CASI Pharmaceuticals, Inc (DE) - Quarter Report: 2002 September (Form 10-Q)

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459

[x]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number 0-20713

ENTREMED, INC.
(Exact name of registrant as specified in its charter)

9640 Medical Center Drive
Rockville, Maryland
(Address of principal executive offices)

20850
(Zip code)

(240) 864-2600
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES   X      NO       

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date.

ENTREMED, INC.
Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains and incorporates by reference certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by forward-looking words such as “may,” “will,” “expect,” “anticipate” or similar words. These forward-looking statements include, among others, statements regarding the timing of our clinical trials and the expected increases in our expenses.

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 those discussed in our forward-looking statements due to, among other factors, our history of operating losses and anticipation of future losses; the value of our common stock; uncertainties relating to our technological approach; uncertainty of our product candidate 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; risks associated with product liability; and other factors discussed in our other filings with the Securities and Exchange Commission.

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ENTREMED, INC.
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the consolidated financial statements.

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ENTREMED, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of the consolidated financial statements.

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ENTREMED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

The accompanying notes are an integral part of the unconsolidated financial statements.

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ENTREMED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002 (unaudited)

1. BASIS OF PRESENTATION

     Our accompanying unaudited consolidated financial information includes the accounts of 85% owned subsidiary, Cytokine Sciences, Inc. and 96% owned subsidiary MaxCyte, Inc. MaxCyte was formed in July 1998 as a wholly owned subsidiary and on April 1, 2000 was capitalized with $40,000 in cash including $1,000 from a MaxCyte officer. In addition, EntreMed, Inc. (the “Company”) agreed to contribute certain technology and provide additional funding in exchange for preferred stock. The Company provides facility and administrative services for which MaxCyte is obligated to repay us. All intercompany balances and transactions have been eliminated in consolidation.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such consolidated financial statements do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to our audited consolidated financial statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2001.

2. CONTINGENCIES

     The law suit between Donald J. Davidson and Abbott Laboratories and Yihai Cao, Judah Judah Folkman, Michael S. O’Reilly, The Children’s Medical Center Corporation and EntreMed, Inc., U.S. District Court for the District of Massachusetts, Case No. 00-CV-11046-GAO has been settled. The terms of the settlement are confidential, but will not have a material adverse impact on the Company’s financial condition.

3. ALLERGAN LICENSING AGREEMENT

     Under a licensing agreement effective as of January 18, 2002, EntreMed, Inc. (the “Company”) entered into a five-year strategic alliance with Allergan Inc. to develop and commercialize small molecule angiogenic inhibitors for treatment and prevention of diseases and conditions of the eye. Under the terms of a licensing agreement, Allergan will receive exclusive worldwide license to commercialize Panzem. In return, the Company may receive up to $41 million in the form of an equity investment, cash payments, and milestone payments.

     In connection with the licensing agreement, Allergan purchased 728,863 Units from the Company at a purchase price of $6.86 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase 0.15 shares of Common Stock. The warrants have a term of five years and an exercise price per share equal to $12.15 per share. Allergan will have certain registration rights beginning one year after the closing of the transaction.

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4. MANAGEMENT’S PLANS

     To date, we have been engaged primarily in research and development activities. As a result we have experienced and expect to continue to incur operating losses for 2002 and the foreseeable future before we commercialize any products. In addition, under the terms of certain license agreements, we must be diligent in bringing potential products to market and would make future milestone payments of up to $4,110,000. 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.

     At September 30, 2002, we had cash and cash equivalents of approximately $4,793,000, as compared to approximately $41,386,000 at December 31, 2001. The decrease in cash and cash equivalents primarily reflects the pay down of approximately $7.5 million of accounts payable (including accrued manufacturing expenses of approximately $13.9 million relating to our fourth quarter 2001 manufacturing campaign) and payment of other accrued liabilities of approximately $1.0 million. Net cash provided from financing activities was approximately $6,064,000 for the nine months ended September 30, 2002. At September 30, 2002, we have negative working capital balance of approximately $9,078,000 reflecting the decrease in our cash and cash equivalents, as well as a current liability of approximately $3,363,000 relating to our stock repurchase obligations to BMS.

     In the absence of additional financing, based on expense reduction measures coupled with the deferral of payments to certain vendors, we believe that our available cash reserves will be sufficient to fund our operations until approximately the end of 2002. Management continues to seek measures to reduce cash used in operating activities through a realignment of programs and workforce reductions and is exploring sources of additional financing.

