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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
For Annual and Transition Reports Pursuant to Sections 13
or 15(d) of the Securities Exchange Act of 1934
 	 	 	
 	þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the Fiscal Year Ended December 31, 2004
OR
 	 	 	
 	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
Commission File Number: 001-31918
HYBRIDON, INC.
(Exact name of Registrant as specified in its certificate of incorporation)
 	 	 	
Delaware
(State or other jurisdiction
of incorporation or organization)	 	04-3072298
(I.R.S. Employer
Identification No.)	
345 Vassar Street
Cambridge, Massachusetts
(Address of principal executive offices)	 	02139
(Zip Code)	
(617) 679-5500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Including Associated Preferred Stock Purchase Rights)
(Title of Class)
      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 the filing requirements for the past 90 days.    Yes  þ     No  o
      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o
      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  o     No  þ
      The approximate aggregate market value of the voting stock held by non-affiliates of the registrant was $60,166,000 based on the last sale price of the registrant’s common stock on the American Stock Exchange on June 30, 2004. As of March 1, 2005, the registrant had 110,989,836 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
 	 	 	
Portions of the Registrant’s Proxy Statement with respect to the Annual Meeting of Stockholders to be held on June 15, 2005	 	Items 10, 11, 12, 13 and 14 of Part III.	

HYBRIDON, INC.
FORM 10-K
INDEX
 	 	 	 	 	 	 	 	 	
 	 	 	 	Page	 	 	 	
 	 	 	 	 	 	 	 	
 PART I.	 	 	
 Item 1.	 	 Business	 	 	1	 	 	 	
 Item 2.	 	 Properties	 	 	15	 	 	 	
 Item 3.	 	 Legal Proceedings	 	 	16	 	 	 	
 Item 4.	 	 Submission of Matters to a Vote of Security Holders	 	 	16	 	 	 	
 	 	 Executive Officers and Key Employees of Hybridon	 	 	16	 	 	 	
 	 	 	
 PART II.	 	 	
 Item 5.	 	 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	 	 	18	 	 	 	
 Item 6.	 	 Selected Financial Data	 	 	19	 	 	 	
 Item 7.	 	 Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	21	 	 	 	
 Item 7A	 	 Quantitative and Qualitative Disclosures About Market Risk	 	 	38	 	 	 	
 Item 8.	 	 Financial Statements and Supplementary Data	 	 	39	 	 	 	
 Item 9.	 	 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	 	 	39	 	 	 	
 Item 9A	 	 Controls and Procedures	 	 	39	 	 	 	
 Item 9B	 	 Other Information	 	 	39	 	 	 	
 	 	 	
 PART III.	 	 	
 Item 10.	 	 Directors and Executive Officers of Hybridon	 	 	39	 	 	 	
 Item 11.	 	 Executive Compensation	 	 	40	 	 	 	
 Item 12.	 	 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	 	 	40	 	 	 	
 Item 13.	 	 Certain Relationships and Related Transactions	 	 	40	 	 	 	
 Item 14.	 	 Principal Accountant Fees and Services	 	 	40	 	 	 	
 	 	 	
 PART IV.	 	 	
 Item 15.	 	 Exhibits and Financial Statement Schedules	 	 	41	 	 	 	
 EX-3.1 Restated Certificate of Incorporation of Hybridon, Inc., as amended	
 EX-10.45 Amended License Agreement dated February 4, 2005	
 EX-10.46 Summary of Director Compensation of Hybridon, Inc.	
 EX-10.47 Non-Employee Director Nonstatutory Stock Option Agreement	
 EX-23.1 Consent of Ernst & Young LLP	
 EX-31.1 Section 302 Certification of C.E.O.	
 EX-31.2 Section 302 Certification of C.F.O.	
 EX-32.1 Section 906 Certification of C.E.O.	
 EX-32.2 Section 906 Certification of C.F.O.	
 
      Hybridon®, IMOxine® and GEM® are our registered trademarks. AmplivaxTM, CpRTM, CycliconTM, IMO TM , Immunomer TM , RpG TM , YpG TM  and YpR TM  are also our trademarks. Other trademarks appearing in this annual report are the property of their respective owners.

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PART I.
 	 	
Item 1.	Business	
Overview
      We are engaged in the discovery, development and commercialization of novel therapeutics based on synthetic DNA for the treatment of cancer, asthma/allergies and infectious diseases. Our activities are primarily focused on the development of our immunomodulatory oligonucleotide, or IMO, technology. Our IMO compounds are synthetic DNA-based sequences that are designed to mimic bacterial DNA and be recognized by a specific protein receptor called Toll-like Receptor 9, or TLR9, which triggers the activation and modulation of the immune system. We also have been a pioneer in the development of antisense technology, which uses synthetic DNA to block the production of disease causing proteins at the cellular level. In 2003 and 2004, we devoted substantially all of our research and development efforts to our IMO technology and products and expect to continue to focus our research and development efforts in 2005 and in future years on our IMO technology and products. We plan to continue to seek to enter into collaborations with third parties for the development and commercialization of products based on our antisense technology.
     Drug Development Strategy
      In the near term, we are focusing our internal drug development efforts on the lead IMO drug candidate in our pipeline, HYB2055. We are developing HYB2055 for oncology applications under the name IMOxine. In October 2004, we commenced patient recruitment for an open label, multi-center phase 2 clinical trial of IMOxine as a monotherapy in patients with metastatic or recurrent clear cell renal carcinoma. We plan to recruit a minimum of 46 patients into the first stage of the trial.
      In addition to the phase 2 clinical trial of IMOxine, we are conducting a phase 1 clinical trial of IMOxine in patients with refractory solid tumor cancers, which was closed to enrollment in November 2004. In November 2004, we announced interim results of this phase 1 clinical trial of IMOxine, which is being conducted at the Lombardi Comprehensive Cancer Center at Georgetown University Medical Center in Washington, D.C. We anticipate announcing further results in the second quarter of 2005. In the interim results of the phase 1 trial, IMOxine was found to be well tolerated with no dose-limiting toxicity observed. Adverse effects recognized through March 1, 2005 have been consistent with the expected immune stimulation activity of IMOxine, consisting primarily of mild to moderate injection site reactions, pain, and “flu-like” symptoms. The interim results provided evidence of dose response effects on immunology parameters in patients with a variety of cancer types including patients with renal cell carcinoma, melanoma, colorectal cancer, sarcoma, breast cancer, non-small cell lung cancer and other cancers.
      In addition to these trials, we may in the future conduct trials in which we evaluate IMOxine for the treatment of other specific types of cancer, as a monotherapy and/or in combination with other anticancer agents, including chemotherapeutics, antibodies, and vaccines/antigens.
     Collaboration Strategy
      In addition to developing drug candidates on our own, we are seeking to establish alliances with other parties for the development and commercialization of products based on our IMO and antisense technologies.
      We believe that pharmaceutical and biotechnology companies may seek to use our IMO compounds as a monotherapy for the treatment of specific diseases or in combination with, or as an adjuvant to, their own chemotherapeutics, vaccines and monoclonal antibodies. In particular, we are developing HYB2055 in a lower dosage form, under the name Amplivax, for use as a vaccine adjuvant. We licensed Amplivax to The Immune Response Corporation for use in its development of a potential therapeutic and prophylactic vaccine for HIV infection, and we plan to seek additional licensees for Amplivax in the future. In June 2004, The Immune Response Corporation initiated a phase 1/2 clinical trial involving the use of Amplivax as an adjuvant to REMUNE, an immune-based HIV therapeutic vaccine being developed by The Immune Response Corporation.

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      We also believe that our antisense technology may prove useful to pharmaceutical and biotechnology companies that are seeking to develop drug candidates that down-regulate gene targets discovered by, or proprietary to, such companies. In addition to collaborations based on gene targets whose proprietary rights are controlled by third parties, we are seeking collaborators to continue development of our most advanced antisense drug candidate GEM231 and our other antisense drug candidates. GEM231 is a 2nd generation antisense compound for treating solid tumor cancers that we developed to inhibit Protein Kinase A, or PKA, a protein that has been shown to be present at increased levels in the cells of many human cancers. We completed enrollment of a phase 1/2 clinical trial of GEM231 as a combination therapy with irinotecan, an anticancer drug marketed in the United States under the name Camptosar®. We presented interim data from this trial at the 2004 Annual Meeting of the American Society of Clinical Oncology, or ASCO.
      We have already entered into nine collaboration and licensing agreements for our antisense technology including agreements with Alnylam Pharmaceuticals, Inc. and VasGene Therapeutics Inc. which were entered into during 2004. We are seeking to enter into additional collaboration agreements for our antisense technologies.
Our Product Pipeline
      The table below summarizes the principal products that we or our collaborators are developing and the therapeutic use and development status of these products.
 	 	 	 	 	
Product Description	 	Therapeutic Use	 	Development Status	
 	 	 	 	 	
IMO	 	 	 	 	
IMOxine1	 	Cancer	 	phase 2	
Amplivax2	 	HIV	 	phase 1/2	
IMOxine3 (used in combination)	 	Cancer	 	preclinical candidate	
HYB2093	 	Asthma/allergy	 	preclinical candidate	
HYB2125	 	Hepatitis C	 	preclinical candidate	
Antisense	 	 	 	 	
GEM2314	 	Cancer	 	phase 1/2	
GEM640 (AEG35156)5	 	Cancer	 	phase 1	
MBI11216	 	Human papillomavirus	 	phase 1	
Veglin7	 	Cancer	 	phase 1	
HYB676	 	Ophthalmology	 	preclinical candidate	

1. 	Being used as a monotherapy in patients with metastatic or recurrent clear cell renal carcinoma.	
 	 	
2. 	Being used as an adjuvant in combination with REMUNE®, an immune-based HIV therapeutic vaccine developed by The Immune Response Corporation under a collaboration agreement with us.	
 	 	
3. 	Being used in combination with chemotherapy, selected monoclonal antibodies and radiation.	
 	 	
4. 	We are seeking to enter into a collaboration for further development of this product.	
 	 	
5. 	Being developed by Aegera Therapeutics, Inc. under a collaboration agreement with us.	
 	 	
6. 	Migenix Inc. has the rights to develop MBI1121 under a collaboration agreement with us.	
 	 	
7. 	Being developed by VasGene Therapeutics Inc. under a collaboration agreement with us.	
      In addition, we have developed several antisense drug candidates for specific applications that are not currently in active development programs but could be suitable candidates for collaborations. These include:
 	 	 	 	 	
Product Description	 	Therapeutic Use	 	Development Status	
 	 	 	 	 	
GEM92	 	HIV	 	phase 1	
GEM240	 	Cancer	 	preclinical candidate	
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Immunomodulatory Oligonucleotide (IMO) Technology
Overview
      Our IMO technology has evolved from our research and clinical experience with antisense oligonucleotides. We learned from this research and clinical experience that some types of oligonucleotides can act as potent stimulators of the immune system. Our early insights and those of others showed that oligonucleotides containing specific nucleotide segments, or motifs, mimic in the human body the immune stimulating effects of bacterial DNA. Nucleotides are the molecules that are linked together to form DNA. Using our DNA chemistry, we have designed and are developing a new, proprietary class of IMO compounds. We believe these compounds, which we refer to as IMO compounds, may offer a number of potential advantages over earlier immune stimulatory oligonucleotides.
      We are designing our IMO compounds to be used in the treatment of conditions such as cancer, allergic asthma and other allergies, and infectious diseases, either alone as a monotherapy or in combination therapies with chemotherapeutics, radiation, vaccines and antibodies.
Background
      The human immune system protects the body against viruses, bacteria and other infectious agents, referred to as pathogens. It also acts to identify and eliminate abnormal cells, such as cancer cells. The immune system works through various mechanisms which recognize pathogens and abnormal cells. These mechanisms initiate a series of interactions resulting in stimulation of specific genes in response to the pathogens or abnormal cells. The activities of the immune system are undertaken by its two components: the innate immune system and the adaptive immune system.
      The role of the innate immune system is to provide a rapid, non-specific response to a pathogenic invasion or to the presence of a foreign substance in the body and to activate the adaptive immune system. The innate immune system consists of cells such as macrophages, dendritic cells and monocytes. When the body is presented with a foreign pathogen, cells of the innate immune system are activated, resulting in a cascade of signaling events that cause the production of proteins to fight the infection. Unlike the antibodies and proteins produced by the adaptive immune system described below, the proteins produced by the innate immune system are not pathogen-specific, but rather are active against a broad spectrum of pathogens. Moreover, once the infection is resolved, the innate immune system will not remember the pathogen.
      In contrast to the innate immune system, the adaptive immune system provides a pathogen-specific response to a pathogenic invasion. The adaptive immune system does this by recognition of specific cell surface proteins, called antigens, which signal the presence of a pathogen. This process is initiated through signals produced by the innate immune system. Upon recognition of a foreign antigen, the adaptive immune system produces antibodies and antigen-specific toxic immune cells that specifically detect and destroy infected cells. This response is referred to as an antigen-specific immune response. An antigen-specific immune response normally takes several weeks to develop the first time. However, once activated by a specific pathogen, the adaptive immune system “remembers” the antigens of the pathogen. In this manner, if the pathogen again invades the body, the presence of the “remembered” antigens will allow the adaptive immune system to respond once more, this time in a matter of days. Scientists generally believe that the adaptive immune system also may be able to eliminate abnormal cells, such as cancer cells.
      The human immune reaction is initially commenced by activation of the innate immune system. One way this occurs is through recognition by the immune system of a pathogen-associated molecular pattern, referred to as a PAMP. These patterns include components of DNA that are present with great frequency in pathogens and with low frequency, or not at all, in humans. The presence of a PAMP acts as a signal to the immune system of the presence of a foreign pathogen and starts an immune response.
      In the case of bacteria, one common PAMP is a combination of DNA known as a CpG dinucleotide or CpG DNA. A CpG dinucleotide, or motif, consists of a cytosine (C) molecule and guanine (G) molecule linked by a phosphate bond (p). Most bacteria contain this CpG motif at the expected frequency of one in sixteen base pairs in their genome. Vertebrates, including humans, display many fewer CpG dinucleotides, and

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usually the cytosine (C) molecule of the CpG motif is methylated, unlike bacterial CpG dinucleotides where the cytosine (C) molecule is unmethylated. Methylation is the substitution of a methyl group, a molecule containing one carbon atom and three hydrogen atoms, for a hydrogen atom. In this way, self DNA, which is methylated, is not mistaken for pathogen DNA.
      CpG DNA has been shown to be recognized by a specific protein receptor called Toll-like Receptor 9, or TLR9. TLR9 is located inside some types of immune cells. Scientists generally believe that once TLR9 recognizes bacterial DNA, such as CpG DNA, it triggers an immune response through a cascade of cell signals that ultimately leads to the release of immune system molecules both from the innate and eventually the adaptive immune systems. These molecules attack the infection. Additional receptors other than TLR9 may also contribute to or modify the recognition of certain CpG DNA, emphasizing the structural importance of CpG DNA in TLR-specific signaling.
      Our IMO compounds are intended to mimic bacterial DNA. We believe the sequences of these compounds are recognized as bacterial DNA by TLR9 and possibly other receptors. As a result, we believe that our IMO compounds can trigger an innate immune response similar to the innate immune response triggered by bacterial DNA. Results from our preclinical studies and our initial clinical trials of our IMO compounds suggest this response leads to signaling events that include production of cytokines. Cytokines are a specific type of immune system molecule that are known to have broad spectrum therapeutic properties against infectious disease as well as against cancer. These signals from the innate immune system also may trigger responses of the adaptive immune system.
      Because recognition of IMO compounds by TLR9 or other receptors may lead to both innate and adaptive immune responses, we believe IMO compounds may have the potential to be useful in treatment of a wide variety of diseases either as a monotherapy or in combination with other agents such as chemotherapeutics, radiation, vaccines, antigens and monoclonal antibodies. We and independent third parties who are investigating CpG DNA drug candidates that work in a manner similar to our IMO compounds are currently exploring the use of these drug candidates in clinical trials for cancer, asthma, allergies and infectious diseases.
Therapeutic Potential of IMO Compounds
      Because IMO compounds can generate a broad range of immune responses, we believe they may provide therapeutic benefits in a number of areas:
 	 	 	
 	• 	Cancer. Cancer cells are recognized by the body as abnormal cells and trigger an immune response. However, the body’s immune response to cancer cells is notoriously weak. The benefits of immune stimulation by bacterial DNA in cancer patients have been long recognized. IMO compounds have been shown to activate dendritic cells and B cells and induce Th1 cytokine secretion in human cell-based assays. The secreted cytokines are known to stimulate natural killer cells to destroy cells within a tumor mass. In pre-clinical studies in mouse models, our IMO compounds have also been shown to enhance the activity of selected chemotherapeutic agents, selected anticancer antibodies and radiation.	
 	 	 	
 	• 	Allergic Asthma and Other Allergies. Based on preclinical studies of our IMO compounds in mouse models, we believe that IMO compounds have potential for use in the treatment of allergic asthma, other allergies and other diseases that result from an overreaction of the immune system by suppressing specific allergen induced allergic responses. In these studies the type of cytokines produced as a result of the activation of immune cells by IMO compounds suppressed asthmatic and allergic immune conditions while simultaneously promoting an immune response that further alleviated asthmatic and allergic conditions.	
 	 	 	
 	• 	Infectious Diseases. According to published reports, various CpG DNA sequences have been shown in studies in mice and other animals to activate an immune defense against pathogens that is of a general nature and not directed at any specific microorganism. As a result, we believe that our IMO compounds have the potential to be used prophylactically to ward off the danger of infection or to boost the immune response to an early-stage or ongoing infection. Some of our IMO compounds have been shown in ongoing preclinical studies to induce Th1-type cytokines, IFN-α in non-human primate	
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 	 	studies for example. These cytokines are useful as anti-infectious agents against bacteria, viruses, and parasites. We have a portfolio of various IMO structures, including compounds that induce high levels of IFN-α, which may be suitable for treating Hepatitis C and other viral infections.	
 	 	 	
 	• 	Combinations with Vaccines. In preclinical studies in mice, the immune response triggered by IMO compounds has been shown to increase the effectiveness of vaccines and peptides. As a result, we believe that IMO compounds have the potential to be used in combination with, or as an adjuvant to, vaccines. The Immune Response Corporation is evaluating our Amplivax IMO compound for use as an adjuvant in combination with REMUNE in a phase 1/ 2 clinical trial.	
IMO Chemistry
      Based on our expertise in synthetic oligonucleotide chemistry compiled over the past fifteen years, we have developed a portfolio of IMO compounds containing different proprietary synthetic motifs and different site-specific sequences. In our preclinical studies of several IMO compounds and initial clinical trials of our lead IMO compound, our IMO compounds have triggered an immune response that has resulted in the expression of many cytokines. This immune response and the resulting expression of cytokines have varied depending on the sequence and structure of the IMO compound. We believe that by varying the synthetic motifs, site-specific sequences and secondary structures in the IMO compounds, we can design IMO compounds that optimize immunostimulatory activity and induce different profiles of immune response. As a result, we believe we may create IMO compounds that are optimized for the treatment of different diseases.
HYB2055 Drug Discovery and Development
          IMOxine
      We are focusing our internal drug development efforts on the lead drug candidate in our pipeline, HYB2055, for oncology applications under the name IMOxine. We selected HYB2055 for clinical development because of the potency it demonstrated as an immune modulator in preclinical models, both  in vitro  and  in vivo . We filed an Investigational New Drug Application, or IND, for HYB2055 with the FDA that became effective March 6, 2003.
      In March 2004, we completed a phase 1 clinical trial of HYB2055 in 28 healthy volunteers over a broad range of dosing levels. In this trial, HYB2055 was well tolerated by the volunteers, who did not experience any significant treatment-related adverse effects. In addition, HYB2055 demonstrated biological activity in the volunteers, according to the several parameters monitored in the study.
      In May 2003, we commenced a phase 1 clinical trial of IMOxine in patients with refractory solid tumor cancers at the Lombardi Comprehensive Cancer Center at Georgetown University Medical Center in Washington, D.C. We announced enrollment completion and interim results from the phase 1 oncology trial in November 2004. We enrolled 23 patients in this trial and one patient continues to receive IMOxine treatment as of March 1, 2005 (for over one year). Interim results from the trial included that IMOxine was found to be well tolerated with no significant dose-limiting toxicity observed. The adverse effects patients experienced as of the November 2004 announcement were consistent with the expected immune stimulation activity of IMOxine, and primarily have been mild to moderate injection site reactions, pain and “flu-like” symptoms including rigors/chills, fever, nausea, myalgia, headache, malaise and fatigue. Observations that were considered serious adverse events and possibly related to IMOxine treatment have been transient dyspnea with hypoxia (1 patient), rigors/chills 1 hour post dose (1 patient), abdominal pain with nausea/vomiting (1 patient) and anemia requiring transfusion (2 patients). The one patient continuing to receive IMOxine therapy has had no additional adverse effects since the November 2004 announcement. The interim results of this phase 1 trial provided evidence of dose response effects on immunology parameters in patients with a variety of cancer types, including renal cell carcinoma, melanoma, colorectal cancer, sarcoma, breast cancer, non-small cell lung cancer and other cancers.
      In February 2005, Hybridon agreed to support a single-patient investigator-sponsored IND involving the weekly administration of IMOxine at a dosage of 0.64 mg/ kg per week. The investigator is Michael

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Seiden, M.D., Ph.D., of Massachusetts General Hospital. The single patient has chemotherapy resistant epithelial ovarian carcinoma.
      We are currently conducting a phase 2 clinical trial of IMOxine in patients with metastatic or recurrent clear cell renal carcinoma. The trial, for which we began patient recruitment in October 2004, is a two-stage, multi-center, open label study of IMOxine as a monotherapy. The primary objective of the study is to determine tumor response by Response Evaluation Criteria in Solid Tumors, or RECIST. Secondary study objectives are safety, duration of response, time to progression, survival one year after the last dose and the treatment effect on quality of life. In the trial, one of two dose levels of 0.16 or 0.64 mg/ kg is administered by weekly subcutaneous injection. Treatment duration is defined as 24 weeks based on safety and the absence of disease progression. We expect that patients can continue to receive IMOxine treatment beyond 24 weeks based on investigator recommendations and independent medical monitor concurrence. We plan to recruit a minimum of 46 patients in the first stage of the trial and anticipate preliminary results related to the primary objective within the first half of 2006. We expect the second stage of the trial to be a continuation of the same trial design if warranted by the first stage interim results.
 	 	
 	Amplivax	
      In addition to cancer applications, we are also developing HYB2055 for use as a vaccine adjuvant. We are developing HYB2055 in a lower dosage form under the name Amplivax for these applications. We licensed Amplivax to The Immune Response Corporation for use in its development of a potential therapeutic and prophylactic vaccine for HIV infection, and we plan to seek additional licensees for Amplivax in the future. In June 2004, The Immune Response Corporation initiated a phase 1/ 2 clinical trial involving the use of Amplivax as an adjuvant to REMUNE, an immune-based HIV therapeutic vaccine being developed by The Immune Response Corporation.
 	 	
 	Additional Applications	
      We believe that HYB2055, or similar compounds based on our IMO technology, may also be used as a monotherapy for treatment of infectious diseases, allergic asthma and other allergies. We may explore the potential of these uses either on our own, or with collaborators through submission of additional INDs.
Antisense Technology
Overview
      Most drugs are chemicals that stimulate or suppress the function of a particular molecule, usually a protein, which causes a disease. The drug acts by binding to the target molecule and interrupting the disease-causing activity of the target molecule. Frequently, however, sites on other non-target molecules present in the body resemble the target-binding site of a disease-causing molecule and, as a result, the conventional drug binds to some degree to those non-target molecules. Most drug side effects arise due to this off-target activity.
      In contrast, antisense drug candidates interact with the target molecule with extremely high specificity. Antisense drug candidates are designed to bind to a unique messenger RNA (mRNA) target and thereby block production of the specific protein encoded by the target mRNA. We believe that drugs based on antisense technology may be more effective and cause fewer side effects than conventional drugs because antisense drugs are designed to intervene in a highly specific fashion in the production of proteins, rather than after the proteins are made.
Background
      A normal cell produces a particular set of normal proteins in the right amount for the body to function properly. A diseased cell produces inappropriate proteins or the wrong amount of normal proteins. A cell produces inappropriate types or amounts of proteins when its DNA expression changes, either through mutation as in many types of cancer cells or through an imbalance of normal bodily function. In some

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instances, inappropriate proteins act directly to cause or support a disease. In other instances, inappropriate proteins interfere with proteins that prevent or combat disease.
      Cells make proteins in a two-stage process. All proteins are based on the DNA which comprises the cellular genome. DNA is a string of individual building blocks chemically known as nucleotides. The specific sequence in which the nucleotides are arranged is the code that embodies genetic information into the DNA. First, the cell uses its genetic DNA code as a pattern to create a molecule of messenger RNA or mRNA consisting of a string of nucleotides in a sequence that is the exact mirror image of, or complementary to, the sequence of the coding strand of nucleotides in the DNA. This mRNA strand is called the “sense” sequence. In the next step, the cell translates the information contained in the “sense” sequence into a specific protein.
Therapeutic Potential of Antisense Compounds
      A synthetic DNA molecule with a sequence exactly complementary to a portion of a specific mRNA can bind to and inhibit the function of that mRNA. This exact complement of the sense mRNA is referred to as an antisense oligonucleotide. By inhibiting binding to a specific mRNA target, the antisense oligonucleotide blocks synthesis of the protein.
      We believe that the pharmaceutical industry is increasingly rich in potential gene-based drug targets. We further believe that the increase in the number of potential targets provides us with increasing opportunities to employ our antisense technology. Once a gene coding for a disease-associated protein is identified, it should be possible to design a synthetic DNA with an antisense mechanism designed to stop production of that protein. Moreover, in contrast with small molecule drug discovery which may take many years, we can design an antisense drug candidate for a gene target in about 90 days after that gene target has been identified.
Hybridon Antisense Technology
      We and other companies recognized early in the exploration of antisense technology that natural DNA-based oligonucleotides are not suitable as drug candidates because they are rapidly degraded in the blood and other tissues before they can reach their intended target within cells. Early modifications made by us and other companies to increase the biological stability of oligonucleotides lead to a chemical class of oligonucleotides which we refer to as 1st generation antisense compounds. To date, the FDA has approved only one 1st generation antisense compound, which one of our competitors developed and which is currently marketed by Novartis Ophthalmics to treat a viral infection through local delivery. Several 1st generation antisense drug candidates of third parties have failed to show activity in late stage clinical trials.
      We have focused our efforts on the design and creation of more advanced synthetic DNA chemistries which we refer to as 2nd generation antisense compounds. We believe that 2nd generation antisense compounds may show more favorable pharmaceutical characteristics and significantly improved therapeutic utility as compared to 1st generation antisense compounds. We believe that these 2nd generation antisense compounds may exhibit the following desirable characteristics in comparison with 1st generation compounds: (1) fewer side effects; (2) greater stability in the body, enabling patients to take doses less frequently; (3) greater potency, permitting patients to take lower doses; and (4) greater potential for multiple routes of administration, including by injection, orally or topically.
      The following companies have licensed Hybridon’s antisense technology: Aegera Therapeutics, Inc., Alnylam Pharmaceuticals, Inc., Avecia Biotechnology, Epigenesis Pharmaceuticals, Inc., Integrated DNA Technologies, Inc., Isis Pharmaceuticals, Inc., Methylgene Inc., Migenix Inc. and VasGene Therapeutics Inc.
 	 	
