
and monkeys and have not yet been tested on humans. The results from these
preclinical studies on animals may not be predictive of results that will be
obtained in clinical trials and large-scale testing on humans.

Our product candidate Endostatin recently entered Phase I clinical trials
on humans. Patient recruitment is underway for Phase I clinical trials of
Angiostatin and 2ME2, and we plan to commence drug administration in April 2000.
Thalidomide, which we licensed to Celgene, is currently being tested in Phase II
and III clinical trials on humans for a variety of types of cancer. In the
future, we will be required to conduct clinical trials on humans for thalidomide
analogs and other new molecules developed by our scientists. We have only
limited experience in conducting clinical trials on humans and intend to rely on
pharmaceutical companies, the National Cancer Institute, and contract research
organizations with which we collaborate for clinical development and regulatory
approval of our product candidates. We cannot guarantee that the clinical trials
conducted by our partners or us will demonstrate sufficient safety and efficacy
to obtain the required regulatory approvals or will result in marketable
products.

The results of initial preclinical studies and clinical trials of products
under development are not necessarily indicative of results that will be
obtained from subsequent or more extensive preclinical studies and clinical
testing. In advanced clinical development, numerous factors may be involved that
may lead to different results in larger, later-stage trials from those obtained
in earlier-stage trials. Early stage trials usually involve a small number of
patients and thus may not accurately predict the actual results regarding safety
and efficacy that may be demonstrated with a large number of patients in a
later-stage trial. Also,

4
<PAGE> 59

differences in the clinical trial design between an early-stage and late-stage
trial may cause different results regarding the safety and efficacy of a product
to be obtained. In addition, many early stage trials are unblinded and based on
qualitative evaluations by clinicians involved in the performance of the trial
whereas later-stage trials generally are required to be blinded in order to
provide more objective data for assessing the safety and efficacy of the
product. The failure to adequately demonstrate the safety and efficacy of a
product under development could delay or prevent regulatory clearance of the
potential product and would have a significant adverse effect on us.

Clinical trials involving cancer patients are often conducted with
terminally ill patients having the most advanced stages of a disease. During the
course of treatment, these patients can die or suffer other adverse events due
to the advanced stage of their disease despite the efficacy of the agents being
tested. These deaths and/or adverse events, though unrelated to the agent being
tested, can nevertheless adversely affect clinical trial results. Various
companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after
attaining promising results in earlier trials. Clinical trials for the product
candidates being developed by us and our collaborators may be delayed by many
factors, including that potential candidates for testing are limited in number.
Any delays in, or termination of, the clinical trials of any of our product
candidates, or the failure of any clinical trials to meet applicable regulatory
standards, could have a material adverse effect on our business.

In addition, we hope eventually to market our products outside of the
United States. This will entail foreign regulatory approvals from governments in
other countries that may have different requirements from the regulatory process
in the United States, subjecting our products to additional clinical trials and
approvals, as well as licensing, manufacturing and labeling standards, even
though the products are fully approved for manufacture, marketing and
distribution in the United States. In order to meet any additional requirements
that might be imposed by foreign governments, we may incur additional costs that
will inhibit our profitability. If the relevant approvals cannot be obtained or
will be too expensive to obtain, foreign distribution may not be feasible, which
could have a material adverse impact on our business.

WE ARE UNCERTAIN WHETHER ADDITIONAL FUNDING WILL BE AVAILABLE FOR OUR FUTURE
CAPITAL NEEDS AND COMMITMENTS

We will require substantial funds in addition to our existing working
capital to develop our product candidates and otherwise to meet our business
objectives. We have never generated enough cash during any period since our
inception to cover our expenses and have spent, and expect to continue to spend,
substantial funds to continue our research and development programs. Any one of
the following factors, among others, could cause us to require additional funds
or otherwise cause our cash requirements in the future to materially increase:

-- results of research and development activities;

-- progress of our preclinical studies or clinical trials;

-- changes in or terminations of our relationships with strategic
partners;

-- changes in the focus, direction, or costs of our research and
development programs;

-- competitive and technological advances;

-- establishment of marketing and sales capabilities;

-- the regulatory approval process; or

-- product launch.

Also, we are a party to sponsored research agreements pursuant to which we
have agreed to fund an aggregate of approximately $2,853,000 through 2001
(including $2,250,000 to Children's Hospital), and materials production costs of
up to $6,000,000 for clinical trials. In addition, under the terms of certain
license agreements, we must be diligent in bringing potential products to market
and must make future
5
<PAGE> 60

milestone payments of up to $3,535,000 and additional payments upon attainment
of regulatory milestones. If we fail to comply with the milestones or fail to
make any required sponsored research or milestone payment, we could face the
termination of the relevant sponsored research or license agreement, which could
have a material adverse effect on our business.

We may seek additional funding through collaborative arrangements and
public or private financing, including equity financing. We cannot guarantee
that collaborative arrangements or additional financing will be available on
acceptable terms to us or at all. If we issue more common stock to raise funds
in the future, your ownership in us may be diluted. If adequate funds are not
available, we may be required to take one or more of the following actions:

-- delay, reduce the scope of, or eliminate one or more of our research
and development programs;

-- forfeit our rights to future technologies;

-- obtain funds through arrangements with collaborative partners or
others that may require us to relinquish rights to certain of our
technologies, product candidates or products that we would otherwise
seek to develop or commercialize on our own; or

-- license the rights to such products on terms that are not favorable to
us.