     In August and September 2002, we announced a realignment of research and development programs to reduce expenses and focus resources on the development of our clinical candidates. In conjunction with this plan, we reduced our headcount by approximately 50% and eliminated funding of research collaborations that do not support our clinical programs. We have recorded charges of approximately $700,000 relating to severance and other termination costs in the third quarter of this year. We also have announced our intention to maintain our clinical programs for Endostatin and Angiostatin although we do not plan to initiate new clinical trials. We believe that these actions, coupled with decreased manufacturing activity, will result in a significant reduction in operating expenses beginning in the fourth quarter.

     We intend to continue to pursue strategic relationships to provide resources for the further development of our future product candidates. There can be no assurance, however, that these discussions will result in relationships or additional funding. In addition, we will continue to seek capital through the public or private sale of securities. If we are successful in raising additional funds through the issuance of equity securities, stockholders likely will experience substantial dilution, or the equity securities may have rights, preferences or privileges senior to those of the holders of our common stock. If we raise funds through the issuance of debt securities, those securities would have rights, preferences and privileges senior to those of our common stock.

     In addition to pursuing sources of additional capital, we intend to take one or more of the following actions:

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     If we are unsuccessful in our efforts, we will have to cease and/or curtail our operations or seek protection under U.S. bankruptcy laws.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 September 30, 2002, all of our revenues have been generated from license fees, research and development funding, royalty payments, the sale of royalty rights, and certain research grants; we have not generated any revenue from direct product sales. We anticipate our primary revenue sources for the next few years to include research grants and collaboration payments under current or future arrangements. 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.

CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES

     The preparation of our financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ materially from those estimates. The items in our financial statements requiring significant estimates and judgments are as follows:

RESULTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2001 and September 30, 2002.

     Revenues. Revenues increased approximately 380% in the three month period ending September 30, 2002 to approximately $346,000 from $91,000 in the comparable 2001 period. For the nine month period revenues decreased approximately 59% to $715,000 from $1,732,000. Royalty revenue decreased approximately 99% in the 2002 periods reflecting the absence of royalty income resulting from the sale of our right to receive royalty income from Celgene’s sales of thalidomide (THALOMID®). In accordance with

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our 1998 collaborative sublicensing agreement for thalidomide with Celgene, we recognized net royalty revenues from Celgene’s sales of thalidomide (THALOMID®) of approximately $1,435,000 for the nine month period ending September 30, 2001. For the nine months ended September 30, 2002 and 2001 grant revenues include funds received from a Small Business Innovative Research, or SBIR, program of the National Institutes of Health of approximately $35,000 and $277,000 in 2002 and 2001, respectively. Included in the three and nine month periods ending September 30, 2002 are revenues of approximately $319,000 and $552,000 respectively resulting from externally funded research collaborations. The majority of these revenues result from performance as a subcontractor under an NIH sponsored Malaria Vaccine program.

     Research and Development Expenses. From inception through September 30, 2002 we have incurred research and development expenses of approximately $203,772,000. Included in this amount are the expenses related to our three lead product candidates, Panzem™, Endostatin and Angiostatin. At September 30, 2002 the accumulated expenses for each of these development projects are $17,443,000, $69,255,000 and $34,134,000 respectively. Project expenses for Panzem™ of $2,779,000, Endostatin of $8,011,000 and Angiostatin of $4,297,000 are reflected in our 2002 R&D expenses for the nine month period ending September 30, 2002 of approximately $27,041,000. Research and Development expenses for the comparable 2001 period were approximately $33,323,000. Research and Development expenses for the three month period ending September 30, 2002 were approximately $8,871,000, a decrease of 30% from the comparable 2001 period. The decreases primarily result from a lower level of bulk manufacturing of clinical trial material. Project costs for Panzem™, Endostatin and Angiostatin were $5,388,000, $12,388,000 and $3,415,000 respectively for the nine month period ending September 30, 2001. In addition to the accumulated expenses attributable to our three lead product candidates, beginning in 1993 we have sponsored several research programs at Children’s Hospital, Boston in an aggregate of $18,050,000 and our subsidiary MaxCyte has incurred approximately $5,405,000 in research and development costs. Reflected in our research and development expenses are sponsored research payments to Children’s Hospital of $1,000,000 in the nine month period ended September 30, 2002 and $1,500,000 for the comparable period in 2001. MaxCyte’s research and development costs for the nine month periods ending September 30, 2002 and September 30, 2001 were $1,581,000 and $1,794,000, respectively. The balance of our accumulated research and development expenses are attributable to discovery research and preclinical development of additional product candidates and costs associated with the management of research and development operations and facilities.

     The amounts of expenditures that will be necessary to execute our business plan are subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. As of September 30, 2002, three of our proprietary product candidates, Panzem™, Endostatin and Angiostatin, were in the Phase II stage of clinical trials. Completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. In light of our current financial condition, we have decided that we will not initiate any new clinical trials for Endostatin and Angiostatin. However, we intend to maintain the current Phase II trials from our current inventory of these product candidates.