 	Antisense Drug Development and Discovery	

 	Clinical Development	
      GEM231 for the Treatment of Cancer. GEM231 is designed to inhibit protein kinase A, or PKA. PKA is a protein that plays a key role in the control of the growth and differentiation of mammalian cells. Levels of PKA have been shown to be increased in the cells of many human cancers. GEM231 has been shown to have preclinical anti-tumor activity in models of various types of cancer, alone and in combination with various

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agents. In August 2004, we completed enrollment of a phase 1/ 2 clinical trial of GEM231 at Vanderbilt University Medical Center as a combination therapy with irinotecan, an anticancer drug marketed in the United States under the name Camptosar®. In March 2004, we presented interim data from this trial showing that the combination of irinotecan at 125 mg/ m 2  with GEM231 at 40 mg/ m 2  per day was well tolerated in patients in the trial. Higher dosages of irinotecan and/or GEM231 were associated with dose-limiting toxicities such as fatigue, nausea, diarrhea, anorexia, weight loss and death attributable to pulmonary embolism. Preliminary evidence was seen of GEM231 effects on PKA activity in the blood and on irinotecan pharmacokinetics. We expect to collect and analyze the final data from the trial by the end of 2005. Even if the final pharmacokinetic data and other findings from this phase 1/ 2 trial are favorable, we do not plan to continue further development of GEM231 without a collaborator.
      One patient who was withdrawn from the Hybridon sponsored trial due to prolonged treatment interruption was enrolled onto a single-patient physician-sponsored IND held by Mace Rothenberg, M.D., of Vanderbilt Medical Center. The single patient had breast cancer and received 125 mg/ m 2  of irinotecan plus 40 mg/ m 2  per day of GEM231.
      GEM640/ AEG35156 is an antisense compound being developed by Aegera Therapeutics, Inc. under a collaboration with us. GEM640 is targeted to the XIAP protein and is intended for the treatment of cancer. XIAP is an inhibitor of apoptosis, which is the process by which disrupted cells are dismantled without causing inflammation or other response. Cancer cells often fail to undergo apoptosis despite damage caused by chemotherapy or radiotherapy. Aegera began a phase 1 trial of GEM640/ AEG35156 in 2004.
      VeglinTM is an antisense drug candidate being developed by VasGene Therapeutics, Inc. and targeted against Vascular Endothelial Growth Factor (VEGF). VEGF contributes to the growth of new blood vessels, which is critical to disease processes including cancer and macular degeneration. In June 2004, VasGene announced the presentation of phase 1 data. The primary objective of this study was to determine the Maximum Tolerated Dose (MTD) and toxicity profile of Veglin among relapsed and refractory patients with a variety of tumor types. Patients in the trial received Veglin intravenously by two-hour infusion for five days followed by a seven-day rest period, for a maximum treatment duration of four months. Results demonstrated that Veglin was well tolerated by patients with a wide variety of cancers. VasGene anticipates initiating multi-center phase 2 clinical trials during 2005 for patients with renal cell carcinoma and/or other specific malignancies.
      GEM92 is an antisense compound that is targeted to a specific region of the genome of the human immunodeficiency virus HIV-1 known as the  gag  region. In 1997, we conducted a phase 1 study that showed GEM92 was well tolerated by the participating subjects. We are not currently pursuing development of GEM92.
 	 	
 	Preclinical Development	
      We have two principal antisense compounds that we are developing in the preclinical testing phase:
 	 	 	
 	• 	HYB676 is a 2nd generation antisense agent targeted to VEGF as a potential drug candidate for age-related macular degeneration.	
 	 	 	
 	• 	GEM240 is targeted to inhibit the protein mdm2 which is increased in many human cancers.	
Research and Development
      For the years ended December 31, 2004, 2003 and 2002, we spent approximately $10.3 million, $10.8 million and $7.9 million, respectively, on research and development activities. Our collaborators sponsored only a nominal portion of these research and development activities in 2004, 2003 and 2002.

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Patents, Proprietary Rights and Licenses
     Patents and Proprietary Rights
      Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
      As of December 31, 2004, we owned 29 U.S. patents and U.S. patent applications and over 80 corresponding world wide patents and patent applications relating to our IMO technology. As of December 31, 2004, we owned or exclusively licensed over 532 world wide patents and patent applications relating to our antisense technology of which 137 are U.S. patents and U.S. patent applications. The issued patents held or exclusively licensed by us include composition of matter patents on our own advanced DNA chemistries covering the use of these chemistries with various genes or sequences, patents covering therapeutic targets, patents covering immune modulation and patents covering oral and other routes of administering our synthetic DNA. These issued patents expire at various dates ranging from 2006 to 2022.
      The composition of matter patents covering GEM231 expire at various dates ranging from 2010 to 2022. We have applied for composition of matter patents covering HYB2055.
      The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or those patent applications which we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, and the rights granted thereunder may not provide us proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thus reducing any advantage of the patent, which could adversely affect our ability to protect future drug development and, consequently, our operating results and financial position.
      Because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in each of our issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in these patent applications.
      Litigation may be necessary to defend against or assert claims of infringement, to enforce patents issued to us, to protect trade secrets or know-how owned by us, or to determine the scope and validity of the proprietary rights of others. In addition, the U.S. Patent and Trademark Office may declare interference proceedings to determine the priority of inventions with respect to our patent applications or reexamination or reissue proceedings to determine if the scope of a patent should be narrowed. Litigation or any of these other proceedings could result in substantial costs to and diversion of effort by us, and could have a material adverse effect on our business, financial condition and results of operations. These efforts by us may not be successful.
Trade Secrets
      We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and other contractors. There can be no

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assurance that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may also arise as to the rights in related or resulting know-how and inventions.
Licenses
      We are a party to a number of royalty-bearing license agreements under which we have acquired rights to patents, patent applications and technology of third parties. Our principal license agreement is with University of Massachusetts Medical Center. Under the terms of our license agreement with the University of Massachusetts Medical Center, we are the worldwide, exclusive licensee under a number of U.S. issued patents and various patent applications owned by UMass Medical Center relating to antisense oligonucleotides and their production and use. Many of these patents and patent applications have corresponding applications on file or corresponding patents in other major industrial countries. The patents licensed to us by the University of Massachusetts Medical Center expire at dates ranging from 2006 to 2019. This license expires upon the expiration of the last to expire of the patents covered by the license.
      Other license agreements under which we are the licensee include:
 	 	 	
 	• 	an exclusive license agreement with Louisiana State University covering patents and patent applications jointly owned by us and Louisiana State University relating to mdm2,	
 	 	 	
 	• 	a non-exclusive license agreement with Genzyme Corporation covering patents and patent applications relating to mdm2,	
 	 	 	
 	• 	a non-exclusive license agreement with Integrated DNA Technologies, Inc., covering patents and patent applications that broadly claim chemical modifications to synthetic DNA,	
 	 	 	
 	• 	an exclusive license agreement with Dr. Yoon S. Cho-Chung covering patents and patent applications relating to Protein Kinase A,	
 	 	 	
 	• 	an exclusive license agreement with Children’s Hospital Medical Center covering patents and patent applications relating to VEGF and	
 	 	 	
 	• 	a non-exclusive license agreement with VasGene Therapeutics, Inc. covering patents and patent applications relating to the use of VEGF for ophthalmic applications.	
      Under these licenses we are obligated to pay royalties on net sales by us of products or processes covered by a valid claim of a patent or patent application licensed to us. We also are required in some cases to pay a specified percentage of any sublicense income that we may receive. These licenses impose various commercialization, sublicensing, insurance and other obligations on us. Our failure to comply with these requirements could result in termination of the licenses. Each of these licenses terminates upon the expiration of the last to expire of the patents covered by the license.
Corporate Alliances
      An important part of our business strategy is to enter into research and development collaborations, licensing agreements and other strategic alliances, primarily with biotechnology and pharmaceutical corporations, to develop and commercialize drugs based on our technologies.
 	 	
 	Isis Pharmaceuticals, Inc.	
      We are a party to a collaboration and license agreement with Isis Pharmaceuticals, Inc. Under the agreement, we granted Isis a license, with the right to sublicense, to our antisense chemistry and delivery patents and patent applications. We retained the right to use these patents and patent applications in our own drug discovery and development efforts and in collaborations with third parties. In consideration of the license, in 2001 Isis paid us $15.0 million in cash and issued to us 857,143 shares of its common stock having an aggregate fair market value on the date of issuance of $17.3 million. Under the agreement, Isis is also required

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to pay us a portion of specified sublicense income it receives from some types of sublicenses of our patents and patent applications. In 2003 and 2004, Isis made such payments to us in connection with sublicenses of our patents and patent applications.
      In addition under the agreement, we licensed from Isis specified antisense patents and patent applications, principally Isis’ suite of RNase H patents and patent applications. We have the right under the agreement to use these patents and patent applications in our drug discovery and development efforts and in some types of collaborations with third parties. In consideration of this license, in 2002 we paid Isis approximately $716,000 in cash and issued to Isis 1,005,499 shares of our common stock having an aggregate fair market value on the date of issuance of approximately $1.2 million. We also agreed to pay Isis a nominal annual maintenance fee and a modest royalty on sales of products covered by specified patents and patent applications sublicensed to us by Isis. The licenses granted under the Isis agreement terminate upon the last to expire of the patents and patent applications licensed under the agreement. We may terminate at any time the sublicense by Isis to us of the patents and patent applications for which we have maintenance fee and royalty obligations to Isis.
 	 	
 	Other Collaborations	
      We are a party to nine other collaboration and license arrangements involving the use of our IMO or antisense technologies and specified indications. Some of these include:
 	 	 	
 	• 	VasGene Therapeutics, Inc. On October 29, 2004, we entered into reciprocal Collaboration and License Agreements with VasGene Therapeutics, Inc. pursuant to which both parties agreed to collaborate on the research and development of VEGF antisense products. We intend to pursue the treatment of opthalmologic and other non-cancer diseases that are susceptible to treatment based on localized administration under one agreement, and VasGene intends to pursue the treatment of cancer and other non-ophthalmologic diseases that are susceptible to treatment through systemic administration under the other agreement.

We are entitled to receive milestone payments, royalties, and sublicensing payments. Additionally, we would be entitled to reimbursement of research services we perform in accordance with the terms of the agreement at the request of VasGene. We may have to pay VasGene royalties and sublicensing payments. Likewise, VasGene would be entitled to reimbursement of research services that it performed under the agreement at our request. The milestones, if fully achieved, would result in payments to us totalling $8.0 million for each non-cancer VEGF antisense product developed by VasGene. Milestone payments would be triggered by the achievement of specific events in the development and commercial launch process.	
 	 	 	
 	• 	Alnylam Pharmaceuticals, Inc. On August 2, 2004, we entered into a Collaboration and License Agreement with Alnylam Pharmaceuticals, Inc. pursuant to which we granted to Alnylam an exclusive license to a series of patents and patent applications relating to the therapeutic use of oligonucleotides that inhibit the production of the protein VEGF. Under the license, Alnylam’s rights are limited to targeting VEGF for ocular indications with RNAi molecules. We are entitled to receive an up-front payment, annual license fees, milestone payments, royalties and sublicensing payments from Alnylam under the terms of the agreement. The upfront payment, license fees and milestone payments payable to us under the agreement could total approximately $4.4 million, if all the milestones are achieved. Milestone payments are triggered by the achievement of specific events in the development process.	
 	 	 	
 	• 	Aegera Therapeutics Inc. We are a party to an agreement with Aegera Therapeutics, Inc. that relates to the development of an antisense drug targeted to the XIAP gene, a gene which has been implicated in the resistance of cancer cells to chemotherapy. In July 2003, Aegera and we announced that we had selected AEG35156/GEM640, an antisense oligonucleotide, targeted to the XIAP gene, as the development candidate. Aegera has advised us in 2003 that it has completed preclinical toxicology studies of AEG35156/GEM640 and in 2004, that it initiated a phase 1 clinical trial in the first quarter of 2004. Under the terms of the license we may receive up to approximately $7.7 million in up-front	
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 	 	and milestone payments upon the achievement of specified development milestones. We are also entitled to receive a royalty on net sales of any drugs that are approved for sale.	
 	 	 	
 	• 	The Immune Response Corporation. We are a party to an agreement with Immune Response that relates to the development of Amplivax as an adjuvant for use in combination with Immune Response’s REMUNE® vaccine candidate for the prevention and treatment of HIV-1. Under the terms of the agreement, we granted Immune Response, during an exclusivity period, a worldwide license to Amplivax as an HIV vaccine adjuvant for the prevention and treatment of HIV. In order to maintain the exclusivity of the license, Immune Response must make payments to us at specified times under the agreement. We are also entitled to receive a royalty on net sales of the REMUNE vaccine combined with Amplivax if it is approved for sale.	
 	 	 	
 	• 	Migenix Inc. (formerly Micrologix Biotechnology, Inc.) We are a party to an agreement with Migenix that relates to the development of an antisense drug for the treatment of human papillomavirus. Origenix, a former subsidiary of ours, and the entity from which Migenix acquired the rights to the development, previously conducted a phase 1 clinical trial of this drug candidate. Under the terms of the agreement we may receive, in cash or equity, up to approximately $5.8 million in up-front and milestone payments upon the achievement of specified development milestones. We are also entitled to receive a royalty on net sales of the drug if it is approved for sale.	
 	 	 	
 	• 	Epigenesis Pharmaceuticals, Inc. We are a party to an agreement with Epigenesis that relates to the development of up to five antisense drugs for the treatment of respiratory disease. Under the agreement, we received an upfront payment and are entitled to receive a royalty on net sales of the drug if it is approved for sale.	
      Under these arrangements, we typically license to our collaborators our chemistries and delivery patents and patent applications on a non-exclusive basis, and any patents and patent applications that we have that are directed at the genes that are the subject of the arrangement on an exclusive basis. In addition, although our collaborators are responsible for the development and commercialization of the product, we typically provide specified research, development and compound optimization services to our collaborators. In consideration for the license and these services, we typically are entitled to receive license fees and are entitled to receive research payments, payments upon achievement of development milestones and royalties on product sales and sublicensing, if earned. The licenses granted under these agreements typically terminate upon the later of the last to expire of the patents licensed under the agreements or a specified number of years after the first commercial sale of products covered by the agreements. These agreements may be terminated by either party upon a material breach. Our collaborators may terminate these agreements at any time upon written notice.
Academic and Research Collaborations
      We have entered into a number of collaborative research relationships with independent researchers, leading academic and research institutions and U.S. government agencies. These research relationships allow us to augment our internal research capabilities and obtain access to specialized knowledge and expertise.
      In general, our collaborative research agreements require us to pay various amounts to support the research. We usually provide the synthetic DNA for the collaboration, which the collaborator then tests. If in the course of conducting research under its agreement with us a collaborator, solely or jointly with us, creates any invention, we generally have an option to negotiate an exclusive, worldwide, royalty-bearing license to the invention. Inventions developed solely by our scientists in connection with a collaborative relationship generally are owned exclusively by us. Most of these collaborative agreements are nonexclusive and can be cancelled with limited notice.
Government Regulation
      The testing, manufacturing, labeling, advertising, promotion, distribution, import, export, and marketing, among other things, of drugs are extensively regulated by governmental authorities in the U.S. and other countries. In the U.S., the FDA regulates pharmaceutical products under the Federal Food, Drug, and

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Cosmetic Act, or FDCA, and other laws. Both before and after approval for marketing is obtained, violations of regulatory requirements may result in various adverse consequences, including the FDA’s delay in approving or refusal to approve a drug, withdrawal of approval, suspension or withdrawal of an approved product from the market, operating restrictions, warning letters, product recalls, product seizures, injunctions, fines, and the imposition of civil or criminal penalties.
      The steps required before a product may be approved for marketing in the U.S. generally include:
 	 	 	
 	• 	preclinical laboratory tests and animal tests under the FDA’s good laboratory practices regulations;	
 	 	 	
 	• 	the submission to the FDA of an investigational new drug application, or IND, for human clinical testing, which must become effective before human clinical trials may begin;	
 	 	 	
 	• 	adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for each indication;	
 	 	 	
 	• 	satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is made to assess compliance with the FDA’s current good manufacturing practices regulations, or cGMP; and	
 	 	 	
 	• 	the submission to the FDA of a new drug application, or NDA.	
      Preclinical tests include laboratory evaluation of the product, as well as animal studies to assess the potential safety and efficacy of a drug. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may be commenced. The IND will automatically become effective 30 days after its receipt by the FDA, unlessthe FDA before that time raises concerns or questions about the conduct of the trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed. If these issues are unresolved, the FDA may not allow the clinical trials to commence. There is no guarantee that submission of an IND will result in the FDA allowing clinical trials to begin.
      Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Clinical trials are conducted under protocols detailing the objectives of the trials, the parameters to be used in monitory safety and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND prior to beginning the trial. Each trial must be reviewed and approved by an independent Institutional Research Board before it can begin. Subjects must provide informed consent for all trials.
 	 	 	
 	• 	In phase 1, the initial introduction of the drug into human subjects, the drug is usually tested for safety or adverse effects, dosage tolerance, and pharmacologic action;	
 	 	 	
 	• 	Phase 2 usually involves controlled trials in a limited patient population to:	

 	• 	evaluate preliminarily the efficacy of the drug for specific, targeted conditions,	
 	 	 	
 	• 	determine dosage tolerance and appropriate dosage, and	
 	 	 	
 	• 	identify possible adverse effects and safety risks; and	

 	• 	Phase 3 trials generally further evaluate clinical efficacy and test further for safety within an expanded patient population.	
Phase 1, 2, and 3 testing may not be completed successfully within any specified period, or at all. We, an Institutional Review Board, or the FDA, may suspend or terminate clinical trials at any time on various grounds, including a finding that the patients are being exposed to an unacceptable health risk.
      The results of the preclinical and clinical studies, together with other detailed information, including information on the manufacture and composition of the product, are submitted to the FDA as part of an NDA for approval prior to the marketing and commercial shipment of the product. In most cases, the NDA must be accompanied by a substantial user fee. The FDA also will inspect the manufacturing facility used to produce

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the product for compliance with cGMPs. The FDA may deny a new drug application if all applicable regulatory criteria are not satisfied or may require additional clinical, toxicology or manufacturing data. Even after an NDA results in approval to market a product, the FDA may limit the indications or place other limitations that restrict the commercial application of the product. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. The FDA may withdraw product approval if compliance with regulatory standards is not maintained or if safety problems occur after the product reaches the market. In addition, the FDA requires surveillance programs to monitor the consistency of manufacturing and the safety of approved products that have been commercialized. Holders of an approved NDA are required to report certain adverse reactions and production problems to the FDA to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling. The agency has the power to require changes in labeling or to prevent further marketing of a product based on new data that may arise after commercialization. Also, new federal, state, or local government requirements may be established that could delay or prevent regulatory approval of our products under development.
      We will also be subject to a variety of foreign regulations governing clinical trials and sales of our products. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. For marketing outside the U.S., we are also subject to foreign regulatory requirements governing human clinical trials. The requirements governing the conduct of clinical trials, product licensing, approval, pricing, and reimbursement vary greatly from country to country.
      In addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other present and potential future federal, state, or local regulations. Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials 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 exceed our resources.
Manufacturing
      We were a party to a supply agreement with Avecia Biotechnology, which was formally known as Boston Biosystems Inc., under which we purchased our requirements for oligonucleotide compounds from Avecia at a preferential price, which expired in March 2004. We have continued to purchase all of the oligonucleotides we are using in our ongoing clinical trials and pre-clinical testing from Avecia. The terms of the agreement have been extended until such time as a new agreement is negotiated. We expect that we will enter into a longer term arrangement with Avecia or new arrangements with other third-party manufacturers to supply us with the oligonucleotide compounds that we need for our research, preclinical, clinical and if we receive approval of a product, commercial supply purposes.
Competition
      We expect that our product candidates will address several different markets defined by the potential indications for which these product candidates are developed and ultimately approved by regulatory authorities. For several of these indications, these product candidates will be competing with products and therapies either currently existing or expected to be developed, including IMO-like compounds and antisense oligonucleotides developed by third parties. Many of these existing products and therapies are marketed by large pharmaceutical companies, have recognized brand names and are widely accepted by physicians and patients.
      Competition among these products and therapies will be based, among other things, on product efficacy, safety, reliability, availability, price, and patent position.

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      The timing of market introduction of our products and competitive products will also affect competition among products. We also expect the relative speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market to be an important competitive factor. Our competitive position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes and to secure sufficient capital resources for the often substantial period between technological conception and commercial sales.
      There are a number of companies, both privately and publicly held, that are conducting research and development, preclinical and clinical and commercial activities relating to technologies and products that are similar to our technologies and products, including large pharmaceutical companies with programs in CpG DNA compounds that have a similar mechanism of action to our IMO compounds or in antisense technology and biotechnology companies with similar programs. Our principal competitors include Isis Pharmaceuticals, Inc., Genta Inc., Coley Pharmaceutical Group and Dynavax Technologies Corp.
      The primary indications for which we are developing our antisense and IMO products are cancer and infectious diseases. None of our competitors is currently marketing any antisense or IMO-like product for cancer or infectious diseases, except for Isis which is currently marketing an antisense product for the treatment of cytomegalovirus retinitis in patients with AIDS. However, our competitors are developing a number of product candidates for cancer and infectious diseases that are currently in clinical trials.
 	 	 	
 	• 	Isis has seven antisense compounds presently in clinical trials.	
 	 	 	
 	• 	Genta is in late-stage clinical trials for an oligonucleotide compound for the treatment of various cancers.	
 	 	 	
 	• 	Dynavax has a CpG DNA compound in clinical trials for four indications. These indications include the treatment of cancer, asthma/allergy and infectious disease.	
 	 	 	
 	• 	Coley has two CpG DNA compounds in clinical trials for three indications. These indications include treatment of cancer, asthma/allergy and infectious disease.	
      Many of our competitors, particularly the pharmaceutical and biotechnology companies with which we compete, have substantially greater financial, technical and human resources than we have. In addition, many of our competitors have significantly greater experience than we have in undertaking preclinical studies and human clinical trials of new pharmaceutical products, obtaining FDA and other regulatory approvals of products for use in health care and manufacturing, marketing and selling approved products.
Employees
      As of March 1, 2005, we employed 24 individuals full-time, including 17 employees in research and development. Ten of our employees hold a doctoral degree. None of our employees are covered by a collective bargaining agreement, and we consider relations with our employees to be good.
Information Available on the Internet
      Our internet address is www.hybridon.com. We make available free of charge through our web site our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 12(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission.
 	 	
Item 2.	Properties	
      We lease approximately 26,000 square feet of laboratory and office space, including 6,000 square feet of specialized preclinical lab space, in Cambridge, Massachusetts under a lease that expires April 30, 2007. We believe these facilities are adequate to accommodate our needs for the near term.

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Item 3.	Legal Proceedings	
      None.
 	 	
Item 4.	Submission of Matters to a Vote of Security Holders	
      None.
Executive Officers and Key Employees of Hybridon
      The following table sets forth the names, ages and positions of our executive officers and other key employees as of March 1, 2005:
 	 	 	 	 	 	 	
Name	 	Age	 	 	Position	
 	 	 	 	 	 	
Sudhir Agrawal, D. Phil	 	 	51	 	 	President, Chief Executive Officer, Chief Scientific Officer and Director	
Robert G. Andersen	 	 	54	 	 	Chief Financial Officer, Vice President of Operations, Treasurer and Secretary	
Naveen N. Anand, Ph.D., MBA	 	 	44	 	 	Vice President of Corporate and Business Development	
Timothy M. Sullivan, Ph.D. 	 	 	50	 	 	Vice President of Development Programs	
Jinyan Tang, Ph.D. 	 	 	61	 	 	Vice President of Chemistry	
      Dr. Sudhir Agrawal joined us in 1990 and has served as our Chief Scientific Officer since January 1993, our Senior Vice President of Discovery since March 1994, our President since February 2000, a director since March 1993 and our Chief Executive Officer since August 2004. Prior to his appointment as Chief Scientific Officer, he served as our Principal Research Scientist from February 1990 to January 1993 and as our Vice President of Discovery from December 1991 to January 1993. He served as Acting Chief Executive Officer from February 2000 until September 2001. Prior to joining us, Dr. Agrawal served as a Foundation Scholar at the Worcester Foundation from 1987 through 1991. Dr. Agrawal served as a Research Associate at the Medical Research Council’s Laboratory of Molecular Biology in Cambridge, England from 1985 to 1986, studying DNA chemistry and synthetic oligonucleotides. Dr. Agrawal received a D. Phil. in chemistry in 1980, an M.Sc. in organic chemistry in 1975 and a B.Sc. in chemistry, botany and zoology in 1973 from Allahaban University in India. Dr. Agrawal is one of the most published researchers in the field of antisense technology. He has authored more than 260 research papers and reviews and has edited three books. He is a member of the editorial board of Antisense Research & Development Journal, Trends in Molecular Medicine, Investigational Drug Journal, and Current Cancer Drug Targets, and is associate editor of Molecular Biotechnology. Dr. Agrawal is the co-author of more than 230 patents worldwide.
      Robert G. Andersen joined us in November 1996 as Vice President of Systems Engineering and Management Information Systems and has served as our Vice President of Operations and Planning since 1997, our Treasurer since March 1998 and our Chief Financial Officer since February 2000. Prior to joining us, Mr. Andersen held a variety of management positions at Digital Equipment Corporation from 1986 to 1996, most recently as Group Manager of the Applied Objects Business Unit. From 1978 to 1986, Mr. Andersen held technical management positions at United Technologies Corporation, most recently as Director of Quality for Otis Elevator Company’s European Operations based in Paris, France and Worldwide Director of Controls for Otis Group. Mr. Andersen received an M.S. in Management from Northeastern University in 1978 and his B.E.E. magna cum laude in Electrical Engineering from The City College of New York in 1972. He is also a graduate of the United Technologies Advanced Studies Program.
      Dr. Naveen Anand joined us in December 2004 as Vice President of Corporate and Business Development after serving as a consultant to us from September 2004 to December 2004. From 2002 to 2004, Dr. Anand served as Vice President, Business Development at Shire Biologics in Montréal, Canada, and from 1999 to 2002 he held the position of Vice President, Business Development and Licensing, at Procyon Biopharma, a Canadian biotechnology company. Dr. Anand served as Manager, New Products and New Markets Development at Aventis Pasteur in Toronto, Canada (now part of Sanofi Aventis) from 1991 to

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1999. Dr. Anand received his B.S and Masters in Pharmaceutical Sciences from Panjab University in Chandigarh, India; his Ph.D. from the University of Cambridge in the U.K.; and his MBA from the University of Toronto.
      Dr. Timothy Sullivan joined us in 2002 as Senior Director, Preclinical Drug Development. His prior professional experience includes positions as Executive Director of Non-clinical Drug Safety Evaluation for Purdue Pharma L.P. from 1999 to 2002 and Vice President of Eastern Operations for Oread, Inc., a contract drug development organization, from 1997 to 1999. Prior to 1997, Mr. Sullivan held a variety of technical management roles with other pharmaceutical companies and contract research organizations (Adria, Battelle, Roma Toxicology Centre), and in veterinary medicine (International Minerals & Chemical). Dr. Sullivan brings broad expertise in the design, execution, and application of drug development programs. Dr. Sullivan earned his B.S. in Microbiology from Michigan State University in 1975. His graduate studies were at Purdue University, where he earned a M.S. degree in Health Physics in 1978 and a Ph.D. in Toxicology in 1981.
      Dr. Jinyan Tang joined us in 1991 and has served as our Vice President of Chemistry since 2000. Dr. Tang was our Vice President of Process Research and Development from 1995 to 1997 and Vice President of Production from 1997 to 2000. Prior to joining us, Dr. Tang served as Visiting Fellow at the Worcester Foundation from 1988 to 1991. Dr. Tang served as Visiting Research Professor at the University of Colorado in 1988 and Associate Professor at the Shanghai Institute of Biochemistry, Chinese Academy of Sciences from 1985 to 1988 where he specialized in oligonucleotide chemistry. Dr. Tang received a B.Sc. in Biochemistry in 1965 and a Ph.D. of Biochemistry in 1978 from the Shanghai Institute of Biochemistry, Chinese Academy of Sciences.