WE MAY NEED NEW COLLABORATIVE PARTNERS TO DEVELOP AND COMMERCIALIZE PRODUCTS

We plan to develop and commercialize our product portfolio with or without
corporate alliances and partners. Nonetheless, we intend to explore
opportunities for new corporate alliances and partners to help us develop,
commercialize and market our products. We expect to grant to our partners
certain rights to commercialize any products developed under these agreements,
and we may rely on our partners to conduct research and development efforts and
clinical trials on, obtain regulatory approvals for, and manufacture and market
any products licensed to them. Each individual partner will seek to control the
amount and timing of resources devoted to these activities generally. Our
revenues will be obtained from strategic partners as research and development
payments and upon achievement of certain milestones. Since we generally expect
to obtain a royalty for sales or a percentage of profits of products licensed to
third parties, our revenues may be less than if we retained all
commercialization rights and marketed products directly. In addition, there is a
risk that our corporate partners will pursue alternative technologies or develop
competitive products as a means for developing treatments for the diseases
targeted by our programs.

We also may elect to collaborate with another partner to replace
Bristol-Myers Squibb. Even if we find such a partner to assist us with the
research, development and eventual commercialization of Angiostatin, our work on
the product may not be successful. We will depend, in part, on our partner's own
competitive, marketing and strategic considerations, including the relative
advantages of other products being developed and marketed.

We cannot guarantee that we will be successful in establishing any
additional collaborative arrangements, that products will be successfully
commercialized under any collaborative arrangement or that we will derive any
revenues from our arrangements. Our strategy also involves entering into
multiple, concurrent strategic alliances to pursue commercialization of our core
technologies. There is a risk that we will not be able to manage simultaneous
programs successfully. With respect to existing and potential future strategic
alliances and collaborative arrangements, we will depend on the expertise and
dedication of sufficient resources by these outside parties to develop,
manufacture, or market products. If a strategic alliance or collaborative
partner fails to develop or commercialize a product to which it has rights, our
business could be materially and adversely affected.

WE HAVE NO CURRENT MARKETING CAPACITY

To the extent that we undertake to market our products, or are unable to
enter into co-promotion agreements or to arrange for third-party distribution of
our products, additional expenditures and

6
<PAGE> 61

management resources will be required to develop an effective sales force. There
can be no assurance that we will be able to establish a sales force or to enter
into co-promotion or distribution agreements on favorable terms or on a timely
basis. Other companies offering similar or substitute products may have
well-established sales forces or agreements in place that will allow them to
market their products more successfully. Failure to establish sufficient
marketing capabilities may have a material adverse impact on our business.

WE HAVE NO CURRENT MANUFACTURING CAPACITY

We do not expect to manufacture or market products in the near term, but we
may try to do so in certain cases. We do not currently have the capacity to
manufacture or market products or any experience in these activities. If we
elect to perform these functions, we will be required to either develop these
capacities, or contract with others to perform some or all of these tasks. We
may be dependent to a significant extent on corporate partners, licensees, or
other entities for manufacturing and marketing of products. If we engage
directly in manufacturing or marketing, we will require substantial additional
funds and personnel and will be required to comply with extensive regulations.
We cannot guarantee that we will be able to develop or contract for these
capacities when required in connection with our business.

The manufacture of pharmaceutical products can be an expensive, time
consuming, and complex process. Manufacturers often encounter difficulties in
scaling-up production of new products, including problems involving production
yields, quality control and assurance, and shortages of personnel. Delays in
formulation and scale-up to commercial quantities could result in additional
expense, delays in our clinical trials, regulatory submissions, and
commercialization. The manufacturing processes for several of the small
molecules and proteins we are developing as product candidates have not yet been
tested at commercial levels, and we cannot guarantee that it will be possible to
manufacture these materials in a cost-effective manner.

In addition, we will depend on all such third-party manufacturers to
perform their obligations effectively and on a timely basis. There can be no
assurance that such parties will perform such obligations and any such
non-performance may delay clinical development or submission of products for
regulatory approval, or otherwise impair our competitive position, which would
have a material adverse affect on our business. Any manufacturer of our product
candidates will be subject to applicable Good Manufacturing Practices (GMP)
prescribed by the FDA or other rules and regulations prescribed by foreign
regulatory authorities. We cannot guarantee that we or any of our collaborators
will be able to enter into or maintain relationships either domestically or
abroad with manufacturers whose facilities and procedures comply or will
continue to comply with GMP and who are able to produce our small molecules and
proteins. Should manufacturing agreements be entered into, our collaborators and
we will be dependent upon such manufacturers for continued compliance with GMP.
Failure by a manufacturer of our products to comply with GMP could result in
significant time delays or our inability to commercialize or continue to market
a product. Changes in our manufacturers could require new product testing and
facility compliance inspections. In the United States, failure to comply with
GMP or other applicable legal requirements can lead to federal seizure of
violative products, injunctive actions brought by the federal government, and
potential criminal and civil liability on the part of a company and its officers
and employees. Because of these and other factors, we may not be able to replace
our manufacturing capacity quickly or efficiently, in the event that our current
or future manufacturers are unable to manufacture our products at one of more of
their facilities. For certain of our potential products, we will need to
substantially increase the capacity of our production facilities (or those of
our manufacturers) in order to conduct human clinical trials and to produce such
products for commercial sale at an acceptable cost.