     Research and development expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with pre-clinical testing and clinical trials of our product candidates, including the costs of manufacturing the product candidates, and facilities expenses. Research and development expenses for the nine months ended September 30, 2002 decreased to approximately $27,041,000 in 2002 from $33,323,000 for the comparable period in 2001. The decrease in overall research and development costs reflects a lower manufacturing level of clinical trial material in 2002. Other cost components of the decrease are associated with the following:

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     General and administrative expenses decreased to $3,170,000 in the three month period ending September 30, 2002 from $3,899,000 in the comparable 2001 period. For the nine months ended September 30, 2002 general and administrative expenses increased to $11,199,000 from $11,058,000 in 2001. The 2002 period increase reflects additional legal fees associated with the Abbott litigation and a charge of $1,995,000 related to the potential repurchase of our common stock from Bristol-Myers Squibb (“BMS”) and the related guaranteed minimum purchase price. These increases are partially offset by decreased personnel costs resulting from a smaller corporate staff versus the comparable 2001 period and the reversal of accrued compensation charges.

     Interest expense. For the nine month period ending September 30, 2002 interest expense increased 27% to approximately $296,000 from $233,000 in the comparable period in 2001. The 2002 increase reflects the accrual of interest relating to MaxCyte’s issuance of additional convertible promissory notes in 2002.

     Investment income. Investment income decreased by approximately 74% in 2002 to approximately $305,000 from $1,165,000 as a result of continued low investment yields and lower balances in interest bearing cash accounts.

LIQUIDITY AND CAPITAL RESOURCES

     To date, we have been engaged primarily in research and development activities. As a result we have experienced and expect to continue to incur operating losses for 2002 and the foreseeable future before we commercialize any products. In addition, under the terms of certain license agreements, we must be diligent in bringing potential products to market and would make future milestone payments of up to $4,110,000. 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.

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     At September 30, 2002, we had cash and cash equivalents of approximately $4,793,000, as compared to approximately $41,386,000 at December 31, 2001. The decrease in cash and cash equivalents primarily reflects the pay down of approximately $7.5 million of accounts payable (including accrued manufacturing expenses of approximately $13.9 million relating to our fourth quarter 2001 manufacturing campaign) and payment of other accrued liabilities of approximately $1.0 million. Net cash provided from financing activities was approximately $6,064,000 for the nine months ended September 30, 2002. At September 30, 2002, we have negative working capital balance of approximately $9,078,000 reflecting the decrease in our cash and cash equivalents, as well as a current liability of approximately $3,363,000 relating to our stock repurchase obligations to BMS discussed below.

The table below sets forth our contractual obligations at September 30, 2002.

     *MaxCyte is a majority owned subsidiary of EntreMed, Inc. and as such these convertible debts are reflected on the consolidated financial statements. Repayment of these convertible debts is the sole responsibility of MaxCyte.

     In addition to the items contained on the above table our balance sheet also reflects accounts payable and other current liabilities of approximately $9,821,000. In the absence of additional financing, based on expense reduction measures coupled with the deferral of payments to certain vendors, we believe that our available cash reserves will be sufficient to fund our operations until approximately the end of 2002. Management continues to seek measures to reduce cash used in operating activities through a realignment of programs and workforce reductions and is exploring sources of additional financing.

     In August and September 2002, we announced a realignment of research and development programs to reduce expenses and focus resources on the development of our clinical candidates. In conjunction with this plan, we reduced our headcount by approximately 50% and eliminated funding of research collaborations that do not support our clinical programs. We have recorded charges of approximately $700,000 relating to severance and other termination costs in the third quarter of this year. We also have announced our intention to maintain our current clinical programs for Endostatin and Angiostatin although we do not plan to initiate new clinical trials. We believe that these actions, coupled with decreased manufacturing activity, will result in a significant reduction in operating expenses beginning in the fourth quarter.

     We intend to continue to pursue strategic relationships to provide resources for the further development of our future product candidates. There can be no assurance, however, that these discussions will result in relationships or additional funding. In addition, we will continue to seek capital through the public or private sale of securities. If we are successful in raising additional funds through the issuance of equity securities, stockholders likely will experience substantial dilution, or the equity securities may have rights, preferences or privileges senior to those of the holders of our common stock. If we raise funds through the issuance of debt securities, those securities would have rights, preferences and privileges senior to those of our common stock.

     In addition to pursuing sources of additional capital, we intend to take one or more of the following actions:

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     If we are unsuccessful in our efforts, we will have to cease and/or curtail our operations or seek protection under U.S. bankruptcy laws.