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PART II.
 	 	
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	
Market Information
      Our common stock has been listed on the American Stock Exchange under the symbol “HBY” since December 5, 2003. Prior to December 5, 2003, our common stock was quoted on the OTC Bulletin Board under the symbol “HYBN”. Quotes on the OTC Bulletin Board may have reflected inter-dealer prices without retail markups, markdowns or commissions and may not necessarily have represented actual transactions.
      The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock during each of the quarters set forth below as reported on the OTC Bulletin Board for the periods from January 1, 2003 through December 4, 2003 and on the American Stock Exchange from December 5, 2003 through December 31, 2004:
 	 	 	 	 	 	 	 	 	
 	 	High	 	 	Low	 	
 	 	 	 	 	 	 	
2004	 	 	 	 	 	 	 	 	
First Quarter	 	$	1.51	 	 	$	0.92	 	
Second Quarter	 	 	1.10	 	 	 	0.51	 	
Third Quarter	 	 	0.69	 	 	 	0.36	 	
Fourth Quarter	 	 	0.68	 	 	 	0.40	 	
2003	 	 	 	 	 	 	 	 	
First Quarter	 	$	1.01	 	 	$	0.65	 	
Second Quarter	 	 	1.11	 	 	 	0.70	 	
Third Quarter	 	 	1.81	 	 	 	0.78	 	
Fourth Quarter	 	 	1.65	 	 	 	0.95	 	
      The number of common stockholders of record on March 1, 2005 was 460.
      We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends on our common stock in the foreseeable future.
      Since December 4, 2003, our series A convertible preferred stock has paid dividends at 1.0% per year, payable semi-annually in arrears. Prior to December 4, 2003, our series A convertible preferred stock paid dividends at 6.5% per year payable semi-annually in arrears. We may pay these dividends either in cash or in additional shares of series A convertible preferred stock, at our discretion, subject to the restriction under the indenture described above.
Sales of Unregistered Securities
      There were no sales of unregistered securities during the fourth quarter of 2004.

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Item 6.	Selected Financial Data	
      The following selected financial data are derived from the consolidated financial statements of Hybridon, Inc. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Year Ended December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	 	2001	 	 	2000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In thousands, except per share data)	 	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Alliance revenue(1)	 	$	942	 	 	$	897	 	 	$	29,606	 	 	$	1,122	 	 	$	344	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Research and development	 	 	10,305	 	 	 	10,817	 	 	 	7,877	 	 	 	4,868	 	 	 	3,620	 	
 	General and administrative	 	 	4,273	 	 	 	6,924	 	 	 	7,054	 	 	 	5,051	 	 	 	3,184	 	
 	Stock-based compensation from repriced options	 	 	(713	)	 	 	543	 	 	 	(1,297	)	 	 	1,762	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total operating expenses	 	 	13,865	 	 	 	18,284	 	 	 	13,634	 	 	 	11,681	 	 	 	6,804	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income from operations	 	 	(12,923	)	 	 	(17,387	)	 	 	15,972	 	 	 	(10,559	)	 	 	(6,460	)	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Investment income, net	 	 	217	 	 	 	190	 	 	 	650	 	 	 	577	 	 	 	229	 	
 	Interest expense	 	 	(29	)	 	 	(118	)	 	 	(150	)	 	 	(1,319	)	 	 	(2,154	)	
 	Loss on conversion of 8% convertible subordinated notes payable	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,412	)	 	 	—	 	
 	Gain on sale of securities, net	 	 	—	 	 	 	104	 	 	 	—	 	 	 	5,217	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	(Loss) income from continuing operations	 	 	(12,735	)	 	 	(17,211	)	 	 	16,472	 	 	 	(7,496	)	 	 	(8,385	)	
 	Income from discontinued operations(2)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,663	 	 	 	5,462	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	(Loss) income before income taxes	 	 	(12,735	)	 	 	(17,211	)	 	 	16,472	 	 	 	(4,833	)	 	 	(2,923	)	
 	Income tax benefit (provision)	 	 	—	 	 	 	—	 	 	 	500	 	 	 	(500	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	 	 	(12,735	)	 	 	(17,211	)	 	 	16,972	 	 	 	(5,333	)	 	 	(2,923	)	
Accretion of preferred stock dividend	 	 	(2,676	)	 	 	(5,529	)	 	 	(4,246	)	 	 	(8,342	)	 	 	(4,087	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income applicable to common stockholders	 	$	(15,411	)	 	$	(22,740	)	 	$	12,726	 	 	$	(13,675	)	 	$	(7,010	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic net (loss) income per common share from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Continuing operations	 	$	(0.13	)	 	$	(0.34	)	 	$	0.36	 	 	$	(0.26	)	 	$	(0.48	)	
 	Discontinued operations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.09	 	 	 	0.31	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share	 	 	(0.13	)	 	 	(0.34	)	 	 	0.36	 	 	 	(0.17	)	 	 	(0.17	)	
 	Accretion of preferred stock dividends	 	 	(0.03	)	 	 	(0.11	)	 	 	(0.09	)	 	 	(0.27	)	 	 	(0.23	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share applicable to common stockholders	 	$	(0.16	)	 	$	(0.45	)	 	$	0.27	 	 	$	(0.44	)	 	$	(0.40	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted net (loss) income per common share from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Continuing operations	 	$	(0.13	)	 	$	(0.34	)	 	$	0.32	 	 	$	(0.26	)	 	$	(0.48	)	
 	Discontinued operations	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.09	 	 	 	0.31	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share	 	 	(0.13	)	 	 	(0.34	)	 	 	0.32	 	 	 	(0.17	)	 	 	(0.17	)	
 	Accretion of preferred stock dividends	 	 	(0.03	)	 	 	(0.11	)	 	 	(0.08	)	 	 	(0.27	)	 	 	(0.23	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share applicable to common stockholders	 	$	(0.16	)	 	$	(0.45	)	 	$	0.24	 	 	$	(0.44	)	 	$	(0.40	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Shares used in computing basic net (loss) income per common share(3)	 	 	98,914	 	 	 	51,053	 	 	 	46,879	 	 	 	30,820	 	 	 	17,418	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Shares used in computing diluted net (loss) income per common share(3)	 	 	98,914	 	 	 	51,053	 	 	 	52,984	 	 	 	30,820	 	 	 	17,418	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance Sheet Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash, cash equivalents and short-term investments	 	$	14,413	 	 	$	13,668	 	 	$	19,175	 	 	$	31,834	 	 	$	3,532	 	
Working capital (deficit)	 	 	13,181	 	 	 	10,740	 	 	 	17,638	 	 	 	27,259	 	 	 	(4,238	)	
Total assets	 	 	15,391	 	 	 	14,410	 	 	 	21,249	 	 	 	32,309	 	 	 	10,001	 	
Restricted cash	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	5,000	 	
Capital lease obligations, current portion	 	 	—	 	 	 	—	 	 	 	34	 	 	 	—	 	 	 	—	 	
9% convertible subordinated notes payable	 	 	—	 	 	 	1,306	 	 	 	1,306	 	 	 	1,306	 	 	 	1,306	 	
8% convertible subordinated notes payable	 	 	—	 	 	 	—	 	 	 	—	 	 	 	288	 	 	 	8,046	 	
Series A convertible preferred stock	 	 	—	 	 	 	5	 	 	 	7	 	 	 	6	 	 	 	6	 	
Accumulated deficit	 	 	(299,294	)	 	 	(283,883	)	 	 	(261,143	)	 	 	(273,868	)	 	 	(260,193	)	
Total stockholders’ equity (deficit)	 	 	12,769	 	 	 	10,526	 	 	 	17,444	 	 	 	(33	)	 	 	(7,530	)	

(1) 	See Note 6(f) of notes to consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for information on the alliance revenue recognized during 2002.	
 	 	
(2) 	Consolidated financial statements reflect the financial results of our Hybridon Specialty Products Division as a discontinued operation for the years ended December 31, 2001 and 2000. Reported revenues, expenses and cash flows exclude the operating results of discontinued operations.	
 	 	
(3) 	Computed on the basis described in Note 11 of notes to consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.	
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Quarterly Operating Results (Unaudited)
      The following table presents the unaudited statement of operations data for each of the eight quarters in the period ended December 31, 2004. The information for each of these quarters is unaudited, but has been prepared on the same basis as the audited financial statements appearing elsewhere in this Annual Report on Form 10-K. In our opinion, all necessary adjustments, consisting only of normal recurring adjustments, have been made to present fairly the unaudited quarterly results when read in conjunction with the audited financial statements and the notes thereto appearing elsewhere in this document. These operating results are not necessarily indicative of the results of operations that may be expected for any future period.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	 	 	
 	 	Dec. 31	 	 	Sep. 30	 	 	Jun. 30	 	 	Mar. 31	 	 	Dec. 31	 	 	Sep. 30	 	 	Jun. 30	 	 	Mar. 31	 	
 	 	2004	 	 	2004	 	 	2004	 	 	2004	 	 	2003	 	 	2003	 	 	2003	 	 	2003	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	(In thousands, except per share data)	 	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Alliance revenues	 	$	131	 	 	$	78	 	 	$	88	 	 	$	645	 	 	$	108	 	 	$	334	 	 	$	120	 	 	$	335	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Research and development	 	 	2,349	 	 	 	2,610	 	 	 	2,541	 	 	 	2,805	 	 	 	2,986	 	 	 	2,567	 	 	 	2,858	 	 	 	2,406	 	
 	General and administrative	 	 	801	 	 	 	1,550	 	 	 	1,025	 	 	 	897	 	 	 	1,475	 	 	 	943	 	 	 	1,282	 	 	 	3,224	 	
 	Stock-based compensation from repriced options	 	 	(121	)	 	 	(18	)	 	 	(257	)	 	 	(317	)	 	 	(98	)	 	 	506	 	 	 	129	 	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total operating expenses	 	 	3,029	 	 	 	4,142	 	 	 	3,309	 	 	 	3,385	 	 	 	4,363	 	 	 	4,016	 	 	 	4,269	 	 	 	5,636	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss from operations	 	 	(2,898	)	 	 	(4,064	)	 	 	(3,221	)	 	 	(2,740	)	 	 	(4,255	)	 	 	(3,682	)	 	 	(4,149	)	 	 	(5,301	)	
Investment income	 	 	74	 	 	 	57	 	 	 	50	 	 	 	36	 	 	 	43	 	 	 	28	 	 	 	36	 	 	 	82	 	
Interest expense	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(29	)	 	 	(29	)	 	 	(29	)	 	 	(29	)	 	 	(29	)	
Gain on sale of securities, net	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	104	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	(2,824	)	 	 	(4,007	)	 	 	(3,171	)	 	 	(2,733	)	 	 	(4,241	)	 	 	(3,683	)	 	 	(4,038	)	 	 	(5,248	)	
Accretion of preferred stock dividend	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(2,676	)	 	 	(2,127	)	 	 	(1,138	)	 	 	(1,194	)	 	 	(1,071	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss applicable to common stockholders	 	$	(2,824	)	 	$	(4,007	)	 	$	(3,171	)	 	$	(5,409	)	 	$	(6,368	)	 	$	(4,821	)	 	$	(5,232	)	 	$	(6,319	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net loss per share applicable to common stockholders	 	$	(0.03	)	 	$	(0.04	)	 	$	(0.03	)	 	$	(0.07	)	 	$	(0.10	)	 	$	(0.10	)	 	$	(0.12	)	 	$	(0.14	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in computing basic and diluted loss per common share(1)	 	 	110,911	 	 	 	105,301	 	 	 	98,269	 	 	 	80,972	 	 	 	64,119	 	 	 	50,704	 	 	 	43,485	 	 	 	45,700	 	

 	 	
(1) 	Computed on the basis described in Note 11 of notes to consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.	
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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
      We are engaged in the discovery, development and commercialization of novel therapeutics based on synthetic DNA for the treatment of cancer, asthma/allergies and infectious diseases. Our activities are primarily focused on the development of our immunomodulatory oligonucleotide, or IMO, technology. Our IMO compounds are synthetic DNA-based sequences that are designed to mimic bacterial DNA and be recognized by a specific protein receptor called Toll-like Receptor 9, or TLR9, which triggers the activation and modulation of the immune system. We also have been a pioneer in the development of antisense technology, which uses synthetic DNA to block the production of disease causing proteins at the cellular level. In 2003 and 2004, we devoted substantially all of our research and development efforts to our IMO technology and products and expect to continue to focus our research and development efforts in 2005 and in future years on our IMO technology and products. We plan to continue to seek to enter into collaborations with third parties for the development and commercialization of products based on our antisense technology.
      Since we began operations in February 1990, we have been involved primarily in research and development and manufacturing. To date, almost all of our revenues have been from collaborative and license agreements. In addition, we generated revenues from the sale of synthetic DNA and reagent products manufactured by our Hybridon Specialty Products Division, or HSP, prior to our selling HSP in September 2000. The sale of HSP together with the sale of our interest in Methylgene, our first spin-off company, and net proceeds from our Collaboration and License Agreement with Isis Pharmaceuticals, Inc. generated approximately $52.5 million.
      We have incurred total losses of $299.3 million through December 31, 2004 and expect to incur substantial operating losses in the future. In order to commercialize our therapeutic products, we need to address a number of technological challenges and to comply with comprehensive regulatory requirements. In 2005, we expect that our research and development expenses will be similar to those in 2004 as we continue to advance IMOxine through clinical development.
Critical Accounting Policies
      This management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
      While our significant accounting policies are more fully described in Note 2 of the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the most critical accounting policy affecting the portrayal of our financial condition is revenue recognition.
 	 	
 	Revenue Recognition	
      We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, or SAB 104. SAB 104 requires that four basic criteria be met before revenue can be recognized:
 	 	 	
 	• 	persuasive evidence of an arrangement exists;	
 	 	 	
 	• 	delivery has occurred, services have been rendered or obligations have been satisfied;	
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 	• 	the fee is fixed or determinable; and	
 	 	 	
 	• 	collectibility is reasonably assured.	
      Determination of the last three criteria are based on management’s judgments regarding the fixed nature of the fee charged for services rendered or products delivered and the collectibility of these fees. Should changes in conditions cause management to determine these criteria are not met for any future transactions, revenues recognized for any reporting period could be adversely affected.
      During 2001, we received a total of $32.3 million in cash and stock under our collaboration and license agreement with Isis. This amount and future amounts due under this license agreement are non-refundable. Prior to amending the agreement in August 2002, we recognized the revenue from Isis on a straight-line basis over the 10-year term of the agreement. Our decision to recognize Isis revenue over the term of the Isis agreement was based primarily on a continuing obligation contained in the license agreement which we had interpreted as neither inconsequential nor perfunctory according to SAB 101,  “Revenue Recognition in Financial Statements” . In 2002, the agreement was amended. The amendment limited each party’s obligation to participate in collaboration committee meetings and terminated the obligations of each party to pay the remaining installment payments due from each party under the agreement. Based on this amendment, we determined that our obligations under the agreement were inconsequential and perfunctory according to SAB 101 and as such did not preclude recognition of revenue. For this reason, in the third quarter of 2002, we recognized the revenue and directly related and incremental expenses that we had previously deferred.
Results of Operations
Years ended December 31, 2004, 2003 and 2002
     Revenues
      Total revenues remained fairly constant at $0.9 million for both 2003 and 2004. Total revenues decreased by $28.7 million from $29.6 million in 2002 to $0.9 million in 2003. Our revenues for 2003 and 2004 were comprised of payments under various collaboration and licensing agreements for research and development, including reimbursement of third party expenses, and as milestone payments, license fees, sublicense fees, and royalty payments. The significant difference in revenues between 2003 and 2002 was primarily due to our recognition in the third quarter of 2002 of $27.9 million of deferred revenue as a result of the August 2002 amendment to the license agreement with Isis.
     Research and Development Expenses
      Research and development expenses decreased by approximately $0.5 million, or 5%, from $10.8 million in 2003 to $10.3 million in 2004 and increased by approximately $2.9 million, or 37%, from $7.9 million in 2002 to $10.8 million in 2003. The decrease in 2004 was primarily attributable to a decrease in spending on antisense technology as we completed enrollment in our GEM231 phase 1/2 clinical trial and lower salary expenses due to a decrease in bonuses and other compensation savings resulting from the retirement of one of our officers. These decreases were partially offset by an increase in our HYB2055 costs in 2004 reflecting additional manufacturing costs we incurred to acquire additional supply of HYB2055. The increase in 2003 was primarily attributable to the ramp up of our immune modulatory development efforts, including the initiation in 2003 of clinical trials of IMOxine, increased costs associated with the clinical trials of GEM231 and increased costs relating to the filing of patents related to new discoveries, offset by a reduction in manufacturing costs associated with our antisense program.
      Our current research and development efforts relate primarily to HYB2055. We have reduced our focus on antisense technology significantly, including the development of GEM231. We plan to continue to seek to enter into collaborations with third parties for the development and commercialization of products based on our antisense technology.
 	 	 	
 	• 	In 2004, 2003 and 2002, we incurred approximately $2.5, $2.3 and $1.8 million, respectively, in direct expenses in connection with developing HYB2055. These expenses included payments to independent	
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 	 	contractors and vendors for preclinical studies, drug manufacturing and related costs and an allocation for patent preparation costs and related filing fees but exclude internal costs such as payroll and overhead. In October 2004, we commenced patient recruitment for an open label, multi-center phase 2 clinical trial of IMOxine as a monotherapy in patients with metastatic or recurrent clear cell renal carcinoma. We plan to recruit a minimum of 46 patients into the first stage of the trial. We are also conducting a phase 1 clinical trial of IMOxine in patients with refractory solid tumor cancers, which is being conducted at the Lombardi Comprehensive Cancer Center at Georgetown University Medical Center in Washington, D.C. Patient enrollment for this phase 1 oncology trial is complete. In May 2004, we also completed a phase 1 study of HYB2055 in healthy volunteers in the UK. Because the development of HYB2055 is in the early stage and given the technological and regulatory hurdles likely to be encountered in the development and commercialization of HYB2055, the future timing and costs of this research and development program is uncertain.	
 	 	 	
 	• 	In 2004, 2003 and 2002, we incurred approximately $0.3, $0.6 and $1.2 million, respectively, in direct expenses in connection with developing GEM231. These direct expenses included payments to independent contractors and vendors for clinical studies, patent preparation costs and related filing fees and drug manufacturing and related costs but exclude internal costs such as payroll and overhead. The decrease from 2003 to 2004 reflected a decreasing patient enrollment rate as the trial moved toward completion. The decrease from 2002 to 2003 reflects the manufacturing costs we incurred in 2002 to acquire a supply of GEM231 for use in our clinical trials in 2002, 2003 and 2004. We completed enrollment of a phase 1/2 clinical trial of GEM231 as a combination therapy with irinotecan, an anticancer drug marketed in the Untied States under the name Camptosar. The decrease from 2003 to 2004 reflects the reduction in clinical trial expenses as the phase 1/2 trial of GEM231 moved to completion. We do not expect to incur significant expenses in 2005 in connection with the development of GEM231, because we do not intend to continue further development of GEM231 without having a collaboration agreement in place.	
     General and Administrative Expenses
      General and administrative expenses decreased by approximately $2.6 million, or 38%, from $6.9 million in 2003 to $4.3 million in 2004 and decreased by approximately $0.1 million, or 2%, from $7.0 million in 2002 to $6.9 million in 2003. General and administrative expenses consisted primarily of salary expense, consulting fees and professional legal fees associated with our regulatory filing requirements and business development. These costs were generally consistent from period to period. The $2.6 million decrease in 2004 primarily reflects the one-time expense for the $1.9 million premium paid in repurchasing shares of our common stock in 2003 and other consulting and professional fees related to the repurchase of our common stock in 2003. The 2004 decrease also reflects a decrease in legal expenses due mainly to decreased expenses incurred in connection with the patent interference proceeding conducted in 2003. These decreases were partially offset by a $0.7 million charge relating to the resignation of our former Chief Executive Officer in 2004.
      The difference between 2003 and 2002 expenses primarily reflects our recognition in 2002 of $2.1 million of deferred expenses as a result of the August 2002 amendment to the license agreement with Isis. No direct expenses associated with our agreement with Isis were included in general and administrative expense in 2004 or 2003. The impact of recognizing deferred expenses from Isis in 2002 was offset by a one-time expense in 2003 of $1.9 million representing the premium over fair market value that we paid in repurchasing shares of our common stock in the first quarter of 2003 and by other consulting and professional fees related to the repurchase of our common stock.
     Stock-Based Compensation
      As a result of our repricing of stock options in September 1999, some of our outstanding stock options are subject to variable plan accounting which requires us to measure the intrinsic value of the repriced options through the earlier of the date of exercise, cancellation or expiration at each reporting date. We recorded a

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credit to operating results of approximately $0.7 million in 2004 as a result of a decrease in the intrinsic value of these options. In 2003, we incurred stock-based compensation expense of $0.5 million in operating results, which resulted from an increase in the intrinsic value of these options. We recorded a credit to operating results of approximately $1.3 million in 2002 as a result of a decrease in the intrinsic value of these options. We expect that compensation charges and credits may occur in the future based upon changes in the intrinsic value of our repriced stock options and upon pending adoption of SFAS No. 123 (revised 2004), “Share-Based Payment” , which is a revision of SFAS No. 123,  “Accounting for Stock-Based Compensation”.  SFAS No. 123(R) supersedes APB Opinion No. 25,  “Accounting for Stock Issued to Employees” , and amends SFAS No. 95,  “Statement of Cash Flows”.
     Investment Income, net
      Investment income remained relatively constant at approximately $190,000 in 2003 and $217,000 in 2004 and decreased by approximately $460,000 from $650,000 in 2002 to $190,000 in 2003. The decrease from 2002 to 2003 is primarily attributable to lower interest income as a result of lower cash and investment balances in 2003.
 	 	
 	Interest Expense	
      Interest expense decreased by approximately $89,000 from $118,000 in 2003 to $29,000 in 2004 and decreased by $32,000 from $150,000 in 2002 to $118,000 in 2003. The decrease from 2003 to 2004 was due to the maturity of our 9% notes on April 1, 2004. Upon the maturity of these notes, we paid $1.3 million, representing the outstanding principal amount of our 9% notes, plus accrued interest. The decrease from 2002 to 2003 was attributable to the maturity of our 8% notes in November 2002.
     Gain on Sale of Securities, net
      The $104,000 gain on sale of the securities in 2003 represents the gain on the sale of shares of Migenix common stock that we received as payment under our agreement with Migenix. There were no gains on sales of securities during 2004 and 2002.
     Income Tax Credit (Expense)
      In 2002, we recognized a $0.5 million tax credit to operations that represented a reversal of the income tax expense recorded in 2001 as a result of income subject to the Alternative Minimum Tax or AMT. In March 2002, the National Economic Stabilization and Recovery Act temporarily rescinded the AMT as it applies to us. As a result, we received a $450,000 refund and recognized a $0.5 million credit to operations during 2002.
     Preferred Stock Dividends
      On December 4, 2003, shareholders approved amendments to our Certificate of Incorporation that:
 	 	 	
 	• 	reduced the liquidation preference of our series A convertible preferred stock from $100 per share to $1 per share;	
 	 	 	
 	• 	reduced the annual dividend on our series A convertible preferred stock from 6.5% to 1%; and	
 	 	 	
 	• 	increased the number of shares of our common stock issuable upon conversion of our series A convertible preferred stock by 25% over the number of shares that would otherwise be issuable. This special conversion extended for a 60-day period between December 4, 2003 and February 2, 2004 inclusive.	
      During the 60-day conversion period, the conversion ratio was increased such that the series A convertible preferred shareholders received approximately 29.41 shares of common stock for each preferred share converted instead of the 23.53 shares that they would normally have received. During the conversion period holders of 99.9% of the series A convertible preferred stock converted their preferred stock to common stock.

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      The preferred stock dividends for each of the three years ended December 31, 2004 were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Dividends	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Accretion of dividends expected to be paid on Series A Preferred Stock	 	$	503	 	 	$	3,402,856	 	 	$	4,246,282	 	
Accretion of dividend that would have been paid on April 1, 2004 and reversal since preferred shares were converted in January and February 2004	 	 	(570,000	)	 	 	570,000	 	 	 	—	 	
Market value of 25% additional shares issued upon conversion	 	 	3,245,492	 	 	 	1,556,000	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Total preferred stock dividend	 	$	2,675,995	 	 	$	5,528,856	 	 	$	4,246,282	 	
 	 	 	 	 	 	 	 	 	 	
      As shown above, the value of the 25% additional shares issued during the special preferred stock conversion periods is recorded as an addition to dividends in the statement of operations during 2004 of $3.2 million and during 2003 of $1.6 million. As a result of the amendment to our Certificate of Incorporation and the series A convertible preferred stock conversions, the preferred stock liquidation preference was reduced from $73.1 million at December 3, 2003 to $0.5 million at December 31, 2003 and $655 at December 31, 2004.
      All preferred stock dividends are payable, at our election, either in cash or shares of series A convertible preferred stock.
 	 	