WE CANNOT GUARANTEE THAT IT WILL BE COMMERCIALLY FEASIBLE TO MANUFACTURE
ENDOSTATIN AND ANGIOSTATIN

We have entered into agreements with Covance Biotechnology Services Inc.
under which Covance is responsible for producing sufficient amounts of the
Endostatin and Angiostatin for preclinical toxicology studies and for scale-up
production of these proteins under GMP conditions for clinical trials. We also
have entered into a letter of understanding with Chiron Corporation for the
large-scale production of GMP
7
<PAGE> 62

Endostatin. We have spent significant time and funds to transfer the technology
underlying the production of the Endostatin and Angiostatin to Covance and
Chiron. As such, we are reliant on Covance and Chiron for the production of
sufficient quantities of the Endostatin and Angiostatin to complete our clinical
studies, and if they fail to produce such quantities, then we would have to
delay our clinical studies. If we are required to change to a new manufacturer,
and if any suitable manufacturer can be found, significant additional time and
funds would be required for technology transfer and testing. Indeed, the
production of protein-based therapeutics using recombinant DNA techniques and
fermentation is a difficult, expensive process. There is, therefore, no
assurance that it will be possible to manufacture commercial quantities of
Endostatin and Angiostatin in a cost-effective manner.

WE DEPEND ON CELGENE TO COMMERCIALIZE THALIDOMIDE

We have sublicensed to Celgene Corporation all of our rights to
commercialize and sell thalidomide worldwide. We have received and will continue
to receive royalties on all sales of thalidomide (THALOMID(R)) by Celgene. The
success of our relationship with Celgene and the marketing of thalidomide will
depend, in part, on Celgene's own competitive, marketing, and strategic
considerations, including the relative advantages of alternative products being
developed and marketed by its competitors. In addition, if Celgene is not
successful in marketing thalidomide, we would be materially adversely affected.

Thalidomide is currently in Phase II/III human clinical trials for a
variety of cancer indications. Based upon our efforts, thalidomide has received
orphan drug designation from the FDA as a treatment for Kaposi's sarcoma, a form
of skin cancer most frequently associated with AIDS, and for primary brain
malignancies. Celgene, to whom we have licensed the rights to commercialize
thalidomide, has received approval from the FDA to market thalidomide for the
treatment of erythema nodosum leprosum, an inflammatory skin condition of some
leprosy patients. The FDA, however, has not yet approved the marketing and sale
of thalidomide for cancer. Celgene still must pass significant regulatory
hurdles before thalidomide will be commercially available for approved use for
treatment of cancer, if ever.

THERE ARE RISKS RELATED TO THE HISTORY OF THALIDOMIDE

Thalidomide has caused serious birth defects in children whose mothers used
it during pregnancy. Therefore, physicians prescribing the drug to women of
childbearing age must take strict precautions, and there can be no assurance
that such precautions will be observed in all cases or, if observed, will be
effective. Use of thalidomide has also been associated, in a limited number of
cases, with other side effects, including nerve damage. We believe that the
characteristics of thalidomide that may have affected fetal development and
caused birth defects by blocking new blood vessel growth are the same
characteristics that may make thalidomide useful in the prevention and treatment
of angiogenic disorders such as cancer. However, we cannot guarantee that
clinical trials with the drug will demonstrate its safety and efficacy or that
the drug will not be associated with other characteristics that prevent or limit
its commercial use.

Even if thalidomide is demonstrated to be safe and effective for use in
treating angiogenic-mediated disease, we may face difficulties in gaining public
acceptance of the drug based on its history of causing birth defects. This may
adversely affect the marketing efforts of our collaborator Celgene Corporation.
In addition, although Celgene has agreed to indemnify us from any liability that
may arise from its sales of thalidomide, we cannot guarantee that we will be
protected from such liability and the possible related losses.

WE CANNOT GUARANTEE THAT OUR PRODUCTS WILL ACHIEVE MARKET ACCEPTANCE

Our success will be dependent on market acceptance of our products in the
United States and, later, in international markets. Since we have not received
the necessary approvals to sell our products in the United States or elsewhere,
we cannot predict whether any of our products will achieve market acceptance,

8
<PAGE> 63

either in the United States or abroad. A number of factors may limit the market
acceptance of our products, including the timing of regulatory approval and
market entry relative to competitive products, the availability of alternative
therapies or treatments, the price of our products relative to any alternatives,
the availability of third-party reimbursement to pay for them, and the extent of
the marketing efforts by competitors. Other risk factors identified in this
section also may affect market acceptance.

WE DEPEND ON PATENTS AND OTHER PROPRIETARY RIGHTS, SOME OF WHICH ARE UNCERTAIN

Our success will depend in part on our ability to obtain patents for our
products, both in the United States and abroad. The patent position of
biotechnology and pharmaceutical companies in general is highly uncertain and
involves complex legal and factual questions. Risks related to patenting our
products include the following:

-- our failure to obtain additional patents;

-- challenge, invalidation, or circumvention of patents already issued to
us;

-- failure of the rights granted under our patents to provide sufficient
protection;

-- independent development of similar products by third parties; or

-- ability of third parties to design around patents issued to us or our
collaborators.