     Our cash and working capital balances represent the net proceeds of our private placements of equity securities and our public offerings, payments from BMS which included equity investments, royalties received from Celgene, proceeds from secured borrowing, the sale of royalty rights and various grants.

     On March 15, 2001, our subsidiary MaxCyte received net proceeds of approximately $2,185,000 from the issuance of convertible promissory notes with a maturity date of December 31, 2003. The notes accrue simple interest at 8% per annum, payable upon maturity. The notes, plus the accrued interest, are convertible to common stock at any time at the option of the holder and are subject to a mandatory conversion to Series B Convertible Preferred Stock upon the occurrence of certain specified events. Holders of the promissory notes also received warrants to purchase a total of 10,925 shares of common stock of EntreMed. In February 2002, MaxCyte received additional proceeds of $550,000 and issued additional convertible promissory notes with a maturity date of December 31, 2003. Holders of the promissory notes also received warrants to purchase a total of 2,750 shares of common stock of EntreMed. MaxCyte received proceeds of $1,100,000 in May 2002 and issued convertible promissory notes with a maturity date of July 23, 2003. Holders of the May 2002 promissory notes also received warrants to purchase additional shares of MaxCyte common stock. MaxCyte is a majority owned subsidiary of EntreMed, Inc. and as such these convertible debts are reflected on the consolidated financial statements. Repayment of these convertible debts is the sole responsibility of MaxCyte.

     In December 2000 and 1999, we exercised our option to repurchase shares of our common stock from BMS for $13.143 per share. Shares repurchased totaled 291,666 and 291,667 for repurchase prices of $3,833,367 and $3,833,379 in 2000 and 1999 respectively. Shares repurchased from BMS are accounted for as treasury stock. In December 2001, BMS agreed not to sell the remaining 291,666 shares until December 1, 2002 unless the trading price of our stock exceeds a specified threshold. In addition, BMS granted us a right of first offer and extended our repurchase right until that time. We also may share some of the proceeds from sales of the remaining shares with BMS. We guaranteed to either repurchase the shares from BMS for $13.143 or pay to BMS the difference between the per share sales price and $13.143 if the shares are sold at less than $13.143 during the 10 days after December 1, 2002.

INFLATION AND INTEREST RATE CHANGES

     Management does not believe that our working capital needs are sensitive to inflation and changes in interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The primary objective of our investment activities is to preserve our capital until it is required to fund operations while at the same time maximizing the income we receive from our investments without incurring investment market volatility risk. Our investment income is sensitive to the general level of U.S. interest rates. In this regard, changes in the U.S. interest rates affect the interest earned our cash and cash equivalents. Due to the short term nature of our cash and cash equivalent holdings, a 10% movement in market interest rates would not materially impact on the total fair market value of our portfolio as of September 30, 2002.

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ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

     Under the supervision and with the participation of the Company’s Chairman, President and Chief Operating Officer, and Chief Accounting Officer (its principal executive officers and principal financial officer), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures within 90 days of the filing date of this quarterly report. Based on that evaluation, the Chairman, President and Chief Operating Officer, and Chief Accounting Officer have concluded that these disclosure controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation

ITEM 5. OTHER INFORMATION

     On October 31, 2002 we were notified by the Nasdaq Listing Qualifications Department that our common stock is subject to delisting from the Nasdaq National Market because it is not in compliance with Marketplace Rule 4450(b)(1)(A), which requires that EntreMed’s common stock have a market value of listed securities of $50 million. We have appealed the staff’s determination and a hearing before a Nasdaq Listing Qualifications Panel has been scheduled for December 12, 2002. Under Nasdaq Marketplace Rules, the hearing request will automatically stay the delisting pending the Panel’s review and determination. Until the Panel’s ultimate determination, our common stock will continue to be traded on the Nasdaq National Market. There can be no assurance that the Nasdaq Panel will grant our request for continued listing on the National Market. If we are unable to comply with all Nasdaq National Market listing criteria, we intend to apply to transfer our common stock to the Nasdaq SmallCap Market where shares of our common stock would continue to be traded under their existing ticker symbol, ENMD.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     This information as set forth in Note 2 of “Notes to Consolidated Financial Statements” appearing in Item 1 of Part I of this report is incorporated herein by reference.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not applicable

Item 3. DEFAULT UPON SENIOR SECURITIES

     Not applicable.

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     Not applicable.

Item 5. OTHER INFORMATION

     Not applicable.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

     (b)  Reports on Form 8-K

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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Certifications

I, John W. Holaday, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of EntreMed, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

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I, Neil Campbell, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of EntreMed, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

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I, Dane R. Saglio, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of EntreMed, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

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