 	Net Operating Loss Carryforwards	
      As of December 31, 2004, we had cumulative net operating losses of approximately $254.9 million and tax credit carryforwards of approximately $4.6 million. The Tax Reform Act of 1986 contains provisions that may limit our ability to utilize net operating loss and tax credit carryforwards in any given year if certain events occur, including cumulative changes in ownership interests in excess of 50% over a three-year period. We have completed several financings since the effective date of the Tax Act, which, as of December 31, 2004, have resulted in ownership changes, as defined under the Tax Act, which will limit our ability to utilize all of our available net operating loss and tax credit carryforwards in the future. The Company has not prepared an analysis to determine the effect of the ownership change limitation on its ability to utilize its net operating losses and tax credit carryforwards.
Liquidity and Capital Resources
 	 	
 	Sources of Liquidity	
      We require cash to fund our operating expenses, to make capital expenditures and to pay debt service. Historically, we have funded our cash requirements primarily through the following:
 	 	 	
 	• 	equity and debt financing;	
 	 	 	
 	• 	license fees and research funding under collaborative and license agreements;	
 	 	 	
 	• 	interest income; and	
 	 	 	
 	• 	lease financings.	
      We have also funded our cash requirements through the following:
 	 	 	
 	• 	manufacturing of synthetic DNA and reagent products within HSP prior to its sale in 2000;	
 	 	 	
 	• 	the sale of HSP for which we received a total of $15.0 million in 2000 and 2001; and	
 	 	 	
 	• 	the sale of our shareholding in MethylGene Inc. for which we received net proceeds of $6.9 million in 2001.	
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      In August 2004, we raised approximately $5.1 million in gross proceeds from a private placement to institutional and overseas investors. In the private placement, we sold 8,823,400 shares of common stock and warrants to purchase 1,764,680 shares of common stock. The warrants to purchase common stock have an exercise price of $0.67 per share and will expire if not exercised on or prior to August 27, 2009. The warrants may be exercised by cash payment only. On or after February 27, 2005, we may redeem the warrants if the closing sales price of the common stock for each day of any 20 consecutive trading day period is greater than or equal to $1.34 per share. The redemption price will be $0.01 per share of common stock underlying the warrants. We may exercise our right to redeem the warrants by providing 30 days prior written notice to the holders of the warrants. The net proceeds to us from the offering, excluding the proceeds of any future exercise of the warrants, totaled approximately $4.7 million.
      In April 2004, we raised approximately $11.8 million in gross proceeds through a registered direct offering. In the offering, we sold 16,899,800 shares of common stock and warrants to purchase 3,041,964 shares of common stock to institutional and other investors. The warrants to purchase common stock have an exercise price of $1.14 per share and are exercisable at any time on or after October 21, 2004 and on or prior to April 20, 2009. The warrants may be exercised by cash payment only. On or after October 21, 2005, we may redeem the warrants if the closing sales price of the common stock for each day of any 20 consecutive trading day period ending within 30 days prior to providing notice of redemption is greater than or equal to $2.60 per share. The redemption price will be $0.01 per share of common stock underlying the warrants. We may exercise our right to redeem the warrants by providing 30 days prior written notice to the holders of the warrants. The net proceeds to us from the offering, excluding the proceeds of any future exercise of the warrants, totaled approximately $10.7 million.
      In August 2003, we raised approximately $14.6 million in gross proceeds from a private placement to institutional and accredited investors. In the private placement, we sold 20,053,022 shares of our common stock and warrants to purchase 6,015,934 shares of our common stock. The warrants to purchase common stock have an exercise price of $1.00 per share and will expire if not exercised by August 28, 2008. The warrants may be exercised by paying cash or by invoking a cashless exercise feature. We may redeem the warrants at a price of $0.05 per share of common stock issuable upon exercise of the warrants if the average closing price of our common stock for a ten consecutive trading day period is greater than or equal to $2.00 per share. The net proceeds to us from the placement, excluding the proceeds of any future exercise of the warrants, totaled approximately $13.1 million. As part of this transaction, we issued to selected dealers and placement agents warrants to purchase 2,458,405 shares of common stock at an exercise price of $0.73 per share and warrants to purchase 1,325,342 shares of common stock at an exercise price of $1.00 per share.
 	 	
 	Cash Flows	
      As of December 31, 2004, we had approximately $14.4 million in cash and cash equivalents and investments, a net increase of approximately $0.7 million from December 31, 2003. We used $13.3 million of cash in operating activities during 2004, principally to fund our research and development expenses and our general and administrative expenses. The $13.3 million primarily consists of our $12.7 million net loss for the period, as adjusted for non-cash expenses including depreciation and amortization and a non-cash benefit for stock-based compensation.
      The net cash used in investing activities during 2004 of $3.5 million reflects our purchase of approximately $18.6 million in “available-for-sale” securities offset by our sale of $12.3 million of “available-for-sale” securities and the proceeds of approximately $2.9 million from securities that matured in 2004.
      The net cash provided by financing activities during 2004, reflects the $4.7 million in net proceeds that we raised in our August 2004 private placement and the $10.7 million in net proceeds that we raised through our April 2004 registered direct offering offset by the use of $1.3 million of our cash to repay our 9% notes upon their maturity. Cash from other financing activities included proceeds from the exercise of stock options and warrants.

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 	Funding Requirements	
      We have incurred operating losses in most fiscal years and had an accumulated deficit of $299.3 million at December 31, 2004. We had cash, cash equivalents and short-term investments of $14.4 million at December 31, 2004. Based on our current operating plan, we believe that these funds will be sufficient to fund operations into January 2006. However, we could reduce planned activities if we need to conserve such funds. We plan to continue operating as a going concern.
      We do not expect to generate significant additional funds internally until we successfully complete development and obtain marketing approval for products, either alone or in collaboration with third parties, which we expect will take a number of years. In addition, we have no committed external sources of funds. As a result, in order for us to continue to pursue our clinical and preclinical development programs and continue operations beyond January 2006, we must raise additional funds in 2005 from debt, equity financings or from collaborative arrangements with biotechnology or pharmaceutical companies. There can be no assurance that the requisite funds will be available in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to significantly curtail our operating plans and possibly relinquish rights to portions of our technology or products. In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require further cost reductions. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.
      We believe that the key factors that will affect our internal and external sources of cash are:
 	 	 	
 	• 	the success of our clinical and preclinical development programs;	
 	 	 	
 	• 	the receptivity of the capital markets to financings by biotechnology companies; and	
 	 	 	
 	• 	our ability to enter into strategic collaborations with biotechnology and pharmaceutical companies and the success of such collaborations.	

 	Contractual Obligations	
      As of December 31, 2004, our contractual obligations were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Payments Due by Period	 	
 	 	 	 	
 	 	 	 	Less than	 	 	 	
Contractual Obligations	 	Total	 	 	1 year	 	 	1-3 years	 	
 	 	 	 	 	 	 	 	 	 	
Lease Commitments	 	$	1,426,000	 	 	$	611,000	 	 	$	815,000	 	
Employment Agreements	 	 	1,892,000	 	 	 	1,082,000	 	 	 	810,000	 	
Consulting & Collaboration Agreements	 	 	79,000	 	 	 	79,000	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Total	 	$	3,397,000	 	 	$	1,772,000	 	 	$	1,625,000	 	
 	 	 	 	 	 	 	 	 	 	
      Our only material lease commitment relates to our facility in Cambridge, Massachusetts. Under our license agreements, we are obligated to make milestone payments upon achieving specified milestones and to pay royalties to our licensors. These contingent milestone and royalty payment obligations are not included in the above table. We do not expect to make any material capital expenditures in 2005.
FORWARD-LOOKING STATEMENTS
      This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or incorporated in this report regarding our strategy, future operations, financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “projects,” “will,” and “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. There are a number of important

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factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These important factors include those set forth below under “Risk Factors.” These factors and the other cautionary statements made in this annual report should be read as being applicable to all related forward-looking statements whenever they appear in this annual report. In addition, any forward-looking statements represent our estimates only as of the date that this annual report is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
RISK FACTORS
      The following important factors could cause actual results to differ from those indicated by forward-looking statements made by us in this annual report on Form 10-K and elsewhere from time to time.
Risks Relating to Our Financial Results and Need for Financing
We have incurred substantial losses and expect to continue to incur losses. We will not be successful unless we reverse this trend.
      We have incurred losses in every year since our inception, except for 2002 when our recognition of revenues under a license and collaboration agreement resulted in us reporting net income for that year. As of December 31, 2004, we had incurred operating losses of approximately $299.3 million. We expect to continue to incur substantial operating losses in future periods. These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity, total assets and working capital.
      We have received no revenues from the sale of drugs. To date, almost all of our revenues have been from collaborative and license agreements and the sale of manufactured synthetic DNA and reagent products by our Hybridon Specialty Products Division prior to our selling that division in September 2000. We have devoted substantially all of our efforts to research and development, including clinical trials, and we have not completed development of any drugs. Because of the numerous risks and uncertainties associated with developing drugs, we are unable to predict the extent of any future losses, whether or when any of our products will become commercially available, or when we will become profitable, if at all.
We will need additional financing, which may be difficult to obtain. Our failure to obtain necessary financing or doing so on unattractive terms could adversely affect our discovery and development programs and other operations.
      We will require substantial funds to conduct research and development, including preclinical testing and clinical trials of our drugs. We will also require substantial funds to conduct regulatory activities and to establish commercial manufacturing, marketing and sales capabilities. We believe that, based on our current operating plan, our existing cash and cash equivalents and short-term investments, will be sufficient to fund our cash requirements into January 2006. However, we could reduce planned activities if we need to conserve such funds. We will need to raise additional funds to operate our business beyond such time. We believe that the key factors that will affect our ability to raise cash are:
 	 	 	
 	• 	the success of our clinical and preclinical development programs;	
 	 	 	
 	• 	the receptivity of the capital markets to financings by biotechnology companies; and	
 	 	 	
 	• 	our ability to enter into strategic collaborations with biotechnology and pharmaceutical companies and the success of such collaborations.	
      Additional financing may not be available to us when we need it or may not be available to us on favorable terms. We could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, drug candidates or drugs which we would otherwise pursue on our own. In addition, if we raise additional funds by issuing equity securities, our then existing stockholders will experience dilution. The terms of any financing may adversely affect the holdings or

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the rights of existing stockholders. If we are unable to obtain adequate funding on a timely basis or at all, we may be required to significantly curtail one or more of our discovery or development programs. For example, we significantly curtailed expenditures on our research and development programs during 1999 and 2000 because we did not have sufficient funds available to advance these programs at planned levels.
Risks Relating to Our Business, Strategy and Industry
We are depending heavily on the success of our lead drug candidate, IMOxine, which is in clinical development. If we are unable to commercialize this product, or experience significant delays in doing so, our business will be materially harmed.
      We are investing a significant portion of our time and financial resources in the development of our lead drug candidate, IMOxine. We anticipate that our ability to generate product revenues will depend heavily on the successful development and commercialization of this product. The commercial success of this product will depend on several factors, including the following:
 	 	 	
 	• 	successful completion of clinical trials;	
 	 	 	
 	• 	receipt of marketing approvals from the FDA and equivalent foreign regulatory authorities;	
 	 	 	
 	• 	establishing commercial manufacturing arrangements with third party manufacturers;	
 	 	 	
 	• 	launching commercial sales of the product, whether alone or in collaboration with others; and	
 	 	 	
 	• 	acceptance of the product in the medical community and with third party payors.	
Our efforts to commercialize this product are at an early stage, as we are currently conducting a phase 1 clinical trial of this product candidate in patients with refractory solid tumor cancers and a phase 2 clinical trial in patients with metastatic or recurrent clear cell renal carcinoma. If we are not successful in commercializing this product, or are significantly delayed in doing so, our business will be materially harmed.
If our clinical trials are unsuccessful, or if they are significantly delayed, we may not be able to develop and commercialize our products.
      We may not be able to successfully complete any clinical trial of a potential product within any specified time period. In some cases, we may not be able to complete the trial at all. Moreover, clinical trials may not show our potential products to be both safe and efficacious. Thus, the FDA and other regulatory authorities may not approve any of our potential products for any indication.
      In order to obtain regulatory approvals for the commercial sale of our products, we will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of our drug candidates. We may not be able to obtain authority from the FDA or other equivalent foreign regulatory agencies to complete these trials or commence and complete any other clinical trials.
      The results from preclinical testing of a drug candidate that is under development may not be predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger scale, advanced stage clinical trials. A failure of one or more of our clinical trials can occur at any stage of testing. Further, there is to date little data on the long-term clinical safety of our lead compounds under conditions of prolonged use in humans, nor on any long-term consequences subsequent to human use. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our products, including:
 	 	 	
 	• 	regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;	
 	 	 	
 	• 	our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or we may abandon projects that we expect may not be promising;	
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 	• 	we might have to suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks;	
 	 	 	
 	• 	regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;	
 	 	 	
 	• 	the cost of our clinical trials may be greater than we currently anticipate; and	
 	 	 	
 	• 	the effects of our products may not be the desired effects or may include undesirable side effects or the products may have other unexpected characteristics.	
      As an example, in 1997, after reviewing the results from the clinical trial of GEM91, a 1st generation antisense compound and our lead drug candidate at the time, we determined not to continue the development of GEM91 and suspended clinical trials of this product candidate.
      The rate of completion of clinical trials is dependent in part upon the rate of enrollment of patients. The rate of enrollment in our ongoing phase 2 clinical trial of IMOxine has thus far been slower than anticipated and may delay the completion of trial beyond the time we expected. Patient accrual is a function of many factors, including:
 	 	 	
 	• 	the size of the patient population,	
 	 	 	
 	• 	the proximity of patients to clinical sites,	
 	 	 	
 	• 	the eligibility criteria for the study,	
 	 	 	
 	• 	the nature of the study,	
 	 	 	
 	• 	the existence of competitive clinical trials and	
 	 	 	
 	• 	the availability of alternative treatments.	
Our product development costs will increase if we experience delays in our clinical trials. We do not know whether planned clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant clinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to commercialize our products.
We face substantial competition which may result in others discovering, developing or commercializing drugs before or more successfully than us.
      The biotechnology industry is highly competitive and characterized by rapid and significant technological change. We face, and will continue to face, intense competition from organizations such as pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies. Some of these organizations are pursuing products based on technologies similar to our technologies. Other of these organizations have developed and are marketing products, or are pursuing other technological approaches designed to produce products, that are competitive with our product candidates in the therapeutic effect these competitive products have on diseases targeted by our product candidates. Our competitors may discover, develop or commercialize products or other novel technologies that are more effective, safer or less costly than any that we are developing. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours.
      Many of our competitors are substantially larger than we are and have greater capital resources, research and development staffs and facilities than we have. In addition, many of our competitors are more experienced than we are in drug discovery, development and commercialization, obtaining regulatory approvals and drug manufacturing and marketing.
      We anticipate that the competition with our products and technologies will be based on a number of factors including product efficacy, safety, availability and price. The timing of market introduction of our products and competitive products will also affect competition among products. We expect the relative speed with which we can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market to be important competitive factors. Our competitive

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position will also depend upon our ability to attract and retain qualified personnel, to obtain patent protection or otherwise develop proprietary products or processes and to secure sufficient capital resources for the period between technological conception and commercial sales.
Because the products that we may develop will be based on new technologies and therapeutic approaches, the market may not be receptive to these products upon their introduction.
      The commercial success of any of our products for which we may obtain marketing approval from the FDA or other regulatory authorities will depend upon their acceptance by the medical community and third party payors as clinically useful, cost-effective and safe. Many of the products that we are developing are based upon technologies or therapeutic approaches that are relatively new and unproven. The FDA has only granted marketing approval for one product based on antisense technology which is currently being marketed by another company for the treatment of cytomegalovirus retinitis, an infectious disease, in patients with AIDs. The FDA has not granted marketing approval to any products based on IMO technology and no such products are currently being marketed. As a result, it may be more difficult for us to achieve regulatory approval or market acceptance of our products. Our efforts to educate the medical community on these potentially unique approaches may require greater resources than would be typically required for products based on conventional technologies or therapeutic approaches. The safety, efficacy, convenience and cost-effectiveness of our products as compared to competitive products will also affect market acceptance.
Competition for technical and management personnel is intense in our industry, and we may not be able to sustain our operations or grow if we are unable to attract and retain key personnel.
      Our success is highly dependent on the retention of principal members of our technical and management staff, including Sudhir Agrawal. Dr. Agrawal serves as our President, Chief Scientific Officer and Chief Executive Officer. Dr. Agrawal has extensive experience in the pharmaceutical industry, has made significant contributions to the field of nucleic acid chemistry and is named as an inventor on over 200 patents and patent applications worldwide. Dr. Agrawal provides the scientific leadership for our research and development activities and directly supervises our research staff. The loss of Dr. Agrawal’s services would be detrimental to our ongoing scientific progress and the execution of our business plan.
      We are a party to an employment agreement with Dr. Agrawal, but this agreement may be terminated by us or Dr. Agrawal for any reason or no reason at any time upon notice to the other party. We do not carry key man life insurance for Dr. Agrawal.
      Furthermore, our future growth will require hiring a significant number of qualified technical and management personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our activities. If we are not able to continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow.
Regulatory Risks
We may not be able to obtain marketing approval for products resulting from our development efforts.
      All of the products that we are developing or may develop in the future will require additional research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. This process is lengthy, often taking a number of years, is uncertain and is expensive. Since our inception, we have conducted clinical trials of a number of compounds. In 1997, we determined not to continue clinical development of GEM91, our lead product candidate at the time. Currently, we are conducting clinical trials of IMOxine, our lead IMO drug candidate.
      We may need to address a number of technological challenges in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove to have

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undesirable or unintended side effects, unintended alteration of the immune system over time, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.
We are subject to comprehensive regulatory requirements, which are costly and time consuming to comply with; if we fail to comply with these requirements, we could be subject to adverse consequences and penalties.
      The testing, manufacturing, labeling, advertising, promotion, export and marketing of our products are subject to extensive regulation by governmental authorities in Europe, the United States and elsewhere throughout the world.
      In general, submission of materials requesting permission to conduct clinical trials may not result in authorization by the FDA or any equivalent foreign regulatory agency to commence clinical trials. In addition, submission of an application for marketing approval to the relevant regulatory agency following completion of clinical trials may not result in the regulatory agency approving the application if applicable regulatory criteria are not satisfied, and may result in the regulatory agency requiring additional testing or information.
      Any regulatory approval of a product may contain limitations on the indicated uses for which the product may be marketed or requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. Any product for which we obtain marketing approval, along with the facilities at which the product is manufactured, any post-approval clinical data and any advertising and promotional activities for the product will be subject to continual review and periodic inspections by the FDA and other regulatory agencies.
      Both before and after approval is obtained, violations of regulatory requirements may result in:
 	 	 	
 	• 	the regulatory agency’s delay in approving, or refusal to approve, an application for approval of a product;	
 	 	 	
 	• 	restrictions on such products or the manufacturing of such products;	
 	 	 	
 	• 	withdrawal of the products from the market;	
 	 	 	
 	• 	warning letters;	
 	 	 	
 	• 	voluntary or mandatory recall;	
 	 	 	
 	• 	fines;	
 	 	 	
 	• 	suspension or withdrawal of regulatory approvals;	
 	 	 	
 	• 	product seizure;	
 	 	 	
 	• 	refusal to permit the import or export of our products;	
 	 	 	
 	• 	injunctions or the imposition of civil penalties; and	
 	 	 	
 	• 	criminal penalties.	
We have only limited experience in regulatory affairs and our products are based on new technologies; these factors may affect our ability or the time we require to obtain necessary regulatory approvals.
      We have only limited experience in filing the applications necessary to gain regulatory approvals. Moreover, the products that result from our research and development programs will likely be based on new technologies and new therapeutic approaches that have not been extensively tested in humans. The regulatory requirements governing these types of products may be more rigorous than for conventional drugs. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals of any product that we develop.

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Risks Relating to Collaborators
We need to establish collaborative relationships in order to succeed.
      An important element of our business strategy includes entering into collaborative relationships for the development and commercialization of products based on our discoveries. We face significant competition in seeking appropriate collaborators. Moreover, these arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to establish collaborative relationships or other alternative arrangements.
      The success of collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Our collaborators will have significant discretion in determining the efforts and resources that they will apply to these collaborations. The risks that we face in connection with these collaborations include the following:
 	 	 	
 	• 	disputes may arise in the future with respect to the ownership of rights to technology developed with collaborators;	
 	 	 	
 	• 	disagreements with collaborators could delay or terminate the research, development or commercialization of products, or result in litigation or arbitration;	
 	 	 	
 	• 	we may have difficulty enforcing the contracts if one of our collaborators fails to perform;	
 	 	 	
 	• 	our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect the perception of us in the business or financial communities;	
 	 	 	
 	• 	collaborators have considerable discretion in electing whether to pursue the development of any additional drugs and may pursue technologies or products either on their own or in collaboration with our competitors that are similar to or competitive with our technologies or products that are the subject of the collaboration with us; and	
 	 	 	
 	• 	our collaborators may change the focus of their development and commercialization efforts. Pharmaceutical and biotechnology companies historically have re-evaluated their priorities following mergers and consolidations, which have been common in recent years in these industries. The ability of our products to reach their potential could be limited if our collaborators decrease or fail to increase spending relating to such products.	
      Given these risks, it is possible that any collaborative arrangements into which we enter may not be successful. Previous collaborative arrangements to which we were a party with F. Hoffmann-La Roche and G.D. Searle & Co. both were terminated prior to the development of any product. The failure of any of our collaborative relationships could delay our drug development or impair commercialization of our products.
Risks Relating to Intellectual Property
If we are unable to obtain patent protection for our discoveries, the value of our technology and products will be adversely affected.
      Our patent positions, and those of other drug discovery companies, are generally uncertain and involve complex legal, scientific and factual questions.
      Our ability to develop and commercialize drugs depends in significant part on our ability to:
 	 	 	
 	• 	obtain patents;	
 	 	 	
 	• 	obtain licenses to the proprietary rights of others on commercially reasonable terms;	
 	 	 	
 	• 	operate without infringing upon the proprietary rights of others;	
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 	• 	prevent others from infringing on our proprietary rights; and	
 	 	 	
 	• 	protect trade secrets.	
      We do not know whether any of our patent applications or those patent applications which we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, and the rights granted thereunder may not provide us proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thus reducing any advantage of the patent.
      Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications.
Third parties may own or control patents or patent applications and require us to seek licenses, which could increase our development and commercialization costs, or prevent us from developing or marketing products.
      We may not have rights under some patents or patent applications related to our products. Third parties may own or control these patents and patent applications in the United States and abroad. Therefore, in some cases, to develop, manufacture, sell or import some of our products, we or our collaborators may choose to seek, or be required to seek, licenses under third party patents issued in the United States and abroad or under patents that might issue from United States and foreign patent applications. In such an event, we would be required to pay license fees or royalties or both to the licensor. If licenses are not available to us on acceptable terms, we or our collaborators may not be able to develop, manufacture, sell or import these products.
We may lose our rights to patents, patent applications or technologies of third parties if our licenses from these third parties are terminated. In such an event, we might not be able to develop or commercialize products covered by the licenses.
      We are party to ten royalty-bearing license agreements under which we have acquired rights to patents, patent applications and technology of third parties. Under these licenses we are obligated to pay royalties on net sales by us of products or processes covered by a valid claim of a patent or patent application licensed to us. We also are required in some cases to pay a specified percentage of any sublicense income that we may receive. These licenses impose various commercialization, sublicensing, insurance and other obligations on us. Our failure to comply with these requirements could result in termination of the licenses. These licenses generally will otherwise remain in effect until the expiration of all valid claims of the patents covered by such licenses or upon earlier termination by the parties. The issued patents covered by these licenses expire at various dates ranging from 2006 to 2022. If one or more of these licenses is terminated, we may be delayed in our efforts, or be unable, to develop and market the products that are covered by the applicable license or licenses.
We may become involved in expensive patent litigation or other proceedings, which could result in our incurring substantial costs and expenses or substantial liability for damages or require us to stop our development and commercialization efforts.
      There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the biotechnology industry. We may become a party to various types of patent litigation or other proceedings regarding intellectual property rights from time to time even under circumstances where we are not practicing and do not intend to practice any of the intellectual property involved in the proceedings.