For several of the products that we are developing, including thalidomide
and 2ME2, composition of matter patents are not available because the compounds
are in the public domain. In these cases, only patents covering the "use" of the
product are available. In general, patents covering a new use for a known
compound can be more difficult to enforce against infringers of the use claims
in the patent. We have secured use patents covering the use of thalidomide for
the treatment of angiogenic diseases. We are aware of at least two other issued
patents covering certain non-antiangiogenic uses of thalidomide. Although we
believe that the claims in such patents will not interfere with our proposed use
of thalidomide, we cannot guarantee that the holders of such patents will not be
able to exclude us from marketing thalidomide for other uses. We have also
secured use patents covering 2ME2.

The enactment of the legislation implementing the General Agreement on
Tariffs and Trade caused 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
seventeen years from the date of grant. The new term of a United States patent
will commence on the date of issuance and terminate twenty years from the
earliest effective filing date of the application. Since the time from filing to
issuance of biotechnology patents is often more than three years, a twenty-year
term from the effective date of filing may result in a term of patent protection
that is substantially shorter than seventeen years. This may adversely impact
our patent position. Often, the duration and level of the royalties we are
entitled to receive from a collaborative partner is based on the existence of a
valid patent. Thus, the shorter period of patent protection may adversely affect
our future operating results and financial condition.

Our potential products may conflict with patents that have been or may be
granted to competitors, universities or others. As the biotechnology industry
expands and more patents are issued, the risk increases that our potential
products may give rise to claims that they infringe the patents of others. Such
other persons could bring legal actions against us claiming damages and seeking
to enjoin clinical testing, manufacturing and marketing of the affected
products. Any such litigation could result in substantial cost to us and
diversion of effort by our management and technical personnel. If any of these
actions are successful, in addition to any potential liability for damages, we
could be required to obtain a license in order to continue to manufacture or
market the affected products. We cannot guarantee that we would prevail in any
action or that any license required under any needed patent would be made
available on acceptable terms, if at all. Failure to obtain needed patents,
licenses, or proprietary information held by others may have a material adverse
effect on our business.

9
<PAGE> 64

We are a party to sponsored research agreements and license agreements that
require us to make milestone payments upon attainment of certain regulatory
milestones. Failure to meet such milestones could result in the loss of certain
rights to compounds covered under such license agreements.

We also rely on trade secret protection for our confidential and
proprietary information. However, trade secrets are difficult to protect and we
cannot guarantee that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets or disclose our technology, or that we can meaningfully
protect our rights to unpatented trade secrets. We require our employees,
consultants, and advisors to execute a confidentiality agreement when beginning
an employment or a consulting relationship with us. The agreements generally
provide that all trade secrets and inventions conceived by the individual and
all confidential information developed or made known to the individual during
the term of the relationship automatically become our exclusive property.
Employees and consultants must keep such information confidential and may not
disclose such information to third parties except in specified circumstances. We
cannot guarantee, however, that these agreements will provide meaningful
protection for our proprietary information in the event of unauthorized use or
disclosure of such information.

To the extent that consultants, key employees, or other third parties apply
technological information independently developed by them or by others to our
proposed projects, disputes may arise as to the proprietary rights to such
information which may not be resolved in our favor. Certain of our consultants
are employed by or have consulting agreements with others and any inventions
discovered by them generally will not become our property.

THE EXPIRATION OF OUR RELATIONSHIP WITH CHILDREN'S HOSPITAL, BOSTON, COULD
ADVERSELY IMPACT OUR ABILITY TO ACQUIRE FUTURE PRODUCT CANDIDATES AND COULD
SUBJECT US TO INCREASED COMPETITION

We have relationships with collaborators at academic and other institutions
who conduct research either on our behalf or whose research we have the right to
license and use. Our primary research collaboration has been with Children's
Hospital, Boston. Pursuant to our agreement with Children's Hospital, Boston, we
agreed to provide funding for some of their antiangiogenesis research projects
and granted them options to acquire an ownership interest in us. In return, they
gave us the right to fund additional research projects and obtain licenses to
any discoveries arising from that research. Children's Hospital, Boston,
originally discovered Endostatin, Angiostatin, 2ME2, and the antiangiogenic
properties of thalidomide and certain thalidomide analogs. To date, we have
received licenses from Children's Hospital, Boston, for these products.

Researchers at Children's Hospital, Boston, also may be working on other
products that may be used to treat cancer in a variety of ways, including by
antiangiogenesis. Although we believe that, pursuant to our agreement, we are
entitled to license and use a wide variety of products related to
antiangiogenesis, Children's Hospital, Boston, may take a different position.
Children's Hospital, Boston, has licensed, and may in the future license,
products to our existing and potential competitors.