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For instance, in 2002, we became involved in an interference declared by the United States Patent and Trademark Office, or USPTO, involving a patent application exclusively licensed by us from University of Massachusetts Medical Center, or UMMC, and three patents issued to the National Institutes of Health, or NIH. In January, 2005, we and UMMC entered into an Interference Settlement Agreement with the NIH. The agreement is subject to approval of the Board of Patent Appeals and Interferences. In addition, in 2003, we became involved in an interference declared by the USPTO involving another patent exclusively licensed to us from UMMC and a patent application assigned jointly to the University of Montreal and The Massachusetts Institute of Technology. On August 6, 2004, the USPTO entered judgment in favor of the patent application jointly assigned to the University of Montreal and The Massachusetts Institute of Technology and against certain claims of the patent exclusively licensed to us from UMMC. We are neither practicing nor intending to practice the intellectual property involved in either of the interference proceedings in which we are involved.
      The cost to us of any patent litigation or other proceeding, including the interferences referred to above, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the cost of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. If any patent litigation or other proceeding is resolved against us, we or our collaborators may be enjoined from developing, manufacturing, selling or importing our drugs without a license from the other party and we may be held liable for significant damages. We may not be able to obtain any required license on commercially acceptable terms or at all.
      Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.
Risks Relating to Product Manufacturing, Marketing and Sales and Reliance on Third Parties
Because we have limited manufacturing experience, we are dependent on third-party manufacturers to manufacture products for us. If we cannot rely on third-party manufacturers, we will be required to incur significant costs and devote significant efforts to establish our own manufacturing facilities and capabilities.
      We have limited manufacturing experience and no commercial scale manufacturing capabilities. In order to continue to develop our products, apply for regulatory approvals and ultimately commercialize products, we need to develop, contract for or otherwise arrange for the necessary manufacturing capabilities.
      We currently rely upon third parties to produce material for preclinical and clinical testing purposes and expect to continue to do so in the future. We also expect to rely upon third parties to produce materials that may be required for the commercial production of our products.
      There are a limited number of manufacturers that operate under the FDA’s current good manufacturing practices regulations capable of manufacturing our products. As a result, we may have difficulty finding manufacturers for our products with adequate capacity for our needs. If we are unable to arrange for third party manufacturing of our products on a timely basis, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.
      Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured products ourselves, including:
 	 	 	
 	• 	reliance on the third party for regulatory compliance and quality assurance,	
 	 	 	
 	• 	the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control,	
 	 	 	
 	• 	the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us,	
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 	• 	the potential that third party manufacturers will develop know-how owned by such third party in connection with the production of our products that is necessary for the manufacture of our products, and	
 	 	 	
 	• 	reliance upon third party manufacturers to assist us in preventing inadvertent disclosure or theft of our proprietary knowledge.	
      We purchased oligonucleotides for preclinical and clinical testing from Avecia at a preferential price under a supply agreement, which expired in March 2004. We have continued to purchase all of the oligonucleotides we are using in our ongoing clinical trials and pre-clinical testing from Avecia. The terms of the agreement have been extended until such time as a new agreement is negotiated. If Avecia determines not to accept any purchase order for oligonucleotides or we are unable to enter into a new manufacturing arrangement with Avecia or a new contract manufacturer on a timely basis or at all, our ability to supply the product needed for our clinical trials could be materially impaired.
We have no experience selling, marketing or distributing products and no internal capability to do so.
      If we receive regulatory approval to commence commercial sales of any of our products, we will face competition with respect to commercial sales, marketing and distribution. These are areas in which we have no experience. To market any of our products directly, we would need to develop a marketing and sales force with technical expertise and with supporting distribution capability. In particular, we would need to recruit a large number of experienced marketing and sales personnel. Alternatively, we could engage a pharmaceutical or other healthcare company with an existing distribution system and direct sales force to assist us. However, to the extent we entered into such arrangements, we would be dependent on the efforts of third parties. If we are unable to establish sales and distribution capabilities, whether internally or in reliance on third parties, our business would suffer materially.
If third parties on whom we rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our products and our business may suffer.
      We do not have the ability to independently conduct the clinical trials required to obtain regulatory approval for our products. We depend on independent clinical investigators, contract research organizations and other third party service providers in the conduct of the clinical trials of our products and expect to continue to do so. For example, we have contracted with PAREXEL International to manage our Phase 2 trials clinical trials of IMOxine. We rely heavily on these parties for successful execution of our clinical trials, but do not control many aspects of their activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our products. If we seek to conduct any of these activities ourselves in the future, we will need to recruit appropriately trained personnel and add to our infrastructure.
If we are unable to obtain adequate reimbursement from third party payors for any products that we may develop or acceptable prices for those products, our revenues and prospects for profitability will suffer.
      Most patients will rely on Medicare and Medicaid, private health insurers and other third party payors to pay for their medical needs, including any drugs we may market. If third party payors do not provide adequate coverage or reimbursement for any products that we may develop, our revenues and prospects for profitability will suffer. Congress recently enacted a limited prescription drug benefit for Medicare recipients in the

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Medicare Prescription Drug and Modernization Act of 2003. While the program established by this statute may increase demand for our products, if we participate in this program, our prices will be negotiated with drug procurement organizations for Medicare beneficiaries and are likely to be lower than we might otherwise obtain. Non-Medicare third party drug procurement organizations may also base the price they are willing to pay on the rate paid by drug procurement organizations for Medicare beneficiaries.
      A primary trend in the United States healthcare industry is toward cost containment. In addition, in some foreign countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates or products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization of our products.
      Third party payors are challenging the prices charged for medical products and services, and many third party payors limit reimbursement for newly-approved healthcare products. In particular, third party payors may limit the indications for which they will reimburse patients who use any products that we may develop. Cost control initiatives could decrease the price we might establish for products that we may develop, which would result in lower product revenues to us.
We face a risk of product liability claims and may not be able to obtain insurance.
      Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing and marketing of human therapeutic drugs. Although we have product liability and clinical trial liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations. We may not be able to obtain or maintain adequate protection against potential liabilities. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our commercialization efforts.
Risks Relating to an Investment in Our Common Stock
Our corporate governance structure, including provisions in our certificate of incorporation and by-laws, our stockholder rights plan and Delaware law, may prevent a change in control or management that stockholders may consider desirable.
      Section 203 of the Delaware General Corporation Law and our certificate of incorporation, by-laws and stockholder rights plan contain provisions that might enable our management to resist a takeover of our company or discourage a third party from attempting to take over our company. These provisions include:
 	 	 	
 	• 	a classified board of directors,	
 	 	 	
 	• 	limitations on the removal of directors,	
 	 	 	
 	• 	limitations on stockholder proposals at meetings of stockholders,	
 	 	 	
 	• 	the inability of stockholders to act by written consent or to call special meetings, and	
 	 	 	
 	• 	the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.	
These provisions could have the effect of delaying, deferring, or preventing a change in control of us or a change in our management that stockholders may consider favorable or beneficial. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

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Our stock price has been and may in the future be extremely volatile. In addition, because an active trading market for our common stock has not developed, our investors’ ability to trade our common stock may be limited. As a result, investors may lose all or a significant portion of their investment.
      Our stock price has been volatile. During the period from January 1, 2003 to December 31, 2004, the closing sales price of our common stock ranged from a high of $1.69 per share to a low of $0.41 per share. The stock market has also experienced significant price and volume fluctuations, and the market prices of biotechnology companies in particular have been highly volatile, often for reasons that have been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including:
 	 	 	
 	• 	results of clinical trials of our product candidates or those of our competitors;	
 	 	 	
 	• 	the regulatory status of our product candidates;	
 	 	 	
 	• 	failure of any of our product candidates, if approved, to achieve commercial success;	
 	 	 	
 	• 	the success of competitive products or technologies;	
 	 	 	
 	• 	regulatory developments in the United States and foreign countries;	
 	 	 	
 	• 	developments or disputes concerning patents or other proprietary rights;	
 	 	 	
 	• 	the departure of key personnel;	
 	 	 	
 	• 	variations in our financial results or those of companies that are perceived to be similar to us;	
 	 	 	
 	• 	our cash resources;	
 	 	 	
 	• 	the terms of any financing conducted by us;	
 	 	 	
 	• 	changes in the structure of healthcare payment systems;	
 	 	 	
 	• 	market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts’ reports or recommendations; and	
 	 	 	
 	• 	general economic, industry and market conditions.	
      In addition, our common stock has historically been traded at low volume levels and may continue to trade at low volume levels. As a result, any large purchase or sale of our common stock could have a significant impact on the price of our common stock and it may be difficult for investors to sell our common stock in the market without depressing the market price for the common stock or at all.
      As a result of the foregoing, investors may not be able to resell their shares at or above the price they paid for such shares. Investors in our common stock must be willing to bear the risk of fluctuations in the price of our common stock and the risk that the value of their investment in our stock could decline.
 	 	
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	
      Historically, our primary exposures have been related to nondollar-denominated operating expenses in Europe. As of December 31, 2004, we have no assets and liabilities related to nondollar-denominated currencies.
      We maintain investments in accordance with our investment policy. The primary objectives of our investment activities are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investments. We do not own derivative financial investment instruments in our investment portfolio.
      Based on a hypothetical ten percent adverse movement in interest rates, the potential losses in future earnings, fair value of risk sensitive financial instruments, and cash flows are immaterial, although the actual effects may differ materially from the hypothetical analysis.

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Item 8.	Financial Statements and Supplementary Data	
      All financial statements required to be filed hereunder are filed as listed under Item 15(a) and are incorporated herein by this reference.
 	 	
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	
      None.
 	 	
Item 9A.	Controls and Procedures	
      (a) Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2004. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2004, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
      (b) Changes in Internal Controls. No change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 	 	
Item 9B.	Other Information.	
      On March 24, 2005, the Company filed a Certificate of Increase with the Secretary of State of the State of Delaware pursuant to Section 151 of the Delaware General Corporation Law, increasing the number of authorized shares of the Company’s Series C Junior Participating Preferred Stock, $.01 par value per share, from 150,000 shares to 185,000 shares, effective as of March 24, 2005.
      On September 16, 2004, the Company granted a bonus of $25,000 to Dr. Sudhir Agrawal, the Company’s Chief Executive Officer.
      On December 21, 2004, the Company granted a bonus of $29,500 to Dr. Sudhir Agrawal and a bonus of $32,700 to Robert G. Andersen, the Company’s Chief Financial Officer.
PART III.
      The response to the Part III items incorporate by reference certain sections of our Proxy Statement for our annual meeting of stockholders to be held on June 15, 2005. The 2005 Proxy Statement will be filed with the Securities and Exchange Commission on or before April 29, 2005.
 	 	
Item 10.	Directors and Executive Officers of Hybridon	
      The response to this item is contained under the following captions in the 2005 Proxy Statement: “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” which sections are incorporated herein by reference. See Part I of this Annual Report on 10-K under the caption “Executive Officers and Key Employees of Hybridon.”

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      Information required by this item pursuant to Item 402(h) and 402(i) of Regulation S-K relating to an audit committee financial expert and identification of the audit committee of our board of directors is contained in our 2005 Proxy Statement under the caption “Corporate Governance” and is incorporated herein by reference.
      We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We intend to disclose any amendments to, or waivers from, our code of business conduct and ethics on our website which is located at www.Hybridon.com.
 	 	
Item 11.	Executive Compensation	
      The response to this item is contained in the 2005 Proxy Statement under the captions: “Certain Transactions,” and “Director Compensation” and “Executive Compensation”, which sections are incorporated herein by reference.
 	 	
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	
      The response to this item is contained in the 2005 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” which section is incorporated herein by reference.
 	 	
Item 13.	Certain Relationships and Related Transactions	
      The response to this item is contained in the 2005 Proxy Statement under the captions “Certain Transactions,” and “Director Compensation”, which sections are incorporated herein by reference.
 	 	
Item 14.	Principal Accountant Fees and Services	
      The response to this item is contained in the 2005 Proxy Statement under the caption “Principal Accountant Fees and Services”, which section is incorporated herein by reference.

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PART IV.
 	 	
Item 15.	Exhibits and Financial Statement Schedules	
      (a)(1) Financial Statements.
 	 	 	 	 	
 	 	Page number in	 	
 	 	this Report	 	
 	 	 	 	
Report of Independent Registered Public Accounting Firm	 	 	F-2	 	
Consolidated Balance Sheets at December 31, 2004 and 2003	 	 	F-3	 	
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002	 	 	F-4	 	
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2004, 2003 and 2002	 	 	F-5	 	
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002	 	 	F-6	 	
Notes to Consolidated Financial Statements	 	 	F-7	 	

 	(2) 	We are not filing any financial statement schedules as part of this Annual Report on Form 10-K because they are not applicable or the required information is included in the financial statements or notes thereto.	
 	 	 	
 	(3) 	The list of Exhibits filed as a part of this Annual Report on Form 10-K is set forth on the Exhibit Index immediately preceding such Exhibits and is incorporated herein by this reference.	
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SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 15th day of March 2005.
 	 	
 	Hybridon, Inc.	

 	By: 	/s/ SUDHIR AGRAWAL	

 	Sudhir Agrawal	
 	Chief Executive Officer	
      Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 	 	 	 	 	 	 	
Signature	 	Title	 	Date	

/s/ JAMES B. WYNGAARDEN

 James B. Wyngaarden	 	Chairman of the Board of Directors	 	March 15, 2005	
 	
/s/ SUDHIR AGRAWAL

 Sudhir Agrawal, D. Phil	 	President, Chief Executive Officer, Chief Scientific Officer and Director
(Principal Executive Officer)	 	March 15, 2005	
 	
/s/ ROBERT G. ANDERSEN

 Robert G. Andersen	 	Chief Financial Officer and Vice President of Operations, Treasurer and Secretary (Principal Financial and Accounting Officer)	 	March 15, 2005	
 	
/s/ YOUSSEF EL-ZEIN

 Youssef El-Zein	 	Director	 	March 15, 2005	
 	
/s/ C. KEITH HARTLEY

 C. Keith Hartley	 	Director	 	March 15, 2005	
 	
/s/ WILLIAM S. REARDON

 William S. Reardon, C.P.A.	 	Director	 	March 15, 2005	
 	
/s/ ALISON TAUNTON-RIGBY

 Alison Taunton-Rigby, Ph.D., OBE	 	Director	 	March 15, 2005	
 	
/s/ PAUL C. ZAMECNIK, M.D.

 Paul C. Zamecnik	 	Director	 	March 15, 2005	
42

Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
 	 	 	 	 	
 	 	Page	 	
 	 	 	 	
Report of Independent Registered Public Accounting Firm	 	 	F-2	 	
Consolidated Balance Sheets	 	 	F-3	 	
Consolidated Statements of Operations	 	 	F-4	 	
Consolidated Statements of Stockholders’ Equity (Deficit)	 	 	F-5	 	
Consolidated Statements of Cash Flows	 	 	F-6	 	
Notes to Consolidated Financial Statements	 	 	F-7	 	
F-1

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Hybridon, Inc.
      We have audited the accompanying consolidated balance sheets of Hybridon, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hybridon, Inc. and subsidiaries at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
 	 	
 	/s/ ERNST & YOUNG LLP	
Boston, Massachusetts
January 28, 2005

F-2

Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	
 	 	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	$	5,021,860	 	 	$	7,607,655	 	
 	Short-term investments	 	 	9,391,140	 	 	 	6,060,420	 	
 	Receivables	 	 	293,113	 	 	 	202,936	 	
 	Prepaid expenses and other current assets	 	 	333,316	 	 	 	101,697	 	
 	 	 	 	 	 	 	
 	 	 	 	Total current assets	 	 	15,039,429	 	 	 	13,972,708	 	
Property and equipment, net	 	 	351,791	 	 	 	436,813	 	
 	 	 	 	 	 	 	
Total Assets	 	$	15,391,220	 	 	$	14,409,521	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
 	Accounts payable	 	$	354,736	 	 	$	675,926	 	
 	Accrued expenses	 	 	1,332,150	 	 	 	1,123,058	 	
 	Current portion of deferred revenue	 	 	171,287	 	 	 	127,537	 	
 	9% convertible subordinated notes payable	 	 	—	 	 	 	1,306,000	 	
 	 	 	 	 	 	 	
 	 	 	 	Total current liabilities	 	 	1,858,173	 	 	 	3,232,521	 	
 	Non-current portion of accrued expenses	 	 	240,000	 	 	 	—	 	
 	Deferred revenue, net of current portion	 	 	523,655	 	 	 	651,192	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
 	Preferred stock, $0.01 par value	 	 	 	 	 	 	 	 	
 	 	Authorized — 5,000,000 shares	 	 	 	 	 	 	 	 	
 	 	Series A convertible preferred stock	 	 	 	 	 	 	 	 	
 	 	 	Designated — 1,500,000 shares	 	 	 	 	 	 	 	 	
 	 	 	Issued and outstanding — 655 and 489,205 shares at December 31, 2004 and 2003, respectively	 	 	 	 	 	 	 	 	
 	 	 	Liquidation value — $655 at December 31, 2004	 	 	7	 	 	 	4,892	 	
 	Common stock, $0.001 par value	 	 	 	 	 	 	 	 	
 	 	Authorized — 185,000,000 and 150,000,000 shares at December 31, 2004 and 2003, respectively	 	 	 	 	 	 	 	 	
 	 	 	Issued and outstanding — 110,931,529 and 70,482,570 shares at December 31, 2004 and 2003, respectively	 	 	110,932	 	 	 	70,483	 	
Additional paid-in capital	 	 	311,988,467	 	 	 	294,373,630	 	
Accumulated deficit	 	 	(299,293,785	)	 	 	(283,882,840	)	
Accumulated other comprehensive loss	 	 	(14,989	)	 	 	(2,995	)	
Deferred compensation	 	 	(21,240	)	 	 	(37,362	)	
 	 	 	 	 	 	 	
 	 	 	 	Total stockholders’ equity	 	 	12,769,392	 	 	 	10,525,808	 	
 	 	 	 	 	 	 	
Total Liabilities and Stockholders’ Equity	 	$	15,391,220	 	 	$	14,409,521	 	
 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Alliance revenue	 	$	942,598	 	 	$	896,572	 	 	$	29,605,930	 	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Research and development	 	 	10,305,292	 	 	 	10,817,288	 	 	 	7,877,343	 	
 	General and administrative	 	 	4,273,009	 	 	 	6,923,899	 	 	 	7,054,023	 	
 	Stock-based compensation from repriced options (1)	 	 	(713,074	)	 	 	542,666	 	 	 	(1,297,445	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	Total operating expenses	 	 	13,865,227	 	 	 	18,283,853	 	 	 	13,633,921	 	
 	 	 	 	 	 	 	 	 	 	
(Loss) income from operations	 	 	(12,922,629	)	 	 	(17,387,281	)	 	 	15,972,009	 	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	
 	Investment income, net	 	 	217,064	 	 	 	190,178	 	 	 	649,554	 	
 	Interest expense	 	 	(29,385	)	 	 	(117,540	)	 	 	(150,023	)	
 	Gain on sale of securities, net	 	 	—	 	 	 	103,585	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
(Loss) income from operations	 	 	(12,734,950	)	 	 	(17,211,058	)	 	 	16,471,540	 	
Income tax benefit	 	 	—	 	 	 	—	 	 	 	500,000	 	
 	 	 	 	 	 	 	 	 	 	
Net (loss) income	 	 	(12,734,950	)	 	 	(17,211,058	)	 	 	16,971,540	 	
Accretion of preferred stock dividends	 	 	(2,675,995	)	 	 	(5,528,856	)	 	 	(4,246,282	)	
 	 	 	 	 	 	 	 	 	 	
Net (loss) income applicable to common stockholders	 	$	(15,410,945	)	 	$	(22,739,914	)	 	$	12,725,258	 	
 	 	 	 	 	 	 	 	 	 	
(Loss) income per share from operations:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	$	(0.13	)	 	$	(0.34	)	 	$	0.36	 	
 	 	 	 	 	 	 	 	 	 	
 	Diluted	 	$	(0.13	)	 	$	(0.34	)	 	$	0.32	 	
 	 	 	 	 	 	 	 	 	 	
Net (loss) income per share applicable to common
stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Basic	 	$	(0.16	)	 	$	(0.45	)	 	$	0.27	 	
 	 	 	 	 	 	 	 	 	 	
 	Diluted	 	$	(0.16	)	 	$	(0.45	)	 	$	0.24	 	
 	 	 	 	 	 	 	 	 	 	
Shares used in computing basic net (loss) income per common share	 	 	98,913,927	 	 	 	51,053,415	 	 	 	46,879,232	 	
 	 	 	 	 	 	 	 	 	 	
Shares used in computing diluted net (loss) income per common share	 	 	98,913,927	 	 	 	51,053,415	 	 	 	52,984,415	 	
 	 	 	 	 	 	 	 	 	 	
(1) The following summarizes the allocation of stock based compensation from repriced options
Research and development	 	$	(516,809	)	 	$	403,310	 	 	$	(925,210	)	
 	 	General and administrative	 	 	(196,265	)	 	 	139,356	 	 	 	(372,235	)	
 	 	 	 	 	 	 	 	 	 	
 	 	Total	 	$	(713,074	)	 	$	542,666	 	 	$	(1,297,445	)	
 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

F-4

Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Series A	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Convertible	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Common Stock	 	 	 	 	 	 	Accumulated	 	 	 	 	Total	 	
 	 	Number	 	 	 	 	 	 	 	Additional	 	 	 	 	Other	 	 	 	 	Stockholders’	 	
 	 	of	 	 	$0.01 Par	 	 	Number of	 	 	$0.001 Par	 	 	Paid-In	 	 	Accumulated	 	 	Comprehensive	 	 	Deferred	 	 	Equity	 	
 	 	Shares	 	 	Value	 	 	Shares	 	 	Value	 	 	Capital	 	 	Deficit	 	 	Loss	 	 	Compensation	 	 	(Deficit)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2001	 	 	640,166	 	 	$	6,402	 	 	 	45,632,525	 	 	$	45,632	 	 	$	273,870,458	 	 	$	(273,868,184	)	 	$	—	 	 	$	(87,582	)	 	$	(33,274	)	
Exercise of common stock options and warrants	 	 	—	 	 	 	—	 	 	 	1,162,172	 	 	 	1,162	 	 	 	458,514	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	459,676	 	
Issuance of stock under the Isis Agreement	 	 	—	 	 	 	—	 	 	 	1,005,499	 	 	 	1,006	 	 	 	1,263,664	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,264,670	 	
Issuance of stock options to employees	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6,150	 	 	 	—	 	 	 	—	 	 	 	(6,150	)	 	 	—	 	
Amortization of deferred compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	49,325	 	 	 	49,325	 	
Conversion of 8% notes into stock	 	 	—	 	 	 	—	 	 	 	52,637	 	 	 	53	 	 	 	31,529	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	31,582	 	
Preferred stock dividends	 	 	42,107	 	 	 	421	 	 	 	—	 	 	 	—	 	 	 	4,245,861	 	 	 	(4,246,282	)	 	 	—	 	 	 	—	 	 	 	—	 	
Conversion of preferred into common stock	 	 	(3,911	)	 	 	(39	)	 	 	92,024	 	 	 	92	 	 	 	(53	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Stock-based compensation from repriced options	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,297,445	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,297,445	)	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized loss on marketable securities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,944	)	 	 	—	 	 	 	(1,944	)	
Net income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	16,971,540	 	 	 	—	 	 	 	—	 	 	 	16,971,540	 	
Total comprehensive income	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	16,969,596	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2002	 	 	678,362	 	 	 	6,784	 	 	 	47,944,857	 	 	 	47,945	 	 	 	278,578,678	 	 	 	(261,142,926	)	 	 	(1,944	)	 	 	(44,407	)	 	 	17,444,130	 	
Sale of common stock	 	 	—	 	 	 	—	 	 	 	20,053,022	 	 	 	20,053	 	 	 	13,031,797	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	13,051,850	 	
Repurchase of common stock	 	 	—	 	 	 	—	 	 	 	(4,643,034	)	 	 	(4,643	)	 	 	(3,477,632	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(3,482,275	)	
Exercise of common stock options and warrants	 	 	—	 	 	 	—	 	 	 	173,860	 	 	 	174	 	 	 	91,963	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	92,137	 	
Issuance of stock options and stock for services	 	 	—	 	 	 	—	 	 	 	75,882	 	 	 	76	 	 	 	82,288	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	82,364	 	
Amortization of deferred compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7,045	 	 	 	7,045	 	
Preferred stock dividends	 	 	44,777	 	 	 	447	 	 	 	—	 	 	 	—	 	 	 	5,528,409	 	 	 	(5,528,856	)	 	 	—	 	 	 	—	 	 	 	—	 	
Conversion of preferred into common stock	 	 	(233,934	)	 	 	(2,339	)	 	 	6,877,983	 	 	 	6,878	 	 	 	(4,539	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Stock-based compensation from repriced options	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	542,666	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	542,666	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized loss on marketable securities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1,051	)	 	 	—	 	 	 	(1,051	)	
Net loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17,211,058	)	 	 	—	 	 	 	—	 	 	 	(17,211,058	)	
Total comprehensive loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(17,212,109	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2003	 	 	489,205	 	 	 	4,892	 	 	 	70,482,570	 	 	 	70,483	 	 	 	294,373,630	 	 	 	(283,882,840	)	 	 	(2,995	)	 	 	(37,362	)	 	 	10,525,808	 	
Sale of common stock	 	 	—	 	 	 	—	 	 	 	25,723,200	 	 	 	25,723	 	 	 	15,377,566	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	15,403,289	 	
Exercise of common stock options and warrants	 	 	—	 	 	 	—	 	 	 	246,175	 	 	 	246	 	 	 	154,497	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	154,743	 	
Issuance of stock options and stock for services	 	 	—	 	 	 	—	 	 	 	109,844	 	 	 	110	 	 	 	129,338	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	129,448	 	
Amortization of deferred compensation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	16,122	 	 	 	16,122	 	
Preferred stock dividends	 	 	20	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,675,995	 	 	 	(2,675,995	)	 	 	—	 	 	 	—	 	 	 	—	 	
Conversion of preferred into common stock	 	 	(488,570	)	 	 	(4,885	)	 	 	14,369,740	 	 	 	14,370	 	 	 	(9,485	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Stock-based compensation from repriced options	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(713,074	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(713,074	)	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized loss on marketable securities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(11,994	)	 	 	—	 	 	 	(11,994	)	
Net loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(12,734,950	)	 	 	—	 	 	 	—	 	 	 	(12,734,950	)	
Total comprehensive loss	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(12,746,944	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2004	 	 	655	 	 	$	7	 	 	 	110,931,529	 	 	$	110,932	 	 	$	311,988,467	 	 	$	(299,293,785	)	 	$	(14,989	)	 	$	(21,240	)	 	$	12,769,392	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income	 	$	(12,734,950	)	 	$	(17,211,058	)	 	$	16,971,540	 	
 	Adjustments to reconcile net loss to net cash used in operating activities —	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Realized gain on marketable securities	 	 	—	 	 	 	(103,585	)	 	 	—	 	
 	 	Stock repurchase expense	 	 	—	 	 	 	1,857,214	 	 	 	—	 	
 	 	Stock-based compensation	 	 	(713,074	)	 	 	542,666	 	 	 	(1,297,445	)	
 	 	Depreciation and amortization expense	 	 	288,464	 	 	 	280,596	 	 	 	552,115	 	
 	 	Issuance of stock options and stock for services	 	 	129,448	 	 	 	82,364	 	 	 	—	 	
 	 	Amortization of deferred compensation	 	 	16,122	 	 	 	7,045	 	 	 	49,325	 	
 	 	Amortization of deferred financing costs	 	 	—	 	 	 	—	 	 	 	10,586	 	
 	 	Issuance of common stock and warrants	 	 	—	 	 	 	—	 	 	 	1,264,669	 	
 	 	Non cash interest expense	 	 	—	 	 	 	—	 	 	 	21,882	 	
 	 	Changes in operating assets and liabilities —	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Receivables	 	 	(90,177	)	 	 	203,377	 	 	 	(131,450	)	
 	 	 	Prepaid expenses and other current assets	 	 	(231,619	)	 	 	90,073	 	 	 	(145,364	)	
 	 	 	Accounts payable and accrued expenses	 	 	127,903	 	 	 	139,565	 	 	 	144,892	 	
 	 	 	Deferred revenue	 	 	(83,787	)	 	 	(266,771	)	 	 	(28,422,685	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash used in operating activities	 	 	(13,291,670	)	 	 	(14,378,514	)	 	 	(10,981,935	)	
Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Purchases of held-to-maturity securities	 	 	—	 	 	 	—	 	 	 	(14,582,249	)	
 	Purchases of available-for-sale securities	 	 	(18,635,747	)	 	 	(17,681,672	)	 	 	(8,219,615	)	
 	Proceeds from sale of available-for-sale securities	 	 	12,300,000	 	 	 	15,343,377	 	 	 	4,800,000	 	
 	Proceeds from sale of held-to-maturity securities	 	 	—	 	 	 	—	 	 	 	3,047,725	 	
 	Proceeds from maturities of held-to-maturity securities	 	 	2,850,000	 	 	 	14,080,000	 	 	 	7,816,000	 	
 	Purchases of property and equipment	 	 	(60,410	)	 	 	(53,943	)	 	 	(371,584	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash (used in) provided by investing activities	 	 	(3,546,157	)	 	 	11,687,762	 	 	 	(7,509,723	)	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Sale of common stock and warrants, net of issuance costs	 	 	15,403,289	 	 	 	13,051,850	 	 	 	—	 	
 	Repurchase of common stock	 	 	—	 	 	 	(5,339,489	)	 	 	—	 	
 	Proceeds from exercise of common stock options and warrants	 	 	154,743	 	 	 	92,137	 	 	 	459,676	 	
 	Payments on debt	 	 	(1,306,000	)	 	 	—	 	 	 	(284,102	)	
 	Payments on capital lease	 	 	—	 	 	 	(33,591	)	 	 	(79,711	)	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Net cash provided by financing activities	 	 	14,252,032	 	 	 	7,770,907	 	 	 	95,863	 	
 	 	 	 	 	 	 	 	 	 	
Net (decrease) increase in cash and cash equivalents	 	 	(2,585,795	)	 	 	5,080,155	 	 	 	(18,395,795	)	
Cash and cash equivalents, beginning of period	 	 	7,607,655	 	 	 	2,527,500	 	 	 	20,923,295	 	
 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents, end of period	 	$	5,021,860	 	 	$	7,607,655	 	 	$	2,527,500	 	
 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2004
 	 	
(1) 	Organization	
      Hybridon, Inc. (the Company) was incorporated in the State of Delaware on May 25, 1989. The Company is engaged in the discovery, development and commercialization of novel therapeutics based on synthetic DNA for the treatment of cancer, asthma/allergies and infectious diseases. Hybridon’s activities are primarily focused on the development of its immunomodulatory oligonucleotide, or IMO, technology. Our IMO compounds are synthetic DNA-based sequences that are designed to mimic bacterial DNA and be recognized by a specific protein receptor called Toll-like Receptor 9, or TLR9, which triggers the activation and modulation of the immune system. The Company has also been a pioneer in the development of antisense technology, which uses synthetic DNA to block the production of disease causing proteins at the cellular level. In 2003 and 2004, Hybridon devoted substantially all of its research and development efforts on developing its IMO technology and products and expects to continue to focus its research and development efforts in 2005 and in future years to its IMO technology and products. The Company plans to continue to seek to enter into collaborations with third parties for the development and commercialization of products based on its antisense technology.
      Since inception, the Company has been primarily engaged in research and development and manufacturing. To date almost all revenues received by the Company have been from collaboration and licensing agreements. In addition, the Company generated revenues from the sale of synthetic DNA and reagent products manufactured by Hybridon Specialty Products Division, or HSP, prior to selling HSP in September 2000.
      The Company has incurred operating losses in most fiscal years and had an accumulated deficit of $299.3 million at December 31, 2004. The Company had cash, cash equivalents and short-term investments of $14.4 million at December 31, 2004. Based on its current operating plan, the Company believes that these funds will be sufficient to fund operations into January 2006, although the Company could reduce planned activities if it needed to conserve such funds. Therefore, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
      The Company does not expect to generate significant additional funds internally until it successfully completes development and obtains marketing approval for products, either alone or in collaboration with third parties, which the Company expects will take a number of years. In addition, it has no committed external sources of funds. As a result, in order for the Company to continue to pursue its clinical and preclinical development programs and continue its operations beyond January 2006, the Company must raise additional funds in 2005 from debt, equity financings or from collaborative arrangements with biotechnology or pharmaceutical companies. There can be no assurance that the requisite funds will be available in the necessary time frame or on terms acceptable to the Company. If the Company is unable to raise sufficient funds, the Company may be required to delay, scale back or eliminate some or all of its operating plans and possibly relinquish rights to portions of the Company’s technology or products. In addition, increases in expenses or delays in clinical development may adversely impact the Company’s cash position and require further cost reductions. No assurance can be given that the Company will be able to operate profitably on a consistent basis, or at all, in the future.
 	 	
(2) 	Summary of Significant Accounting Policies	
     (a) Use of Estimates
      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
      The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biotechnology industry, such as uncertainty of clinical trial outcomes, uncertainty of additional funding and history of operating losses.
     (b) Cash Equivalents and Short-Term Investments
      The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2004 and 2003 consist of cash and money market funds.
      The Company accounts for investments in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities . Management determines the appropriate classification of marketable securities at the time of purchase. In accordance with SFAS No. 115, investments that the Company has the positive intent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity, which approximates fair market value. Such amortization is included in “Investment income, net” on the accompanying consolidated statements of operations. Investments that the Company does not have the positive intent to hold to maturity are classified as “available-for-sale” and reported at fair market value. Unrealized gains and losses associated with “available-for-sale” investments are recorded in “Accumulated other comprehensive loss” on the accompanying consolidated balance sheet. The amortization of premiums and accretion of discounts and interest and dividends are included in “Investment income, net” on the accompanying consolidated statements of operations for all securities. Any realized gains and losses and declines in value judged to be other than temporary are included in “Gain on sale of securities, net”. The cost of securities sold is based on the specific identification method. The Company recorded $103,585 of realized gains in “Gain on sale of securities, net” on the accompanying consolidated statement of operations from available-for-sale securities sold in 2003. For the years ended December 31, 2004, 2003 and 2002, there were no realized losses or permanent declines in value included in “Gain on sale of securities, net” for any securities.
      There were no long-term investments as of December 31, 2004 and 2003. Available for sale securities are classified as short-term regardless of the maturity date if the Company plans to use them to fund operations within one year of the balance sheet date. Auction securities are highly liquid equity and debt securities that have floating interest or dividend rates that reset periodically through an auctioning process that sets rates based on bids. Issuers include municipalities, closed-end bond funds and corporations. These securities can either be debt or preferred shares. At December 31, 2004 and 2003, the Company’s short-term investments consisted of the following all of which are classified as available-for-sale securities:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2004	 	
 	 	 	 	
 	 	 	 	Gross	 	 	Gross	 	 	
 	 	 	 	Unrealized	 	 	Unrealized	 	Estimated	 	
 	 	Cost	 	 	Losses	 	 	Gains	 	Fair Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Corporate bonds due in one year or less	 	$	2,006,129	 	 	$	1,979	 	 	$	—	 	 	$	2,004,150	 	
Government bonds due in one year or less	 	 	3,000,000	 	 	 	13,010	 	 	 	—	 	 	 	2,986,990	 	
Auction Securities	 	 	4,400,000	 	 	 	—	 	 	 	—	 	 	 	4,400,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	9,406,129	 	 	$	14,989	 	 	$	—	 	 	$	9,391,140	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2003	 	
 	 	 	 	
 	 	 	 	Gross	 	 	Gross	 	 	
 	 	 	 	Unrealized	 	 	Unrealized	 	Estimated	 	
 	 	Cost	 	 	Losses	 	 	Gains	 	Fair Value	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Corporate bonds:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Due in one year or less	 	$	520,545	 	 	$	1,045	 	 	$	—	 	 	$	519,500	 	
 	Due in one to two years	 	 	2,042,870	 	 	 	1,950	 	 	 	—	 	 	 	2,040,920	 	
Auction Securities	 	 	3,500,000	 	 	 	—	 	 	 	—	 	 	 	3,500,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	6,063,415	 	 	$	2,995	 	 	$	—	 	 	$	6,060,420	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
      Although unrealized losses exist as of December 31, 2004, the Company does not believe they are other-than-temporary based on the nature of the investment and the lack of any adverse events.
     (c) Depreciation and Amortization
      Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the related assets, as follows:
 	 	 	 	 	
 	 	Estimated	 	
Asset Classification	 	Useful Life	 	
 	 	 	 	
Leasehold improvements	 	 	Life of lease	 	
Laboratory equipment and other	 	 	3 – 5  years	 	
     (d) Reclassification and Additional Disclosures
      Certain amounts in the prior years consolidated financial statements have been reclassified and certain additional disclosures have been made to such financial statements as discussed below.
     (e) Revenue Recognition
      In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition , which codifies, revises and rescinds certain sections of SAB No. 101,  Revenue Recognition , in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material effect on the Company’s consolidated results of operations, consolidated financial position or consolidated cash flows. The Company’s revenue recognition policy complies with SAB No. 101 as modified by SAB No. 104. Alliance revenues are comprised of payments under various collaboration and licensing agreements for research and development, including reimbursement of third party expenses, milestone payments, license fees, sublicense fees, and royalty payments.
      The Company recognizes license fees and other upfront fees, not specifically tied to a separate earnings process, ratably over the term of the contract or the term in which the Company must fulfill an obligation to aid in the research or use of the licensed technology.
      The Company recognizes service and research and development revenue when the services are performed.
      For payments that are specifically associated with a separate earnings process, the Company recognizes revenue when the specific performance obligation is completed. Performance obligations typically consist of significant milestones in the development life cycle of the related technology, such as initiation of clinical trials, filing for approval with regulatory agencies and approvals by regulatory agencies.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
      Royalty income represents amounts earned under certain collaboration and license agreements and is recognized as earned, which generally occurs upon receipt of quarterly royalty statements from the licensee or, in the case of a contractually-stated minimum annual royalty arrangement, the greater of the amount actually earned or the guaranteed minimum amount.
     (f) Financial Instruments
      SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of the estimated fair values of financial instruments. The Company’s financial instruments consist of cash and cash equivalents, short-term investments, and receivables. The estimated fair values of these financial instruments approximates their carrying values as of December 31, 2004 and 2003, respectively. The estimated fair values have been determined through information obtained from market sources and management estimates. As of December 31, 2004 and 2003, the Company does not have any derivatives or any other financial instruments as defined by SFAS No. 133,  Accounting for Derivative and Hedging Instruments .
     (g) Comprehensive Income (Loss)
      The Company applies SFAS No. 130, Reporting Comprehensive Income. Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Comprehensive income or loss for the years ended December 31, 2004, 2003 and 2002 is comprised of reported net income or loss and the change in net unrealized losses on investments during each year which is included in “Accumulated other comprehensive loss” on the accompanying consolidated balance sheet.
     (h) Net (Loss) Income per Common Share
      The Company applies SFAS No. 128, Earnings per Share. Under SFAS No. 128, basic and diluted net (loss) income per common share is computed using the weighted average number of shares of common stock outstanding during the period. In addition, diluted net income per common share is calculated to give effect of stock options, convertible preferred stock and convertible debt (where the effect is not antidilutive) resulting in lower net income per share. The dilutive effect of outstanding stock options is reflected by the application of the treasury stock method under SFAS No. 128. Diluted net loss per common share is the same as basic net loss per common share for the years ended December 31, 2004 and 2003 as the effects of the Company’s potential common stock equivalents are antidilutive (see Note 11).
     (i) Segment Reporting
      SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. To date, the Company has viewed its operations and manages its business as one operating segment. Accordingly, the Company operates in one segment, which is the business of discovering and developing novel therapeutics through the application of synthetic DNA. As a result, the financial information disclosed herein represents all of the material financial information related to the Company’s principal operating segment. For all of the periods presented, all of the Company’s revenues were generated in the United States. As of December 31, 2004 and 2003, all assets were located in the United States.

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
     (j) Stock-Based Compensation
      The Company applies the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by the disclosure requirements of FASB Statement No. 148,  Accounting for Stock-Based Compensation — Transition and Disclosure . The Company continues to account for employee stock compensation at intrinsic value, in accordance with Accounting Principles Board (APB) Opinion No. 25,  Accounting for Stock Issued to Employees  and related interpretations, with disclosure of the effects of fair value accounting on net income or net loss and related per share amounts on a pro forma basis.
      The Company has computed the pro forma disclosures required by SFAS No. 123 for all stock options granted to employees after January 1, 1995, using the Black-Scholes option-pricing model. The assumptions used for the years ended December 31, 2004, 2003, and 2002 are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Average risk free interest rate	 	 	4.18	%	 	 	3.30	%	 	 	4.23	%	
Expected dividend yield	 	 	—	 	 	 	—	 	 	 	—	 	
Expected lives	 	 	6 years	 	 	 	6 years	 	 	 	6 years	 	
Expected volatility	 	 	90	%	 	 	90	%	 	 	90	%	
Weighted average grant date fair value of options granted during the period (per share)	 	$	0.40	 	 	$	0.79	 	 	$	0.70	 	
      For the years ended December 31, 2004, 2003 and 2002, the weighted average per share grant date fair value and exercise price per share of option grants to employees in relation to market price of the stock on the date of the grant is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Exercise Price	 	
 	 	 	 	
 	 	Equals	 	 	Exceeds	 	 	Is Less than	 	
 	 	Market	 	 	Market	 	 	Market	 	
 	 	Price	 	 	Price	 	 	Price	 	
 	 	 	 	 	 	 	 	 	 	
2004 Option Grants	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average grant date fair value of options granted during the period	 	$	0.41	 	 	$	0.36	 	 	$	—	 	
Weighted average exercise price of options granted during the period	 	$	0.54	 	 	$	0.52	 	 	$	—	 	
2003 Option Grants	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average grant date fair value of options granted during the period	 	$	0.79	 	 	$	—	 	 	$	—	 	
Weighted average exercise price of options granted during the period	 	$	1.05	 	 	$	—	 	 	$	—	 	
2002 Option Grants	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average grant date fair value of options granted during the period	 	$	0.62	 	 	$	1.12	 	 	$	1.11	 	
Weighted average exercise price of options granted during the period	 	$	0.82	 	 	$	1.54	 	 	$	1.40	 	
      The Black-Scholes option-pricing 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-pricing models require the input of highly subjective assumptions including 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

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Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
      The pro forma effect of applying SFAS No. 123 for the three years ended December 31, 2004 would be as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Net (loss) income applicable to common stockholders, as reported	 	$	(15,410,945	)	 	$	(22,739,914	)	 	$	12,725,258	 	
Less: stock-based compensation (income) expense included in reported net (loss) income	 	 	(713,074	)	 	 	542,666	 	 	 	(1,297,445	)	
Add: stock-based employee compensation expense determined under fair value based method for all awards	 	 	(1,711,953	)	 	 	(1,078,898	)	 	 	(1,586,526	)	
 	 	 	 	 	 	 	 	 	 	
Pro forma net (loss) income applicable to common stockholders, as adjusted for the effect of applying SFAS No. 123	 	$	(17,835,972	)	 	$	(23,276,146	)	 	$	9,841,287	 	
 	 	 	 	 	 	 	 	 	 	
Basic net (loss) income per common share —	 	 	 	 	 	 	 	 	 	 	 	 	
 	As reported	 	$	(0.16	)	 	$	(0.45	)	 	$	0.27	 	
 	 	 	 	 	 	 	 	 	 	
 	Pro forma	 	$	(0.18	)	 	$	(0.46	)	 	$	0.21	 	
 	 	 	 	 	 	 	 	 	 	
Diluted net (loss) income per common share —	 	 	 	 	 	 	 	 	 	 	 	 	
 	As reported	 	$	(0.16	)	 	$	(0.45	)	 	$	0.24	 	
 	 	 	 	 	 	 	 	 	 	
 	Pro forma	 	$	(0.18	)	 	$	(0.46	)	 	$	0.19	 	
 	 	 	 	 	 	 	 	 	 	
      The effects on years ended December 31, 2004, 2003 and 2002 pro forma net (loss) income and net (loss) income per share of expensing the estimated fair value of stock options are not necessarily representative of the effects on reported net (loss) income for future years because of the vesting period of the stock options and the potential for issuance of additional stock options in future years.
 	 	
     (k) 	Concentration of Credit Risk	
      Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and short-term investments. The Company’s credit risk is managed by investing its cash and cash equivalents and marketable securities in highly rated money market instruments and debt securities. Due to these factors, no significant additional credit risk is believed by management to be inherent in the Company’s assets. As of December 31, 2004, approximately 99% of the Company’s cash, cash equivalents, and investments are held at one financial institution.
 	 	
     (l) 	New Accounting Pronouncement	
      In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, which is a revision of SFAS No. 123,  “Accounting for Stock-Based Compensation” . SFAS No. 123(R) supersedes APB Opinion No. 25,  “Accounting for Stock Issued to Employees” , and amends SFAS No. 95,  “Statement of Cash Flows” . Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
longer an alternative. The new standard will be effective for the Company in the quarter beginning July 1, 2005.
      As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using APB 25’s intrinsic value method and, as such, generally, except for marking to market the repriced options discussed in Note 7(e), the Company recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123(R)’s fair value method may have a material impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The impact of adopting SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the company adopted SFAS 123(R) in a prior period, the impact of applying that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net loss and net loss per share in Note 2(j) to these financial statements. The Company is currently evaluating the impact of adopting of SFAS 123(R) on its financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.
 	 	
(3) 	Accrued Expenses	
      At December 31, 2004 and 2003, accrued expenses consist of the following:
 	 	 	 	 	 	 	 	 	
 	 	December 31	 	
 	 	 	 	
 	 	2004	 	 	2003	 	
 	 	 	 	 	 	 	
Payroll and related costs	 	$	527,000	 	 	$	308,891	 	
Clinical trial expenses	 	 	306,596	 	 	 	364,070	 	
Other	 	 	498,554	 	 	 	450,097	 	
 	 	 	 	 	 	 	
 	 	$	1,332,150	 	 	$	1,123,058	 	

 	 	
(4) 	Property and Equipment	
      At December 31, 2004 and 2003, net property and equipment at cost consists of the following:
 	 	 	 	 	 	 	 	 	
 	 	December 31	 	
 	 	 	 	
 	 	2004	 	 	2003	 	
 	 	 	 	 	 	 	
Leasehold improvements	 	$	424,500	 	 	$	407,812	 	
Laboratory equipment and other	 	 	1,804,799	 	 	 	1,761,077	 	
 	 	 	 	 	 	 	
Total property and equipment, at cost	 	 	2,229,299	 	 	 	2,168,889	 	
Less: Accumulated depreciation and amortization	 	 	1,877,508	 	 	 	1,732,076	 	
 	 	 	 	 	 	 	
Property and equipment, net	 	$	351,791	 	 	$	436,813	 	
 	 	 	 	 	 	 	
      For the years ended December 31, 2004 and 2003, laboratory equipment and other includes approximately $113,000 of office equipment financed under capital leases with accumulated depreciation of approximately $57,000 and $34,000, respectively.
      Depreciation expense, which includes amortization of assets recorded under capital leases, was approximately $145,000, $152,000 and $93,000 in 2004, 2003 and 2002, respectively.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
(5) 	Debt	

     (a) 	9% Convertible Subordinated Notes Payable	
      On April 1, 2004, the Company’s 9% convertible subordinated notes payable (the 9% Notes) matured. As a result, the Company paid $1,306,000 to the note holders in payment of the principal amount outstanding under the notes plus accrued interest through the maturity date of $58,770. Under the terms of the 9% Notes, the Company made semi-annual interest payments on the outstanding principal balance through the maturity date of April 1, 2004. The Company currently has no debt outstanding.
 	 	
     (b) 	8% Convertible Notes Payable	
      Upon maturity of the Company’s 8% convertible notes payable (the 8% Notes) on November 30, 2002, $31,582 of the 8% Notes plus accrued interest were converted into 52,637 shares of common stock. The Company paid approximately $284,000 to the holders of the remaining 8% Notes in payment of the outstanding principal and accrued interest thereon.
 	 	
(6) 	Collaboration and License Agreements	

     (a) 	Collaboration and License Agreement with VasGene Therapeutics, Inc.	
      On October 29, 2004, the Company and VasGene Therapeutics Inc. entered into reciprocal Collaboration and License Agreements pursuant to which both parties agreed to collaborate on the research and development of VEGF antisense products. The Company intends to pursue the treatment of ophthalmologic and other non-cancer diseases that are susceptible to treatment based on localized administration under one agreement, and VasGene intends to pursue the treatment of cancer and other non-ophthalmologic diseases that are susceptible to treatment through systemic administration under the other agreement. The Company is entitled to receive milestone payments, royalties, and sublicensing payments. Additionally, the Company may be entitled to reimbursement of research services performed in accordance with the terms of the agreement at the request of VasGene. The Company may have to pay VasGene royalties and sublicensing payments. VasGene may also be entitled to reimbursement of research services that it performs under the agreement at the Company’s request. The milestones, if fully achieved, could result in payments to the Company of $8.0 million for each non-cancer VEGF antisense product developed by VasGene. Milestone payments would be triggered by the achievement of specific events in the development and commercial launch process.
 	 	
     (b) 	Collaboration and License Agreement with Alnylam Pharmaceuticals, Inc.	
      On August 2, 2004, the Company and Alnylam Pharmaceuticals, Inc. entered into a collaboration and license agreement pursuant to which the Company granted to Alnylam an exclusive license to a series of patents and patent applications relating to the therapeutic use of oligonucleotides that inhibit the production of the protein Vascular Endothelial Growth Factor (VEGF). Under the license, Alnylam’s rights are limited to targeting VEGF for ocular indications with RNAi molecules. The Company is entitled to receive an up-front payment, annual license fees, milestone payments, royalties and sublicensing payments from Alnylam under the terms of the agreement. The up-front payment, license fees and milestone payments payable to the Company under the agreement could total approximately $4.4 million if all the milestones are achieved. Milestone payments are triggered by the achievement of specific events in the development process.
 	 	
     (c) 	Collaboration and License Agreement with The Immune Response Corporation.	
      On October 8, 2003, the Company entered into a collaboration and license agreement with The Immune Response Corporation to develop Amplivax as an adjuvant for use in combination with Immune Response’s REMUNE vaccine candidate for the prevention and treatment of HIV-1. Under the terms of the agreement,

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
the Company granted Immune Response, during an exclusivity period, a worldwide license to Amplivax as an HIV vaccine adjuvant for the prevention and treatment of HIV. In order to maintain the exclusivity of the license to Amplivax that the Company granted to Immune Response in the agreement, Immune Response must make payments to the Company at specified times under the agreement. The Company is also entitled to reimbursement for time and materials and amounts payable to third parties for contracted services at cost plus an additional contractually stated percentage. In addition, the Company may receive certain specified fees, royalties on sales of the REMUNE vaccine combined with Amplivax and a percentage of sublicense income received by Immune Response.
 	 	
     (d) 	Collaboration and License Agreement with Aegera Therapeutics Inc.	
      On September 13, 2002, the Company and Aegera Therapeutics Inc. entered into a Collaboration and License Agreement (the Collaboration) to research, develop, and optimize a 2nd generation antisense drug targeted to the XIAP gene, a gene which has been implicated in the resistance of cancer cells to chemotherapy. In addition, Hybridon licensed to Aegera, on a non-exclusive basis, rights to the Company’s portfolio of 2nd generation antisense chemistries and oral antisense delivery intellectual property owned or licensed by the Company. In consideration for research, development and optimization work to be performed by the Company under the Collaboration and the license of technology by the Company, Aegera paid the Company an upfront license fee and a prepaid milestone. In addition, Aegera agreed to pay the Company additional research payments, milestone payments upon the achievement of specified development milestones, and royalties on product sales and sublicensing, if any. Future anticipated payments under the Collaboration could total approximately $7.7 million if all of the milestones are achieved. Aegera is responsible for the development costs of the drug candidate.
 	 	
     (e) 	Collaboration and License Agreement with Migenix Inc.	
      On September 11, 2002, the Company and Migenix Inc. (formerly Micrologix Biotechnology, Inc.) entered into a Collaboration and License Agreement to develop an antisense drug candidate (MBI1121) for the treatment of human papillomavirus (HPV). The Company licensed Migenix the exclusive worldwide rights to a family of patents, claims of which cover a number of antisense oligonucleotides targeted to the HPV genome and non-exclusive rights to a portfolio of antisense chemistries owned or licensed by the Company. In consideration, Migenix agreed to pay the Company a license fee, paid in two installments, milestone payments upon the achievement of specified milestones, and royalties on product sales and sublicensing, if earned. The total license fee and milestone payments could amount to approximately $5.8 million, if all the milestones are achieved.
      As part of the collaboration and license agreement, the Company and Migenix entered into a stock purchase agreement relating to the payment of the remaining portion of the license fee and certain future milestone payments under which Migenix issued to the Company shares of preferred stock of Migenix. Under the terms of the agreement, upon a specified date or the achievement of a milestone, a portion of the shares of preferred stock would, at the option of Migenix, either (i) be converted into common stock of Migenix at a conversion rate based on an average market price or (ii) be redeemed by Migenix for a cash amount equal to the payment due in respect of such date or milestone. The Company became entitled to receive the final installment of the license fee on April 17, 2003 and was issued 379,139 shares of Migenix common stock upon conversion of a portion of the preferred stock. The Company classified the common stock as available-for-sale. In the second quarter of 2003, the Company sold all the shares it received from Migenix for approximately $343,000 and recorded a realized gain of approximately $103,000. License fee revenue is being recorded over the current estimated development term of the drug candidate, MBI1121.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
     (f) 	Collaboration and License Agreement with Isis Pharmaceuticals, Inc.	
      On May 24, 2001, the Company and Isis Pharmaceuticals, Inc. (Isis) entered into a Collaboration and License Agreement (the Isis Agreement). Under the Isis Agreement, the Company granted Isis a license, with the right to sublicense, to the Company’s antisense chemistry and delivery patents and patent applications. Isis also agreed to pay the Company a portion of specified sublicense income it receives from specified types of sublicenses of the Company’s patents and patent applications. The Company has retained the right to use the patents and patent applications in its own drug discovery and development efforts and in collaboration with third parties. In consideration of the license granted by the Company, Isis paid $15.0 million in cash and issued 857,143 shares of its common stock having an aggregate fair market value on the dates on which title to the shares was received of $17.3 million. An additional $4.5 million installment was due in 2003; this obligation was subsequently canceled as part of the August 2002 amendment to the Isis Agreement described below.
      Isis granted the Company a license to use specified antisense patents and patent applications, principally Isis’ suite of RNase H patents. The Company has the right under the Isis Agreement to use these patents and patent applications in its drug discovery and development efforts and in specified types of collaborations with third parties. In consideration of this license, the Company originally agreed to pay Isis a total of $6.0 million in cash or in shares of its common stock in three equal annual installments of $2.0 million beginning in 2002. In May 2002, the Company made its first payment to Isis consisting of approximately $716,000 in cash and 1,005,499 shares of common stock having a fair market value of approximately $1.2 million on the date of issuance. The Company also agreed to pay Isis a nominal annual maintenance fee and a modest royalty on sales of products covered by specified patents and patent applications sublicensed to the Company by Isis. The actual number of shares of Hybridon stock that was issuable to Isis under the Isis Agreement was based on certain market conditions, as defined in the Isis Agreement, but was intended to have a fair market value of $6.0 million, if the stock remained in a certain price range as defined in the Isis Agreement; this obligation was subsequently cancelled as part of the August 2002 amendment to the Isis Agreement described below.
      Prior to August 14, 2002, the Company interpreted its obligations under the Isis Agreement not to be inconsequential and perfunctory. As a result, for the year ended December 31, 2001, the Company recognized revenue under the Isis Agreement, net of amortization of the Company’s payments to Isis, over the 10-year term of the Isis Agreement expiring in 2011. On August 14, 2002, the Company and Isis entered into an amendment to the Isis Agreement. As part of the amendment, each party agreed to cancel the remaining tranche payments due to the other under the Isis Agreement. In addition, the Company and Isis agreed to more specifically define and limit each party’s future collaborative obligations under the Isis Agreement. As a result of the amendment, the Company was able to specifically limit the nature of its obligation and related cost of compliance under the Isis Agreement and to determine that such amended obligation and cost was inconsequential. In accordance with SAB 101, the Company recognized all previously deferred revenue under the Isis Agreement at the time of the amendment. Revenue for 2002 included approximately $29.5 million which was the previously deferred portion, at the time of the amendment, of the $32.3 million of cash and Isis stock received by the Company in 2001. Revenue for 2003 includes sublicense income received from Isis in connection with sublicenses of the Company’s patents and patent applications granted by Isis to third parties. General and administrative expenses for the year ended December 31, 2002 include the $2.2 million previously unrecognized portion of the $2.4 million in direct expenses related to the Isis Agreement.
 	 	
     (g) 	License Agreement with University of Massachusetts Medical Center	
      The Company has a licensing agreement with the University of Massachusetts Medical Center (UMass), under which the Company has received exclusive licenses to technology in specified patents and patent applications. The Company is required to make royalty payments based on future sales of products employing

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
the technology or falling under claims of a patent, as well as a specified percentage of sublicense income received related to the licensed technology. Additionally, the Company is required to pay an annual maintenance fee through the life of the patents.
 	 	