Early last year, we extended our agreement with Children's Hospital, Boston
for another year. However, while this agreement has been renewed before, we do
not know whether this agreement will be renewed again this year. Because
Children's Hospital, Boston, has, in the past, been an important source of
product candidates for us, the expiration of this collaboration may adversely
impact our ability to acquire future product candidates. We cannot be sure that
we will be able to negotiate research collaborations with new institutions or
that any new collaboration will be successful. The expiration of the
collaboration with Children's Hospital, Boston, may subject us to increased
competition. It also is possible that, after the expiration of our agreement,
Children's Hospital, Boston, may develop other products that have antiangiogenic
qualities similar to those contained in the products that we currently license
and could license those products to our competitors.

10
<PAGE> 65

OUR POTENTIAL PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATORY REQUIREMENTS AND A
LENGTHY APPROVAL PROCESS

Our research, development, preclinical and clinical trials, manufacturing,
and marketing of most of our product candidates are subject to an extensive
regulatory approval process by the FDA and other regulatory agencies in the
United States and abroad. The process of obtaining FDA and other required
regulatory approvals for drug and biologic products, including required
preclinical and clinical testing, is lengthy, expensive and uncertain. Even
after spending time and money, we may not receive regulatory approvals for
clinical testing or for the manufacturing or marketing of any products. Our
collaborators or we may encounter significant delays or excessive costs in the
effort to secure necessary approvals or licenses. Even if we obtain regulatory
clearance for a product, that product will be subject to continual review. Later
discovery of previously unknown defects or failure to comply with the applicable
regulatory requirements may result in restrictions on a product's marketing or
withdrawal of the product from the market, as well as possible civil or criminal
penalties.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY

The pharmaceutical and biotechnology industries are intensely competitive
and we expect competition from other companies and other research and academic
institutions to increase. In addition to competing with universities and other
research institutions to develop products, technologies, and processes, we may
compete with other companies to acquire the rights to products, technologies,
and processes developed by universities and other research institutions. Many of
these companies have substantially greater financial and research and
development capabilities than we have and have substantially greater experience
in undertaking preclinical and clinical testing of products, obtaining
regulatory approvals and manufacturing and marketing pharmaceutical products. We
are aware of a number of other companies and academic institutions that are
pursuing angiogenesis research and are testing other angiogenesis inhibitors.

These other companies and academic institutions may be larger than we are
and may have significantly greater financial resources, or be supported by large
entities with greater financial resources than are currently available to us.
They may also have established marketing and distribution channels. The drug
industry is characterized by intense price competition, and we anticipate that
we will face this and other forms of competition. There can be no assurance that
developments by others will not render our products or technologies obsolete or
noncompetitive or that we will be able to keep pace with technological
developments. Competitors may develop products that use an entirely different
approach or means of accomplishing the desired therapeutic effect that our
products seek to achieve and may be more effective or less costly, or both. In
addition, other competitors may have significantly greater experience than we do
in undertaking preclinical testing and human clinical trials and obtaining
regulatory approvals of pharmaceutical products. Accordingly, our competitors
may succeed in commercializing products more rapidly than we do. Were these
competitors to develop their products more rapidly and complete the regulatory
process sooner, it could have a material adverse effect on our business.

If other companies were to get FDA approval to market thalidomide for other
disease indications, "off-label" use of thalidomide could adversely affect our
business and operations. We are aware of other companies engaged in the
development of thalidomide for various disease indications. Although the FDA
does not permit a manufacturer or distributor to market or promote an approved
drug for an unapproved off-label use or dosage level, under its "practice of
medicine" policy, the FDA generally does not prohibit a physician from
prescribing an approved drug product for an unapproved use or dosage. In
addition, the FDA has from time to time proposed to liberalize its restrictions
on the dissemination of off-label information.

The pharmaceutical and biotechnology industries are rapidly evolving. We
may not be able to develop products that are more effective or achieve greater
market acceptance than our competitors' products. Our competitors may succeed in
developing products and technologies that are more effective than those being
developed by us or that render our products and technologies less competitive or
obsolete. One competitor in particular is working on the development for
clinical trials of an antiangiogenic developed by the same researcher at
Children's Hospital, Boston, who developed Angiostatin and Endostatin. While we
do not

11
<PAGE> 66

know the potential effectiveness of this product in comparison to Angiostatin,
Endostatin or our other products, it is possible that this product will be more
effective than our products, will be easier to manufacture, will come to market
before any of our products or will achieve market acceptance over our products.

LOSS OF KEY PERSONNEL AND CONSULTANTS COULD ADVERSELY AFFECT OUR BUSINESS

We are dependent on certain of our executive officers and scientific
personnel, including John W. Holaday, Ph.D., our co-founder, Chairman, President
and Chief Executive Officer. We have a three-year employment agreement with Dr.
Holaday through December 31, 2001. Competition for qualified employees among
pharmaceutical and biotechnology companies is intense, and the loss of certain
of our personnel, or an inability to attract, retain, and motivate additional
highly skilled scientific, technical, and management personnel, could materially
adversely affect our business and prospects. We cannot guarantee that we will be
able to retain our existing personnel or attract and retain additional qualified
employees.

We may also be dependent, in part, upon the continued contributions of the
lead investigators of our sponsored research programs. Our scientific
consultants and collaborators may have commitments to or consulting or advisory
agreements with other entities that may affect their ability to contribute to us
or may be competitive with us. Inventions or processes discovered by them will
not necessarily become our property, but may remain the property of these
persons or of these persons' full-time employers.

POTENTIAL PRODUCTS MAY SUBJECT US TO PRODUCT LIABILITY FOR WHICH INSURANCE MAY
NOT BE AVAILABLE

The use of our potential products in clinical trials and the marketing of
any pharmaceutical products may expose us to product liability claims. We have
obtained a level of liability insurance coverage that we believe is appropriate
for our current stage of development. However, there is a risk that our present
insurance coverage is not adequate. Such existing coverage will not be adequate
as we further develop products, and there is a risk that in the future adequate
insurance coverage and indemnification by collaborative partners will not be
available in sufficient amounts or at a reasonable cost. A successful product
liability claim could have a material adverse effect on our business and
financial condition.

THE MARKETABILITY OF OUR POTENTIAL PHARMACEUTICAL PRODUCTS MAY DEPEND ON
REIMBURSEMENT AND REFORM MEASURES IN THE HEALTH CARE INDUSTRY

Our success may depend, in part, on the extent to which reimbursement for
the costs of therapeutic products and related treatments will be available from
third-party payors such as government health administration authorities, private
health insurers, managed care programs, and other organizations. Over the past
decade, the cost of health care has risen significantly, and there have been
numerous proposals by legislators, regulators, and third-party health care
payors to curb these costs. Some of these proposals have involved limitations on
the amount of reimbursement for certain products. We cannot guarantee that
similar federal or state health care legislation will not be adopted in the
future or that any products sought to be commercialized by us or our
collaborators will be considered cost-effective or that adequate third-party
insurance coverage will be available for us to establish and maintain price
levels sufficient for realization of an appropriate return on our investment in
product development. Moreover, the existence or threat of cost control measures
could have an adverse effect on the willingness or ability of our corporate
collaborators to pursue research and development programs related to our product
candidates.

WE ARE SUBJECT TO RISK DUE TO OUR USE OF HAZARDOUS MATERIALS

Our research and development involves the controlled use of hazardous
biological, chemical, and radioactive materials. We are subject to federal,
state, and local laws and regulations governing the use, manufacture, storage,
handling, and disposal of such materials and certain waste products. Although we
believe that our safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials

12
<PAGE> 67

cannot be completely eliminated. In the event of such an accident, we could be
held liable for any damages that result and any such liability could have a
material adverse effect on us.

THE PRICE OF OUR STOCK IS HIGHLY VOLATILE

The market price of our common stock, like that of the common stock of many
other biopharmaceutical companies, has at times been, and again may be, highly
volatile. Factors that may have a significant impact on the market price of our
common stock include:

-- the results of preclinical studies and clinical trials by us or our
competitors;

-- FDA actions with respect to our product candidates;

-- other evidence of the safety or efficacy of our product candidates or
those of our competitors;

-- announcements of technological innovations or new commercial products
by us or our competitors;

-- changes in reimbursement policies;

-- health care legislation;

-- developments in patent or other proprietary rights;

-- developments in our relationships with collaborative partners;

-- public concern as to the safety and efficacy of drugs we develop;

-- fluctuations in our operating results;

-- actions by traders and shortsellers;

-- articles in the public press;

-- general market conditions; and

-- sales of substantial numbers of shares of common stock.

PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS

Any of the following provisions could discourage, hinder or preclude an
unsolicited acquisition of us and could make it less likely that securityholders
receive a premium for their securities as a result of any such attempt:

-- Without shareholder approval, our Board of Directors may issue up to
5,000,000 shares of preferred stock with voting rights equal to the
common stock and conversion, liquidation, or dissolution rights and
preferences that may be superior to the common stock. The rights of
the holders of any such preferred stock may adversely affect the
rights of holders of common stock. The issuance of preferred stock or
of rights to purchase preferred stock could be used to discourage an
unsolicited acquisition proposal.

-- In addition, our Board of Directors is divided into three classes, the
members of each of which will serve for a staggered three-year term.
Because shareholders only may elect one-third of the Directors each
year, it is more difficult for a third party to gain control of our
Board of Directors.

-- Furthermore, we are subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits us from
engaging in a "business combination" with an "interested stockholder,"
unless the business combination is approved in a prescribed manner.

13
<PAGE> 68

RISKS RELATED TO POTENTIAL YEAR 2000 PROBLEMS MIGHT ADVERSELY AFFECT OUR
BUSINESS

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, those
computer programs having time-sensitive software would recognize a date using
"00" as the year 1900 rather than the year 2000.

Even though the date is now past January 1, 2000 and we have not
experienced any immediate adverse impact on our operations from the transition
to the Year 2000, we cannot provide complete assurance that our operations have
not been affected in a manner that is not yet apparent or that will arise in the
future. In addition, certain computer programs that were date sensitive to the
Year 2000 may not have been programmed to process the Year 2000 as a leap year,
and any negative consequential effects remain unknown. As a result, we will
continue to monitor our Year 2000 compliance and the Year 2000 compliance of our
suppliers and customers. However, we anticipate no Year 2000 problems that are
reasonably likely to have a material adverse effect on our operations.

THE COMPANY

We were incorporated in Delaware in September 1991 and are engaged
primarily in the research and development of biopharmaceutical products that
address the role of angiogenesis in the prevention and treatment of a broad
range of diseases.