(7) 	Stockholders’ Equity	

     (a) 	Common Stock	
      Pursuant to the terms of a unit purchase agreement dated as of May 5, 1998, the Company issued and sold a total of 9,597,476 shares of common stock (the “Put Shares”) at a price of $2.00 per share. Under the terms of the unit purchase agreement, the initial purchasers (the “Put Holders”) of the Put Shares have the right (the “Put Right”) to require the Company to repurchase the Put Shares. The Put Right may not be exercised by any Put Holder unless: 1) the Company liquidates, dissolves or winds up its affairs pursuant to applicable bankruptcy law, whether voluntarily or involuntarily; 2) all of the Company’s indebtedness and obligations, including without limitation the indebtedness under the Company’s then outstanding notes, has been paid in full; and 3) all rights of the holders of any series or class of capital stock ranking prior and senior to the common stock with respect to liquidation, including without limitation the Series A convertible preferred stock, have been satisfied in full. The Company may terminate the Put Right upon written notice to the Put Holders if the closing sales price of its common stock exceeds $4.00 per share for the twenty consecutive trading days prior to the date of notice of termination. Because the Put Right is not transferable, in the event that a Put Holder has transferred Put Shares since May 5, 1998, the Put Right with respect to those shares has terminated. As a consequence of the Put Right, in the event the Company is liquidated, holders of shares of common stock that do not have Put Rights with respect to such shares may receive smaller distributions per share upon the liquidation than if there were no Put Rights outstanding.
      In February 2003, the Company repurchased 2,415,880 Put Shares (see Note 14). As of December 31, 2004, 1,087,124 of the Put Shares continued to be held in the name of Put Holders. The Company cannot determine at this time what portion of the Put Rights of the remaining 6,094,472 Put Shares have terminated.
 	 	
     (b) 	Warrants	
      The Company has the following warrants outstanding and exercisable for the purchase of common stock at December 31, 2004:
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Weighted	 	
 	 	 	 	Exercise Price	 	
Expiration Date	 	Shares	 	 	Per Share	 	
 	 	 	 	 	 	 	
March 31, 2006	 	 	500,000	 	 	$	0.50	 	
January 1, 2007	 	 	100,000	 	 	 	1.65	 	
August 28, 2008	 	 	2,368,629	 	 	 	0.73	 	
August 28, 2008	 	 	7,308,684	 	 	 	1.00	 	
April 20, 2009	 	 	3,041,964	 	 	 	1.14	 	
August 27, 2009	 	 	2,197,200	 	 	 	0.67	 	
 	 	 	 	 	 	 	
 	 	 	15,516,477	 	 	 	 	 	
 	 	 	 	 	 	 	
 	Weighted average exercise price per share	 	 	 	 	 	$	0.93	 	
 	 	 	 	 	 	 	
      During 2002, the Company issued warrants to purchase 100,000 shares of common stock to a financial advisor which it valued at approximately $98,000 using the Black-Scholes pricing model and charged to

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
general and administrative expense during the year. The warrants that expire in 2008 and 2009 are described in Notes 8(d) and 15.
 	 	
     (c) 	Stock Options	
      The 1990 Stock Option Plan provided for the grant of incentive stock options and nonqualified stock options. All options granted under this plan and outstanding are fully vested. No additional options are being granted under the 1990 Option Plan. As of December 31, 2004, options to purchase a total of 53,334 shares of common stock remained outstanding under the 1990 Option Plan.
      The 1995 Stock Option Plan provides for the grant of incentive stock options and nonqualified stock options. Options granted under this plan generally vest over three to five years, and expire no later than 10 years from the date of grant. A total of 700,000 shares of common stock may be issued upon the exercise of options granted under this plan. The maximum number of shares with respect to which options may be granted to any employee under the 1995 Option Plan shall not exceed 500,000 shares of common stock during any calendar year. The Compensation Committee of the Board of Directors has the authority to select the employees to whom options are granted and determine the terms of each option, including (i) the number of shares of common stock subject to the option; (ii) when the option becomes exercisable; (iii) the option exercise price, which in the case of incentive stock options must be at least 100% and 110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common stock, of the fair market value of the common stock as of the date of grant and (iv) the duration of the options which in the case of incentive stock options may not exceed 10 years. As of December 31, 2004, options to purchase a total of 442,954 shares of common stock remained outstanding under the 1995 Stock Option Plan.
      Under the 1995 Director Stock Option Plan, a total of 800,000 shares of common stock may be issued upon the exercise of options. Under the terms of the Director Plan options to purchase 3,750 shares of common stock are granted to each non-employee director on the first day of each calendar quarter and options to purchase 25,000 shares of common stock are granted to non-employee directors upon appointment to the Board. All options vest on the first anniversary of the date of grant. As of December 31, 2004, options to purchase a total of 242,250 shares of common stock remained outstanding under the Director Plan.
      Under the 1997 Stock Incentive Plan, options generally vest over three to five years, and expire no later than 10 years from the date of grant. A total of 13,500,000 shares of common stock may be issued upon the exercise of options granted under the plan. The maximum number of shares with respect to which options may be granted during any calendar year to any employee under the 1997 Stock Incentive Plan is determined by dividing 1,500,000 by the fair market value of a share of the Company’s common stock at the time of grant, and may not exceed an overall per participant annual limit of 5,000,000 shares. The Compensation Committee of the Board of Directors has the authority to select the employees to whom options are granted and determine the terms of each option, including (i) the number of shares of common stock subject to the option; (ii) when the option becomes exercisable; (iii) the option exercise price, which in the case of incentive stock options must be at least 100% (110% in the case of incentive stock options granted to those holding 10% or more of the voting power of the Company) of the fair market value of the common stock as of the date of grant and (iv) the duration of the option, which in the case of incentive stock options may not exceed 10 years. As of December 31, 2004, options to purchase a total of 9,583,876 shares of common stock remained outstanding under the 1997 Stock Incentive Plan.
      As of December 31, 2004, options to purchase 2,411,414 shares of common stock remain available for grant under the 1995 Stock Option Plan, the 1995 Director Plan and the 1997 Stock Incentive Plan.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
      Stock option activity for the years ended December 31, 2004, 2003, and 2002 is summarized as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted	 	
 	 	Number of	 	 	Exercise Price	 	 	Average Price	 	
 	 	Shares	 	 	Per Share	 	 	Per Share	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding, December 31, 2001	 	 	14,477,114	 	 	$	0.50 – $2.00	 	 	$	0.74	 	
 	Granted	 	 	786,500	 	 	 	0.50 –  1.54	 	 	 	0.92	 	
 	Exercised	 	 	(889,687	)	 	 	0.50 –  0.56	 	 	 	0.50	 	
 	Terminated	 	 	(66,667	)	 	 	0.50 –  2.00	 	 	 	0.51	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding, December 31, 2002	 	 	14,307,260	 	 	 	0.50 –  2.00	 	 	 	0.77	 	
 	Granted	 	 	596,000	 	 	 	0.70 –  1.15	 	 	 	1.05	 	
 	Exercised	 	 	(96,841	)	 	 	0.50 –  0.56	 	 	 	0.50	 	
 	Terminated	 	 	(86,500	)	 	 	0.50 –  2.00	 	 	 	0.87	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding, December 31, 2003	 	 	14,719,919	 	 	 	0.50 –  2.00	 	 	 	0.78	 	
 	Granted	 	 	2,084,750	 	 	 	0.52 –  1.14	 	 	 	0.53	 	
 	Exercised	 	 	(85,784	)	 	 	0.50 –  0.82	 	 	 	0.59	 	
 	Terminated	 	 	(159,178	)	 	 	0.50 –  1.54	 	 	 	1.13	 	
 	 	 	 	 	 	 	 	 	 	
Outstanding, December 31, 2004	 	 	16,559,707	 	 	$	0.50 – $2.00	 	 	$	0.75	 	
 	 	 	 	 	 	 	 	 	 	
Exercisable, December 31, 2002	 	 	8,739,045	 	 	$	0.50 – $2.00	 	 	$	0.74	 	
 	 	 	 	 	 	 	 	 	 	
Exercisable, December 31, 2003	 	 	10,357,565	 	 	$	0.50 – $2.00	 	 	$	0.75	 	
 	 	 	 	 	 	 	 	 	 	
Exercisable, December 31, 2004	 	 	12,883,125	 	 	$	0.50 – $2.00	 	 	$	0.76	 	

 	 	Options Outstanding	 	 	Options Exercisable	 	
 	 	 	 	 	 	 	
 	 	 	 	Weighted	 	 	Weighted	 	 	 	 	Weighted	 	
 	 	 	 	Average	 	 	Average	 	 	 	 	Average	 	
 	 	 	 	Remaining	 	 	Exercise	 	 	 	 	Exercise	 	
Exercise	 	 	 	 	Contractual Life	 	 	Price Per	 	 	 	 	Price Per	 	
Prices	 	 	Number	 	 	(Years)	 	 	Share	 	 	Number	 	 	Share	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
$	0.50	 	 	 	2,622,028	 	 	 	3.66	 	 	$	0.50	 	 	 	2,602,888	 	 	$	0.50	 	
 	0.52	 	 	 	1,965,000	 	 	 	9.92	 	 	 	0.52	 	 	 	—	 	 	 	—	 	
 	0.56	 	 	 	2,497,192	 	 	 	6.24	 	 	 	0.56	 	 	 	2,490,939	 	 	 	0.56	 	
 	0.57 – 0.79	 	 	 	1,196,000	 	 	 	7.50	 	 	 	0.74	 	 	 	1,010,311	 	 	 	0.74	 	
 	0.82 – 0.83	 	 	 	2,353,750	 	 	 	6.59	 	 	 	0.83	 	 	 	1,221,250	 	 	 	0.83	 	
 	0.84	 	 	 	3,152,500	 	 	 	6.57	 	 	 	0.84	 	 	 	3,151,250	 	 	 	0.84	 	
 	0.93 – 1.10	 	 	 	1,469,487	 	 	 	5.81	 	 	 	1.06	 	 	 	1,436,487	 	 	 	1.06	 	
 	1.12 – 2.00	 	 	 	1,303,750	 	 	 	6.77	 	 	 	1.23	 	 	 	970,000	 	 	 	1.26	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	16,559,707	 	 	 	6.48	 	 	 	0.75	 	 	 	12,883,125	 	 	 	0.76	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      In accordance with EITF No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services , the Company recognizes the fair value of non-employee options as they vest using the Black-Scholes option pricing model. The Company has recorded compensation expense of $1,082, $1,082, and $2,079 in 2004, 2003 and 2002, respectively, related to grants to non-employees.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
     (d) Employee Stock Purchase Plan
      The 1995 Employee Stock Purchase Plan (the Stock Purchase Plan) was adopted in October 1995 and amended in June 2003. Under the Stock Purchase Plan up to 500,000 shares of common stock may be issued to participating employees of the Company, as defined, or its subsidiaries. Participation is limited to employees that would not own 5% or more of the total combined voting power or value of the stock of the Company after the grant.
      On the first day of a designated payroll deduction period, the “Offering Period”, the Company will grant to each eligible employee who has elected to participate in the Stock Purchase Plan an option to purchase shares of common stock as follows: the employee may authorize an amount, a whole percentage from 1% to 10% of such employee’s regular pay, to be deducted by the Company from such pay during the Offering Period. On the last day of the Offering Period, the employee is deemed to have exercised the option, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the Stock Purchase Plan, the option price is an amount equal to 85% of the fair market value per share of the common stock on either the first day or the last day of the Offering Period, whichever is lower. In no event may an employee purchase in any one Offering Period a number of shares that is more than 15% of the employee’s annualized base pay divided by 85% of the market value of a share of common stock on the commencement date of the Offering Period. The Compensation Committee may, in its discretion, choose an Offering Period of 12 months or less for each of the Offerings and choose a different Offering Period for each Offering.
      Offering periods are three months in duration and commence on March 1, June 1, September 1, and December 1. In 2004, 2003 and 2002, the Company issued 92,215, 58,179 and 25,185 shares of common stock, respectively, under the Stock Purchase Plan.
     (e) Repricing
      In September 1999, the Company’s Board of Directors authorized the repricing of options to purchase 5,251,827 shares of common stock to $0.50 per share, which represented the market value on the date of the repricing. These options are subject to variable plan accounting, as defined in FASB Interpretation No. 44 (FIN 44). The Company will remeasure the intrinsic value of the repriced options, through the earlier of the date of exercise, cancellation or expiration, at each reporting date. A decrease in the intrinsic value of these options over 2004 and 2002 resulted in credits of approximately $713,000 and $1,297,000 to stock compensation expense for the years ended December 31, 2004 and 2002, respectively. For the year ended December 31, 2003, the Company recognized approximately $543,000 as stock compensation expense from repriced options. As of December 31, 2004, options to purchase 2,403,256 shares are subject to variable plan accounting.
     (f) Preferred Stock
      The Restated Certificate of Incorporation of the Company permits its Board of Directors to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting such series, and fix by resolution, the powers, privileges, preferences and relative, optional or special rights thereof, including liquidation preferences and dividends, and conversion and redemption rights of each such series. During 1998, the Company designated 1,500,000 shares as Series A convertible preferred stock which is described below in Note (7)(g). As of December 31, 2004 and 2003, there were 655 and 489,205 shares, respectively, of Series A convertible preferred stock outstanding. As discussed in Note (13), during 2002 the Company designated 100,000 shares of Series C junior participating preferred stock. In 2003, the Company designated an additional 50,000 shares of Series C junior participating preferred stock. There were no shares of Series C junior participating preferred stock issued or outstanding at December 31, 2004 and 2003.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
     (g) 	Series A Convertible Preferred Stock	
      On December 4, 2003, stockholders approved amendments to the Company’s Restated Certificate of Incorporation that:
 	 	 	
 	• 	reduced the liquidation preference of the Company’s Series A convertible preferred stock from $100 per share to $1 per share;	
 	 	 	
 	• 	reduced the annual dividend on the Company’s Series A convertible preferred stock from 6.5% to 1%; and	
 	 	 	
 	• 	increased the number of shares of the Company’s common stock issuable upon conversion of the Company’s Series A convertible preferred stock by 25% over the number of shares that would otherwise be issuable for a sixty-day conversion period between December 4, 2003 and February 2, 2004 inclusive.	
      During the sixty-day conversion period, the conversion ratio was increased so that the Series A convertible preferred shareholders could receive approximately 29.41 shares of common stock for each share of Series A convertible preferred stock converted instead of the stated conversion rate of 23.53 shares.
      During the conversion period, 99.9% of the Series A convertible preferred stock was converted to common stock. The combined effects of the amendments to the Company’s Restated Certificate of Incorporation and the Series A convertible preferred stock conversions are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 3, 2003	 	 	December 31, 2003	 	 	February 2, 2004	 	
 	 	 	 	 	 	 	 	 	 	
Shares:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Preferred stock outstanding	 	 	722,727	 	 	 	489,205	 	 	 	635	 	
 	Common stock issued from conversions (cumulative)	 	 	—	 	 	 	6,868,288	 	 	 	21,238,028	 	
 	Common stock outstanding	 	 	63,595,442	 	 	 	70,482,570	 	 	 	84,900,627	 	
Series A preferred liquidation preference	 	$	73,055,654	 	 	$	494,912	 	 	$	643	 	
Annual dividend amount	 	$	4,697,726	 	 	$	937,643	 	 	$	864	 	
      The financial statement recognition of the Series A preferred stock conversion is shown below:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Dividends	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Accretion of dividends expected to be paid on Series A Preferred Stock	 	$	503	 	 	$	3,402,856	 	 	$	4,246,282	 	
Accretion of dividend that would have been paid on April 1, 2004 and reversal since preferred shares were converted in January and February 2004	 	 	(570,000	)	 	 	570,000	 	 	 	—	 	
Market value of 25% additional shares issued upon conversion	 	 	3,245,492	 	 	 	1,556,000	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Total preferred stock dividend	 	$	2,675,995	 	 	$	5,528,856	 	 	$	4,246,282	 	
 	 	 	 	 	 	 	 	 	 	
      As shown above, $1.6 million of the 25% additional shares issued during the sixty-day conversion period was recorded as additional dividends (a) in the calculation of net loss applicable to common stockholders in the 2003 statement of operations and (b) in the 2003 statement of stockholders’ equity. The remaining $3.2 million of the 25% additional shares were issued between January 1, 2004 and February 2, 2004 and was recorded as additional dividends (a) in the calculation off “Net (loss) applicable to common stockholders” in

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
the 2004 statement of operations and (b) in the 2004 statement of stockholders equity. As a result of the amendment to the Company’s Certificate of Incorporation and the Series A convertible preferred stock conversions, the preferred stock liquidation preference was reduced from $73,055,654 at December 3, 2003 to $494,912 at December 31, 2003 and $643 at February 2, 2004.
      The dividends are now payable semi-annually in arrears at the rate of 1% per annum, at the election of the Company, either in cash or additional duly authorized, fully paid and nonassessable shares of Series A preferred stock. In the event of liquidation, dissolution or winding up of the Company, after payment of debts and other liabilities of the Company, the holders of the Series A convertible preferred stock then outstanding will be entitled to a distribution of $1 per share out of any assets available to shareholders. The Series A preferred stock is non-voting. All remaining shares of Series A preferred stock rank as to payment upon the occurrence of any liquidation event senior to the common stock. Shares of Series A preferred stock are convertible, in whole or in part, at the option of the holder into fully paid and nonassessable shares of common stock at $4.25 per share, subject to adjustment as defined.
 	 	
(8) 	Commitments and Contingencies	

     (a) 	Lease Commitments	
      The Company leases its headquarters facility on Vassar Street in Cambridge, Massachusetts, under a lease that has a 10-year term, which commenced on May 1, 1997. Future minimum commitments as of December 31, 2004, under existing lease agreements through the lease term, are approximately:
 	 	 	 	 	
 	 	Operating	 	
December 31,	 	Leases	 	
 	 	 	 	
2005	 	 	611,000	 	
2006	 	 	611,000	 	
2007	 	 	204,000	 	
 	 	 	 	
 	 	$	1,426,000	 	
 	 	 	 	
      During 2004, 2003, and 2002, facility rent expense for continuing operations, net of sublease income, was approximately $282,000, $397,000 and $282,000, respectively.
 	 	
     (b) 	External Collaborations	
      The Company funds research efforts of various academic collaborators and consultants in connection with its research and development programs. Total future fixed commitments under these agreements are estimated at approximately $79,000 for 2005.
      In July 2004, the Company signed an agreement with PAREXEL International (PAREXEL) to manage the phase 2 clinical trial of IMOxine in patients with renal cell carcinoma. Under the agreement, the Company may pay PAREXEL up to $4.4 million in connection with this trial. As of December 31, 2004, the Company had paid approximately $0.7 million to PAREXEL under the agreement and expensed approximately $0.4 million in “Research and development” on the accompanying consolidated statement of operations.
 	 	
     (c) 	Contract Obligations	
      In August 2004, Dr. Sudhir Agrawal, the Company’s President and Chief Scientific Officer, was appointed to the additional position of Chief Executive Officer, replacing Stephen R. Seiler who resigned as

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
CEO and a director of the Company. The Company has expensed approximately $0.7 million for amounts to be paid to Mr. Seiler through September 1, 2006 under his employment agreement.
 	 	
 	(d) Related-Party Agreements with Affiliates of Stockholders and Directors	
      In 2004, the Company paid Pillar Investment Ltd., which is controlled by a director of the Company, a total of $281,000 for commissions relating to the Company’s August 2004 financing. In conjunction with the financing, the Company also issued Pillar Investment Ltd., as additional commissions, warrants to purchase 432,520 shares of common stock at an exercise price of $0.67 per share. These warrants have a Black-Scholes value of approximately $155,000. Optima Life Sciences Limited, which is controlled by Pillar Investment Ltd., purchased 2,768,100 shares of common stock and warrants to purchase 553,620 additional shares of common stock at an exercise price of $0.67 per share in the financing.
      In 2003, the Company paid Pillar S.A. and Pillar Investment Ltd. a total of $550,000 for (i) consulting services relating to international investor relations (ii) consulting services related to the repurchase of the Company’s common stock from certain stockholders and (iii) commissions relating to the Company’s August 2003 private placement. In conjunction with the private placement, the Company also issued Pillar Investment Ltd., as additional compensation for services provided as a placement agent in the private placement, warrants to purchase 587,709 shares of common stock at an exercise price of $1.00 per share. The amounts payable to Pillar in cash and warrants for the August 2003 private placement were less on a percentage basis than the comparable fees paid to the other placement agent involved in the private placement. Optima Life Sciences Limited, which is controlled by Pillar Investment Ltd., purchased 5,500,381 shares of common stock and warrants to purchase 1,650,114 additional shares of common stock in the private placement.
      Drs. James Wyngaarden and Paul Zamecnik, Chairman of the Board of Directors and a director of the Company, respectively, participated in the August 2003 private placement offering under the same terms as other investors. Dr. Wyngaarden purchased 34,246 shares of common stock and warrants to purchase 10,274 shares of common stock at an exercise price of $1.00 per share; Dr. Zamecnik purchased 68,493 shares of common stock and warrants to purchase 20,548 shares of common stock at an exercise price of $1.00 per share.
      In addition to the fees described above, the Company also paid other directors consulting fees of $35,875, $65,000 and $20,000 in 2004, 2003 and 2002, respectively.
 	 	
 	(e) Contingencies	
      In the fourth quarter of 2002, the United States Patent and Trademark Office (the PTO) declared an interference involving a patent application exclusively licensed by the Company from the University of Massachusetts Medical Center, or UMMC (formerly the Worcester Foundation for Biological Research), and three patents issued to the National Institutes of Health. An interference proceeding is a proceeding to determine who was the first to invent and thus who is entitled to patent a claimed invention. The PTO’s initial declaration of interference named UMMC, and indirectly the Company, as the senior party. In the fourth quarter of 2004, the PTO redeclared and restyled the interference subsequently naming UMMC, and indirectly the Company, as the junior party in the interference. See Note 16.
      On July 8, 2003, the PTO declared a second interference between another patent exclusively licensed to the Company from UMMC and a patent application assigned jointly to the University of Montreal and Massachusetts Institute of Technology. The PTO’s declaration of interference in the second proceeding named UMMC, and indirectly the Company, as the junior party. Under the terms of the license agreement with UMMC, the Company is responsible for the prosecution and maintenance of the patents and patent

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
applications at issue and is acting on behalf of UMMC in connection with the interference proceedings. Based upon priority of filing, the PTO issued judgment against UMMC, and indirectly the Company. As a result, UMMC, and indirectly the Company, are not entitled to certain claims of the UMMC patent involved.
      The Company is not practicing nor does it intend to practice any of the intellectual property involved in either interference. Consequently, if the remaining matter is not resolved in a way beneficial to the Company, the Company does not believe that it will have a negative impact on the Company’s business. If UMMC is successful in the patent interferences, the Company may be entitled to a portion of any sublicense income resulting from the patents that are the subject of the interferences.
 	 	
(9) 	Income Taxes	
      The Company applies SFAS No. 109, Accounting for Income Taxes. Accordingly, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities, as measured by the enacted tax rates expected to be in effect when these differences reverse. At December 31, 2004, the Company had cumulative net operating loss and tax credit carryforwards for federal income tax purposes of approximately $254.9 million and $4.6 million, respectively, available to reduce federal taxable income and federal income taxes, respectively. These carryforwards expire through 2024. The Tax Reform Act of 1986 contains provisions which limit the amount of net operating loss and credit carryforwards that companies may utilize in any one year in the event of cumulative changes in ownership over a three-year period in excess of 50%. The Company has completed several financings since the effective date of the Tax Reform Act of 1986, which as of December 31, 2004, have resulted in ownership changes in excess of 50%, as defined under the Act and which will limit the Company’s ability to utilize its net operating loss and tax credit carryforwards. The Company has not prepared an analysis to determine the effect of the ownership change limitation on its ability to utilize its net operating loss and tax credit carryforwards. Ownership changes in future periods may place additional limits on the Company’s ability to utilize net operating loss and tax credit carryforwards.
      As of December 31, 2004 and 2003, the components of the deferred tax assets are approximately as follows:
 	 	 	 	 	 	 	 	 	
 	 	2004	 	 	2003	 	
 	 	 	 	 	 	 	
Operating loss carryforwards	 	$	101,946,064	 	 	$	97,330,439	 	
Tax credit carryforwards	 	 	4,603,431	 	 	 	4,362,658	 	
Other	 	 	679,106	 	 	 	692,546	 	
 	 	 	 	 	 	 	
 	 	 	107,228,601	 	 	 	102,385,643	 	
Valuation allowance	 	 	(107,228,601	)	 	 	(102,385,643	)	
 	 	 	 	 	 	 	
 	 	$	—	 	 	$	—	 	
 	 	 	 	 	 	 	
      The Company has provided a valuation allowance for its deferred tax asset due to the uncertainty surrounding the ability to realize this asset. During 2001, the Company accrued $500,000 for Alternative Minimum Tax (AMT) of which $450,000 was paid prior to December 31, 2001. The National Economic Stabilization and Recovery Act, enacted in March 2002, has temporarily rescinded the AMT as it applies to the Company. The Company received a $450,000 refund and recognized a $500,000 credit to operations during 2002 in accordance with SFAS No. 109,  Accounting for Income Taxes .

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
(10) 	Employee Benefit Plan	
      The Company has an employee benefit plan under Section 401(k) of the Internal Revenue Code. The plan allows employees to make contributions up to a specified percentage of their compensation. Under the plan, the Company may, but is not obligated to, match a portion of the employees’ contributions up to a defined maximum. The Company is currently contributing up to 3% of employee base salary, by matching 50% of the first 6% of annual base salary contributed by each employee. Approximately $82,000, $74,000, and $58,000 of 401(k) benefits were charged to continuing operations during 2004, 2003, and 2002, respectively.
 	 	
(11) 	Income (Loss) Per Share	
      The following table sets forth the computation of basic and diluted (loss) income per share:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income from operations	 	$	(12,734,950	)	 	$	(17,211,058	)	 	$	16,971,540	 	
Accretion of preferred stock dividend	 	 	(2,675,995	)	 	 	(5,528,856	)	 	 	(4,246,282	)	
 	 	 	 	 	 	 	 	 	 	
Numerator for basic (loss) income applicable to common shareholders	 	 	(15,410,945	)	 	 	(22,739,914	)	 	 	12,725,258	 	
Effect of dilutive securities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest expense related to convertible debt	 	 	—	 	 	 	—	 	 	 	21,896	 	
 	 	 	 	 	 	 	 	 	 	
Numerator for diluted (loss) income applicable to common shareholders	 	$	(15,410,945	)	 	$	(22,739,914	)	 	$	12,747,154	 	
 	 	 	 	 	 	 	 	 	 	
Denominator for basic (loss) income per share:	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding	 	 	98,913,927	 	 	 	51,053,415	 	 	 	46,879,232	 	
Effect of dilutive securities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Common stock options and warrants	 	 	—	 	 	 	—	 	 	 	5,647,539	 	
 	Convertible debt	 	 	—	 	 	 	—	 	 	 	457,644	 	
 	 	 	 	 	 	 	 	 	 	
Denominator for diluted (loss) income per share	 	 	98,913,927	 	 	 	51,053,415	 	 	 	52,984,415	 	
 	 	 	 	 	 	 	 	 	 	
(Loss) income per share — basic	 	 	 	 	 	 	 	 	 	 	 	 	
 	(Loss) income from operations	 	$	(0.13	)	 	$	(0.34	)	 	$	0.36	 	
 	Accretion of preferred stock dividends	 	 	(0.03	)	 	 	(0.11	)	 	 	(0.09	)	
 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share applicable to common stockholders	 	$	(0.16	)	 	$	(0.45	)	 	$	0.27	 	
 	 	 	 	 	 	 	 	 	 	
(Loss) income per share — diluted	 	 	 	 	 	 	 	 	 	 	 	 	
 	(Loss) income from operations	 	$	(0.13	)	 	$	(0.34	)	 	$	0.32	 	
 	Accretion of preferred stock dividends	 	 	(0.03	)	 	 	(0.11	)	 	 	(0.08	)	
 	 	 	 	 	 	 	 	 	 	
 	Net (loss) income per share applicable to common stockholders	 	$	(0.16	)	 	$	(0.45	)	 	$	0.24	 	
 	 	 	 	 	 	 	 	 	 	
      For the years ended December 31, 2004 and 2003, diluted net loss per share from operations is the same as basic net loss per common share, as the effects of the Company’s potential common stock equivalents are antidilutive. Total antidilutive securities were 32,091,596 and 39,545,229 at December 31, 2004 and 2003, respectively, and consist of stock options, warrants, and convertible preferred stock. Antidilutive securities for the year ended December 31, 2003 also includes convertible debt instruments (on an as-converted basis). As of December 31, 2002, 22,383,725 shares were not included in diluted net income per share as the effects of certain convertible debt, convertible preferred stock, warrants, and certain stock options are antidilutive.