We are an innovative biopharmaceutical company with a research and product
focus on the role of angiogenesis in disease. Our core technology includes an
antiangiogenesis program focused on the development of proprietary products
intended to inhibit the abnormal growth of new blood vessels associated with
cancer and certain causes of blindness.

Angiogenesis is the biological process by which new blood vessels are
formed and is a normal process during the first three months of embryonic
development, the reproductive cycle of women, and in wound healing. At other
times, angiogenesis is harmful when associated with disease, particularly that
of cancer and macular degeneration, a leading cause of blindness. We believe
that antiangiogenic products, which inhibit the abnormal growth of blood
vessels, may have fewer adverse side effects than traditional therapies for
these diseases. Our portfolio of potential products includes antiangiogenic
compounds, Angiostatin, Endostatin, 2-Methoxyestradiol, thalidomide and
thalidomide analogs, and others which are used to block the growth of blood
vessels supplying primary and metastatic tumors.

Our principal executive offices are located at 9640 Medical Center Drive,
Rockville, Maryland 20850, and our telephone number is (301) 217-9858. For
further information about our business and operations, reference is made to our
reports incorporated herein by reference. See "Incorporation of Certain
Information by Reference" above.

USE OF PROCEEDS

We will use the net proceeds received from the sale of the securities for
development of current and future products, advances to and investments in
subsidiaries, working capital and general corporate purposes, at the discretion
of management.

PLAN OF DISTRIBUTION

We may sell the securities being offered by this prospectus separately or
together:

-- through agents;

-- to or through underwriters;

-- through dealers;

14
<PAGE> 69

-- through a block trade in which the broker or dealer engaged to handle
the block trade will attempt to sell the securities as agent, but may
position and resell a portion of the block as principal to facilitate
the transaction;

-- directly to purchasers, through a specific bidding, auction or other
process; or

-- through a combination of any of these methods of sale.

We may effect the distribution of the securities from time to time in one
or more transactions at a fixed price or prices, which may be changed from time
to time:

-- at market prices prevailing at the times of sale;

-- at prices related to such prevailing market prices; or

-- at negotiated prices.

We will describe the method of distribution of the securities in the
prospectus supplement.

Agents designated by us from time to time may solicit offers to purchase
the securities. We will name any agent involved in the offer or sale of the
securities and set forth any commissions payable by us to an agent in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment. Any agent may be deemed to be an "underwriter" of the securities as
that term is defined in the Securities Act.

If we use an underwriter or underwriters in the sale of securities, we will
execute an underwriting agreement with the underwriter or underwriters at the
time we reach an agreement for sale. We will set forth in the prospectus
supplement the names of the specific managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers. This compensation may be in the
form of discounts, concessions or commissions. Underwriters and others
participating in any offering of securities may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. We will
describe any of these activities in the prospectus supplement.

If a dealer is used in the sale of the securities, we or an underwriter
will sell securities to the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale. The prospectus supplement will set forth the name of the dealer
and the terms of the transactions.

We may directly solicit offers to purchase the securities, and we may sell
directly to institutional investors or others. These persons may be deemed to be
underwriters within the meaning of the Securities Act with respect to any resale
of the securities. The prospectus supplement will describe the terms of any
direct sales, including the terms of any bidding or auction process.

Agreements we enter into with agents, underwriters and dealers may entitle
them to indemnification by us against specified liabilities, including
liabilities under the Securities Act, or to contribution by us to payments they
may be required to make in respect of these liabilities. The prospectus
supplement will describe the terms and conditions of indemnification or
contribution.

No securities may be sold under this prospectus without delivery, in paper
format, in electronic format on the internet, or both, of the applicable
prospectus supplement describing the method and terms of the offering.

15
<PAGE> 70

DESCRIPTION OF COMMON STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

As of December 31, 1999, we had 35,000,000 shares of common stock
authorized, of which 14,755,998 shares were outstanding, and 5,000,000 shares of
preferred stock authorized, of which no shares were outstanding.

LISTING

Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "ENMD."

DIVIDENDS

Our board of directors may authorize, and we may make, distributions to our
common stockholders, subject to any restriction in our articles of incorporation
and to those limitations prescribed by law.

FULLY PAID AND NON-ASSESSABLE

All of our outstanding common shares are fully paid and non-assessable. Any
additional common shares that we issue will be fully paid and non-assessable.

VOTING RIGHTS

Each of our outstanding common shares as of the applicable record date is
entitled to one vote in each matter submitted to a vote at a meeting of
stockholders and, in all elections for directors, every stockholder has the
right to vote the number of shares owned by it for as many persons as there are
directors to be elected, provided directors are elected according to our
articles of incorporation and by-laws. Our stockholders may vote either in
person or by proxy.

PREEMPTIVE AND OTHER RIGHTS

Holders of our common stock have no preemptive rights and have no other
rights to subscribe for additional shares nor does the common stock have any
conversion rights or rights of redemption, either of which rights have not been
waived. Upon liquidation, all holders of our common stock are entitled to
participate pro rata in our assets available for distribution, subject to the
rights of any class of preferred stock then outstanding.

STOCKHOLDER ACTION BY WRITTEN CONSENT; MEETINGS

Under Delaware corporate law, any action required to be taken by our
stockholders may be taken without a meeting, without prior notice and without a
vote if a consent in writing is signed by holders of shares having at least the
number of votes necessary at a stockholder meeting and prompt notice of the
taking of such action is given to the other stockholders.

Our by-laws provide that special meetings of our stockholders may be called
at any time only by the board of directors or by the president, secretary, or an
assistant secretary at the written request of the holders of at least fifty
percent (50%) of all outstanding shares entitled to vote on the matter for which
the meeting is called.

STAGGERED BOARD OF DIRECTORS

Our Board of Directors is divided into three classes, the members of each
of which will serve for a staggered three-year term. Our shareholders may elect
only one-third of the directors each year; therefore, it is more difficult for a
third party to gain control of our Board of Directors than if our Board was not
staggered.

16
<PAGE> 71

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company is our transfer agent and
registrar, and is located in Brooklyn, New York.

DESCRIPTION OF WARRANTS

We may issue warrants for the purchase of shares of the common stock.
Warrants may be issued independently or together with the shares of common stock
offered by any prospectus supplement to this prospectus and may be attached to
or separate from such shares. Further terms of the warrants will be set forth in
the applicable prospectus supplement.

The applicable prospectus supplement will describe the terms of the
warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:

-- the title of such warrants;

-- the aggregate number of such warrants;

-- the price or prices at which such warrants will be issued;

-- the designation, terms and number of shares of common stock
purchasable upon exercise of such warrants;

-- the designation and terms of the shares of commons stock with which
such warrants are issued and the number of such warrants issued with
such shares;

-- the date on and after which such warrants and the related common stock
will be separately transferable, including any limitations on
ownership and transfer of such warrants;

-- the price at which each share of common stock purchasable upon
exercise of such warrants may be purchased;

-- the date on which the right to exercise such warrants shall commence
and the date on which such right shall expire;

-- the minimum or maximum amount of such warrants which may be exercised
at any one time;

-- information with respect to book-entry procedures, if any;

-- a discussion of certain federal income tax consequences; and

-- any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such warrants.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to part of this prospectus. These documents may include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as Proxy Statements. Any documents that we
subsequently file with the SEC will automatically update and replace the
information previously filed with the SEC. Thus, for example, in the case of a
conflict or inconsistency between information set forth in this prospectus and
information incorporated by reference into this prospectus, you should rely on
the information contained in the document that was filed later.

This prospectus incorporates by reference the documents listed below that
we previously have filed with the SEC and any additional documents that we may
file with the SEC (File No. 000-20713) under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 between the date of this

17
<PAGE> 72

prospectus and the termination of the offering of the securities. These
documents contain important information about us.

1. Our Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Commission on March 31, 1999, as amended;

2. Our Quarterly Reports on Form 10-Q for the quarter ended March 31, 1999,
filed with the Commission on May 17, 1999, as amended; for the quarter
ended June 30, 1999, filed with the Commission on August 16, 1999; and
for the quarter ended September 30, 1999, filed with the Commission on
November 12, 1999;

3. Our Current Reports on Form 8-K filed under the Exchange Act, filed with
the Commission on February 11, 1999 and August 10, 1999; and

4. The description of our common stock contained in our Registration
Statement on Form 8-A filed under the Exchange Act, including any
amendment or report filed for the purpose of updating such description.

You can obtain a copy of any or all of the documents incorporated by
reference in this prospectus (other than an exhibit to a documents unless that
exhibit is specifically incorporated by reference into that document) from the
SEC on its web site at http://www.sec.gov. You also can obtain these documents
from us without charge by visiting our internet web site at
http://www.entremed.com or by requesting them in writing, by email or by
telephone at the following address:

Francine K. Jackson
Finance Assistant
EntreMed, Inc.
9640 Medical Center Drive
Rockville, Maryland 20850
(301) 738-2493
[email protected]

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement under the Securities
Act of 1933 that registers the distribution of the securities offered under this
prospectus. The registration statement, including the attached exhibits and
schedules and the information incorporated by reference, contains additional
relevant information about us and the securities. The rules and regulations of
the SEC allow us to omit from this prospectus certain information included in
the registration statement.

In addition, we file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy this
information and the registration statement at the following locations of the
SEC:

-- Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20459;

-- Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and

-- New York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York 10048.

You may also read and copy this information at the SEC's Public Reference
Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20459, at prescribed
rates. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.

In addition, the SEC maintains an Internet World Wide Web site that
contains reports, proxy statements and other information about issuers of
securities, like us, who file such material electronically with the SEC. The
address of that web site is http://www.sec.gov. You also can inspect such
reports, proxy statements and other information about us at the offices of the
National Association of Securities
18
<PAGE> 73

Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Our common stock is
traded on The Nasdaq National Market under the symbol "ENMD."

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for us
by Arnold & Porter, Washington, D.C.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.

19
<PAGE> 74

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

2,000,000 Shares

[ENTREMED LOGO]

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

Prospectus Supplement

April , 2000

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

Joint Book Running Managers

BANC OF AMERICA SECURITIES LLC WARBURG DILLON READ LLC

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

GERARD KLAUER MATTISON & CO., INC.

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