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HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
(12) 	Supplemental Disclosure of Cash Flow Information	
      Supplemental disclosure of cash flow information for the periods presented are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	
 	 	 	 	
 	 	2004	 	 	2003	 	 	2002	 	
 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Cash paid for interest	 	$	58,770	 	 	$	117,540	 	 	$	121,278	 	
 	 	 	 	 	 	 	 	 	 	
 	Cash (received) paid for taxes	 	$	—	 	 	$	 —	 	 	$	(450,000	)	
 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of non cash financing and investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	Exchange of 8% convertible notes payable for common stock	 	$	—	 	 	$	 —	 	 	$	31,582	 	
 	 	 	 	 	 	 	 	 	 	
 	Accretion (reversal) of Series A preferred stock dividends	 	$	(569,497	)	 	$	3,972,856	 	 	$	4,246,282	 	
 	 	 	 	 	 	 	 	 	 	
 	Dividend from induced conversion of Series A preferred stock	 	$	3,245,492	 	 	$	1,556,000	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	
 	Issuance of stock options and stock for services	 	$	129,448	 	 	$	82,364	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	
 	Interest paid in kind on 8% Notes	 	$	—	 	 	$	 —	 	 	$	27,657	 	
 	 	 	 	 	 	 	 	 	 	
 	Conversion of Series A preferred stock into common stock	 	$	14,370	 	 	$	6,878	 	 	$	92	 	
 	 	 	 	 	 	 	 	 	 	
 	Issuance of warrants in connection with consulting services	 	$	—	 	 	$	 —	 	 	$	98,000	 	
 	 	 	 	 	 	 	 	 	 	
 	Cashless exercise of stock warrants	 	$	7	 	 	$	19	 	 	$	247	 	
 	 	 	 	 	 	 	 	 	 	
 	Deferred compensation relating to issuance of stock options	 	$	—	 	 	$	 —	 	 	$	6,150	 	
 	 	 	 	 	 	 	 	 	 	
 	Equipment acquired under capital lease	 	$	—	 	 	$	 —	 	 	$	113,303	 	

 	 	
(13) 	Shareholder Rights Plan	
      The Company adopted a shareholder rights plan in December 2001. Under the rights plan, one right was distributed as of the close of business on January 7, 2002 on each then outstanding share of the Company’s common stock. The rights will automatically trade with the underlying common stock and ordinarily will not be exercisable. The rights will only become exercisable if a person acquires beneficial ownership of, or commences a tender offer for, fifteen percent or more of the Company’s common stock, unless, in either case, the transaction was approved by the Company’s board of directors.
      If the rights become exercisable, the type and amount of securities receivable upon exercise of the rights would depend on the circumstances at the time of exercise. Initially, each right would entitle the holder to purchase one one-thousandth of a share of the Company’s newly created Series C junior participating preferred stock for an exercise price of $13.00. If a person acquires fifteen percent or more of the Company’s common stock in a transaction that was not approved by the Company’s board of directors, then each right, other than those owned by the acquiring person, would instead entitle the holder to purchase $26.00 worth of the Company’s common stock for the $13.00 exercise price. If the Company is involved in a merger or other transaction with another company in which the Company is not the surviving corporation, or transfers more than 50% of its assets to another company, in a transaction that was not approved by the Company’s board of directors, then each right, other than those owned by the acquiring person, would instead entitle the holder to purchase $26.00 worth of the acquiring company’s common stock for the $13.00 exercise price.
      The Company’s board of directors may redeem the rights for $0.001 per right at any time until ten business days after a person acquires fifteen percent or more of the Company’s outstanding common stock. Unless the rights are redeemed or exchanged earlier, they will expire on December 10, 2011.

F-26

Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
(14) 	Repurchase of Common Shares	
      On February 14, 2003, the Company repurchased 4,643,034 shares of its common stock at a price of $1.15 per share. The fair market value of the common stock was $0.75 per share on the date of the transaction resulting in a premium of approximately $1,857,000 in the aggregate. The Company charged this premium to general and administrative expense in 2003. The repurchased stock was retired on March 13, 2003.
 	 	
(15) 	Financing	
      In August 2004, the Company raised approximately $5.1 million in gross proceeds from a private placement to institutional and overseas investors. In the private placement, the Company sold 8,823,400 shares of common stock and warrants to purchase 1,764,680 shares of common stock. The warrants to purchase common stock have an exercise price of $0.67 per share and will expire if not exercised on or prior to August 27, 2009. The warrants may be exercised by cash payment only. On or after February 27, 2005, the Company may redeem the warrants if the closing sales price of the common stock for each day of any 20 consecutive trading day period is greater than or equal to $1.34 per share. The redemption price will be $0.01 per share of common stock underlying the warrants. The Company may exercise its right to redeem the warrants by providing 30 days prior written notice to the holders of the warrants. The net proceeds to the Company from the offering, excluding the proceeds of any future exercise of the warrants, totaled approximately $4.7 million.
      In April 2004, the Company raised approximately $11.8 million in gross proceeds through a registered direct offering. In the offering, the Company sold 16,899,800 shares of common stock and warrants to purchase 3,041,964 shares of common stock to institutional and other investors. The warrants to purchase common stock have an exercise price of $1.14 per share and are exercisable at any time on or after October 21, 2004 and on or prior to April 20, 2009. The warrants may be exercised by cash payment only. On or after October 21, 2005, the Company may redeem the warrants if the closing sales price of the common stock for each day of any 20 consecutive trading day period within 30 days prior to providing advance notice of redemption is greater than or equal to $2.60 per share. The redemption price will be $0.01 per share of common stock underlying the warrants. The Company may exercise its right to redeem the warrants by providing 30 days prior written notice to the holders of the warrants. The net proceeds to the Company from the offering, excluding the proceeds of any future exercise of the warrants, totaled approximately $10.7 million.
      In August 2003, the Company raised approximately $14.6 million in gross proceeds from a private placement to institutional and accredited investors. In the private placement, the Company sold 20,053,022 shares of common stock and warrants to purchase 6,015,934 shares of common stock. The warrants to purchase common stock have an exercise price of $1.00 per share and will expire if not exercised by August 28, 2008. The warrants may be exercised by paying cash or by invoking a cashless exercise feature. The Company may redeem the warrants at a price of $0.05 per share of common stock issuable upon exercise of the warrants if the average closing sales price of the common stock for a ten consecutive trading day period is greater than or equal to $2.00 per share. The net proceeds to the Company from the offering, excluding the proceeds of any future exercise of the warrants, totaled approximately $13.1 million. In addition, the Company issued warrants to selected dealers and placement agents which assisted with the private placement. These include warrants to purchase 2,458,405 shares of common stock at an exercise price of $0.73 per share and warrants to purchase 1,325,342 shares of common stock at an exercise price of $1.00 per share. These warrants have a Black-Scholes value of $2.8 million and will expire if not exercised by August 28, 2008. These warrants may be exercised by paying cash or through a cashless exercise feature. The Company does not have the right to redeem these warrants.

F-27

Table of Contents
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
 	 	
(16) 	Subsequent Event	
      On January 15, 2005, the Company and UMMC entered into an Interference Settlement Agreement with the NIH with respect to the interference proceeding discussed in the first paragraph of Note 8(e). The agreement is subject to approval of the Board of Patent Appeals and Interferences.

F-28

Table of Contents
Exhibit Index
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Incorporated by Reference	
 	 	 	 	 	 	 	
Exhibit	 	 	 	 	Filed with this	 	 	Form or	 	 	Filing Date	 	SEC File	
Number	 	 	Description	 	Form 10-K	 	 	Schedule	 	 	with SEC	 	Number	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	3.1	 	 	Restated Certificate of Incorporation of Hybridon, Inc., as amended.	 	 	X	 	 	 	 	 	 	 	 	 	
 	3.2	 	 	Amended and Restated Bylaws of Hybridon, Inc. 	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	4.1	 	 	Specimen Certificate for shares of Common Stock, $.001 par value, of Hybridon, Inc. 	 	 	 	 	 	 	S-1	 	 	December 8, 1995	 	33-99024	
 	4.2	 	 	Indenture dated as of March 26, 1997 between Forum Capital Markets LLC and Hybridon, Inc. 	 	 	 	 	 	 	8-K	 	 	April 14, 1997	 	000-27352	
 	4.3	 	 	Rights Agreement dated December 10, 2001 by and between Hybridon, Inc. and Mellon Investor Services LLC, as rights agent, as amended.	 	 	 	 	 	 	S-2	 	 	October 10, 2003	 	333-109630	
 	10.1†	 	 	License Agreement dated February 21, 1990 and restated as of September 8, 1993 between Hybridon, Inc. and University of Massachusetts Medical Center.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.2†	 	 	Patent License Agreement effective as of October 13, 1994 between Hybridon, Inc. and McGill University.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.3†	 	 	License Agreement effective as of October 25, 1995 between Hybridon, Inc. and the General Hospital Corporation.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.4†	 	 	License Agreement dated as of October 30, 1995 between Hybridon, Inc. and Yoon S. Cho-Chung.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.5	 	 	Registration Rights Agreement dated as of February 21, 1990 between Hybridon, Inc., University of Massachusetts Medical Center and Paul C. Zamecnik.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.6††	 	 	1990 Stock Option Plan, as amended.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.7††	 	 	1995 Stock Option Plan.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.8††	 	 	1995 Director Stock Plan.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	
 	10.9††	 	 	1995 Employee Stock Purchase Plan.	 	 	 	 	 	 	S-1	 	 	November 6, 1995	 	33-99024	

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Incorporated by Reference	
 	 	 	 	 	 	 	
Exhibit	 	 	 	 	Filed with this	 	 	Form or	 	 	Filing Date	 	SEC File	
Number	 	 	Description	 	Form 10-K	 	 	Schedule	 	 	with SEC	 	Number	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	10.10††	 	 	Employment Agreement dated April 1, 2002 between Hybridon, Inc. and Dr. Sudhir Agrawal.	 	 	 	 	 	 	10-Q	 	 	May 14, 2002	 	000-27352	
 	10.11††	 	 	Consulting Agreement dated as of March 1, 2003 between Hybridon, Inc. and Dr. Paul C. Zamecnik.	 	 	 	 	 	 	10-K	 	 	March 31, 2003	 	000-27352	
 	10.12†	 	 	Amendment No. 1 to License Agreement, dated as of February 21, 1990 and restated as of September 8, 1993, by and between University of Massachusetts Medical Center and Hybridon, Inc., dated as of November 26, 1996.	 	 	 	 	 	 	10-Q	 	 	August 14, 1997	 	000-27352	
 	10.13†	 	 	Licensing Agreement dated March 12, 1999 by and between Hybridon, Inc. and Integrated DNA Technologies, Inc. 	 	 	 	 	 	 	10-K	 	 	April 15, 1999	 	000-27352	
 	10.14†	 	 	Licensing Agreement dated September 7, 1999 by and between Hybridon, Inc. and Genzyme Corporation.	 	 	 	 	 	 	10-Q	 	 	November 15, 1999	 	000-27352	
 	10.15	 	 	License Agreement dated September 20, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	
 	10.16	 	 	Assignment of Coexclusive License dated September 20, 2000 by and between Hybridon and the Public Health Service.	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	
 	10.17	 	 	Oligonucleotide Purification Patent License Agreement dated September 20, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	
 	10.18	 	 	Asset Purchase Agreement dated June 29, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	Schedule
14A	 	 	August 15, 2000	 	000-27352	
 	10.19†	 	 	Assignment of Patent Rights dated September 20, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	
 	10.20†	 	 	PNT Monomer Patent License and Option Agreement dated September 20, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Incorporated by Reference	
 	 	 	 	 	 	 	
Exhibit	 	 	 	 	Filed with this	 	 	Form or	 	 	Filing Date	 	SEC File	
Number	 	 	Description	 	Form 10-K	 	 	Schedule	 	 	with SEC	 	Number	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	10.21†	 	 	Agreement Relating to Patents Forming Part of Acquired Assets but to be Licensed Back to Hybridon for the Purposes of OriGenix Agreements dated September 20, 2000 by and between Hybridon and Boston Biosystems, Inc. 	 	 	 	 	 	 	S-1/A	 	 	December 29, 2000	 	333-69649	
 	10.22	 	 	Agreement and Mutual Release between Hybridon and MethylGene, Inc. dated March 21, 2001.	 	 	 	 	 	 	10-K	 	 	April 13, 2001	 	000-27352	
 	10.23††	 	 	Amended and Restated 1997 Stock Incentive Plan.	 	 	 	 	 	 	10-Q	 	 	May 15, 2001	 	000-27352	
 	10.24†	 	 	Collaboration and License Agreement by and between Isis Pharmaceuticals, Inc., and Hybridon, Inc., dated May 24, 2001.	 	 	 	 	 	 	10-Q	 	 	August 20, 2001	 	000-27352	
 	10.25	 	 	Amendment No. 1 to the Collaboration and License Agreement, dated as of May 24, 2001 by and between Isis Pharmaceuticals, Inc. and Hybridon, Inc., dated as of August 14, 2002.	 	 	 	 	 	 	10-K	 	 	March 31, 2003	 	000-27352	
 	10.26	 	 	Master Agreement relating to the Cross License of Certain Intellectual Property and Collaboration by and between Isis Pharmaceuticals, Inc. and Hybridon, Inc., dated May 24, 2001.	 	 	 	 	 	 	10-Q	 	 	August 20, 2001	 	000-27352	
 	10.27††	 	 	Employment Agreement by and between Stephen R. Seiler and Hybridon, Inc. effective as of July 25, 2001.	 	 	 	 	 	 	10-Q	 	 	November 14, 2001	 	000-27352	
 	10.28††	 	 	Amendment to Employment Agreement, dated August 20, 2004, by and between Hybridon, Inc. and Stephen R. Seiler.	 	 	 	 	 	 	10-Q	 	 	November 12, 2004	 	001-31918	
 	10.29	 	 	Unit Purchase Agreement by and among Hybridon, Inc. and certain persons and entities listed therein, dated April 1, 1998.	 	 	 	 	 	 	10-K	 	 	April 1, 2002	 	000-27352	
 	10.30††	 	 	Employment Agreement dated April 1, 2002 between Hybridon, Inc. and Robert G. Andersen.	 	 	 	 	 	 	10-Q	 	 	May 14, 2002	 	000-27352	

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Incorporated by Reference	
 	 	 	 	 	 	 	
Exhibit	 	 	 	 	Filed with this	 	 	Form or	 	 	Filing Date	 	SEC File	
Number	 	 	Description	 	Form 10-K	 	 	Schedule	 	 	with SEC	 	Number	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	10.31††	 	 	Executive Stock Option Agreement for 3,150,000 Options effective as of July 25, 2001 between Hybridon, Inc. and Stephen R. Seiler.	 	 	 	 	 	 	10-Q	 	 	August 14, 2002	 	000-27352	
 	10.32††	 	 	Executive Stock Option Agreement for 490,000 Options effective as of July 25, 2001 between Hybridon, Inc. and Stephen R. Seiler.	 	 	 	 	 	 	10-Q	 	 	August 14, 2002	 	000-27352	
 	10.33††	 	 	Executive Stock Option Agreement for 1,260,000 Options effective as of July 25, 2001 between Hybridon, Inc. and Dr. Sudhir Agrawal.	 	 	 	 	 	 	10-Q	 	 	October 24, 2002	 	000-27352	
 	10.34††	 	 	Executive Stock Option Agreement for 550,000 Options effective as of July 25, 2001 between Hybridon, Inc. and Dr. Sudhir Agrawal.	 	 	 	 	 	 	10-Q	 	 	October 24, 2002	 	000-27352	
 	10.35††	 	 	Executive Stock Option Agreement for 500,000 Options effective as of July 25, 2001 between Hybridon, Inc. and Dr. Sudhir Agrawal.	 	 	 	 	 	 	10-Q	 	 	October 24, 2002	 	000-27352	
 	10.36	 	 	Consulting Agreement effective as of October 1, 2002 between Hybridon, Inc. and Pillar, S.A. 	 	 	 	 	 	 	10-Q	 	 	October 24, 2002	 	000-27352	
 	10.37†	 	 	License Agreement by and between Louisiana State University and Hybridon, Inc., dated July 1, 1998.	 	 	 	 	 	 	10-K	 	 	March 31, 2003	 	000-27352	
 	10.38	 	 	Engagement Letter, dated as of April 18, 2003, by and among Hybridon, Inc., Pillar Investment Limited and PrimeCorp Finance S.A. 	 	 	 	 	 	 	S-2	 	 	October 10, 2003	 	333-109630	
 	10.39	 	 	Registration Rights Agreement, dated as of August 28, 2003 by and among Hybridon, Inc., the Purchasers and the Agents.	 	 	 	 	 	 	S-2	 	 	October 10, 2003	 	333-109630	
 	10.40	 	 	Form of Common Stock Purchase Warrant issued to purchasers of units in a private placement on August 28, 2003 and August 29, 2003.	 	 	 	 	 	 	S-2	 	 	October 10, 2003	 	333-109630	
 	10.41	 	 	Form of Common Stock Purchase Warrant issued to selected dealers and placement agents on August 28, 2003 in connection with a private placement.	 	 	 	 	 	 	S-2	 	 	October 10, 2003	 	333-109630	
 	10.42	 	 	Engagement Letter, dated as of August 27, 2004, by and among Hybridon, Inc. and Pillar Investment Limited.	 	 	 	 	 	 	10-Q	 	 	November 12, 2004	 	001-31918	

Table of Contents
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Incorporated by Reference	
 	 	 	 	 	 	 	
Exhibit	 	 	 	 	Filed with this	 	 	Form or	 	 	Filing Date	 	SEC File	
Number	 	 	Description	 	Form 10-K	 	 	Schedule	 	 	with SEC	 	Number	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	10.43	 	 	Registration Rights Agreement, dated August 27, 2004 by and among Hybridon, Inc., Pillar Investments Limited and Purchasers.	 	 	 	 	 	 	10-Q	 	 	November 12, 2004	 	001-31918	
 	10.44	 	 	Form of Warrants issued to investors and the placement agent in connection with Hybridon’s August 27, 2004 financing.	 	 	 	 	 	 	10-Q	 	 	November 12, 2004	 	001-31918	
 	10.45	 	 	Amendment to the License Agreement dated as of October 30, 1995 by and between Hybridon, Inc. and Yoon S. Cho-Chung, M.D., Ph.D. dated February 4, 2005. 	 	 	X	 	 	 	 	 	 	 	 	 	
 	10.46	 	 	Summary of Director Compensation of Hybridon, Inc.	 	 	X	 	 	 	 	 	 	 	 	 	
 	10.47	 	 	Non-Employee Director Nonstatutory Stock Option Agreement Granted under 1997 Stock Incentive Plan	 	 	X	 	 	 	 	 	 	 	 	 	
 	23.1	 	 	Consent of Independent Registered Public Accounting Firm.	 	 	X	 	 	 	 	 	 	 	 	 	
 	31.1	 	 	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.	 	 	X	 	 	 	 	 	 	 	 	 	
 	31.2	 	 	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.	 	 	X	 	 	 	 	 	 	 	 	 	
 	32.1	 	 	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	 	 	X	 	 	 	 	 	 	 	 	 	
 	32.2	 	 	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	 	 	X	 	 	 	 	 	 	 	 	 	

 	† 	Confidential treatment granted as to certain portions, which portions are omitted and filed separately with the Commission.	

†† 	Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the Annual Report on Form 10-K.	

Exhibit 3.1

RESTATED

CERTIFICATE OF INCORPORATION

OF

HYBRIDON, INC.

Hybridon, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:

1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of Delaware on May 25, 1989, which Certificate of
Incorporation was amended by a Certificate of Amendment of Certificate of
Incorporation filed on February 21, 1990, and amended and restated by a Restated
Certificate of Incorporation filed on June 5, 1990. A Restated Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
November 20, 1990, which Restated Certificate of Incorporation was amended by a
Certificate of Amendment of Restated Certificate of Incorporation filed on
October 16, 1991, a Certificate of Amendment of Restated Certificate of
Incorporation filed on March 3, 1992, a Certificate of Amendment of Restated
Certificate of Incorporation filed on March 23, 1992, a Certificate of Amendment
of Restated Certificate of Incorporation filed on October 23, 1992, a
Certificate of Amendment of Restated Certificate of Incorporation filed on
February 12, 1993, a Certificate of Amendment of Restated Certificate of
Incorporation filed on June 17, 1993, a Certificate

of Amendment of Restated Certificate of Incorporation filed on July 13, 1993, a
Certificate of Amendment of Restated Certificate of Incorporation filed on
September 9, 1994, a Certificate of Amendment of Restated Certificate of
Incorporation filed on July 7, 1995, a Certificate of Amendment of Restated
Certificate of Incorporation filed on December 19, 1995, and a Certificate of
Retirement of Stock filed on even date herewith.

2. At a meeting of the Board of Directors of the Corporation, a
resolution was duly adopted, pursuant to Sections 141(f) and 245 of the General
Corporation Law of the State of Delaware, setting forth a Restated Certificate
of Incorporation of the Corporation and declaring said Restated Certificate of
Incorporation advisable. The resolution setting forth the Restated Certificate
of Incorporation is as follows:

RESOLVED: That the Restated Certificate of Incorporation of the
Corporation, as amended, be and hereby is amended and restated in its entirety
so that the same shall read as follows:

FIRST. The name of the Corporation is:

Hybridon, Inc.

SECOND. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.

THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is as follows:

To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.

-2-

FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issues is One Hundred Million (100,000,000)
shares of Common Stock, $.001 par value per share ("Common Stock"), and (ii)
Five Million ($5,000,000)shares of Preferred Stock, $.01 par value per share
("Preferred Stock"), which may be issued from time to time in one or more series
as set forth in Part B of this Articles FOURTH.

The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK.

1. GENERAL. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.

2. VOTING. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.

The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.

3. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.

4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.

-3-

B. PREFERRED STOCK.

Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.

Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law. Except as
otherwise specifically provided in this Certificate of Incorporation, no vote of
the holders of the Preferred Stock or Common Stock shall be a prerequisite to
the issuance of any shares of any series of the Preferred Stock authorized by
and complying with the conditions of the Certificate of Incorporation, the right
to have such vote being expressly waived by all present and future holders of
the capital stock of the Corporation.

FIFTH. The name and mailing address of the sole incorporator are as
follows:

NAME                           MAILING ADDRESS
----                           ---------------

David P. Johst                     60 State Street
Boston, MA  02109

SIXTH. In furtherance of and not in limitation of powers conferred by statute,
it is further provided:

-4-

1. Election of directors need not be by written ballot.

2. The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation.

SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any promise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.

EIGHTH. Except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty, no director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of
law imposing such liability. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.

NINTH. 1. ACTION, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT
OF THE CORPORATION. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has

-5-

agreed to become, a director or officer of the Corporation, or is or was
serving, or has agreed to serve, at the request of the Corporation, as a
director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees) judgment,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 6 below, the Corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation.

2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or

-6-

the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.

3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or NOLO CONTENDERE by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.

4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a

-7-

conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
for the Indemnitee shall be at the expense of the Corporation, except as
otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.

5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
PROVIDED, HOWEVER, that the payment of such expense incurred by an Indemnitee in
advance of the final disposition of such matter shall be made only upon receipt
of an undertaking by or on behalf of the Indemnitee to repay all amounts so
advanced in the event that it shall ultimately be determined that the Indemnitee
is not entitled to be indemnified by the Corporation as authorized in this
Article. Such undertaking may be accepted without reference to the financial
ability of such person to make such repayment.

6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors'), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors,

-8-

(c) a majority vote of a quorum of the outstanding shares of stock of all
classes entitled to vote for directors, voting as a single class, which quorum
shall consist of stockholders who are not at that time parties to the action,
suit or proceeding in question, (d) independent legal counsel (who may be
regular legal counsel to the Corporation), or (e) a court of competent
jurisdiction.

7. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advanced of expenses under this
Article shall be on the Corporation. Neither the failure of the Corporation to
have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.

8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.

9. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing

-9-

indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.

10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal,
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.

11. INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation law of Delaware.

12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.

13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees) judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.

-10-

14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).

15. SUBSEQUENT LEGISLATION. If the General Corporation Law of Delaware
is amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.

TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute and this Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.

ELEVENTH. This Article is inserted for the management of the business
and for the conduct of the affairs of the Corporation and shall not become
effective until the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, resulting in at least $10,000,000
of gross proceeds to the Corporation (a "Public Offering").

1. NUMBER OF DIRECTORS. The number of directors of the Corporation shall not be
less than three. The exact number of directors within the limitations specified
in the preceding sentence shall be fixed from time to time by, or in the manner
provided in, the Corporation's By-Laws.

2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class II, and if such fraction is two-thirds, one of the extra directors shall
be a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.

3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the By-Laws of the Corporation.

-11-

4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; PROVIDED, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 1996; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 1997; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in 1998; and PROVIDED FURTHER, that the
term of each director shall be subject to the election and qualification of his
successor and to his earlier death, resignation or removal.

5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated

directorships shall be subtracted from those classes whose terms of offices are
to expire at the earliest dates following such allocation, unless otherwise
provided from time to time by resolution adopted by the Board of Directors.

6. QUORUM; ACTION AT MEETING. A majority of the directors at any time
in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the By-Laws of the
Corporation or by this Restated Certificate of Incorporation.

7. REMOVAL. Directors of the Corporation may be removed only for cause
by the affirmative vote of the holders of at least two-thirds of the shares of
the capital stock of the Corporation issued and outstanding and entitled to
vote.

-12-

8. VACANCIES. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the board, shall be filled
only by a vote of a majority of the directors then in office, although less than
a quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.

9. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-Laws of the Corporation.

10. AMENDMENTS TO ARTICLE. Notwithstanding any other provisions of law,
this Restated Certificate of Incorporation or the By-Laws of the Corporation,
and notwithstanding the fact that a lesser percentage may be specified by law,
the affirmative vote

of the holders of at least seventy-five percent (75%) of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article ELEVENTH.

TWELFTH. Until the closing of a Public Offering, any action which is
required to be taken or which may be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote on such action were present
and voted. Effective upon the closing of a Public Offering, stockholders of the
Corporation may not take any action by written consent in lieu of a meeting.
Notwithstanding any other provisions of law, the Restated Certificate of
Incorporation or the By-Laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
TWELFTH.

THIRTEENTH. Effective upon the closing of a Public Offering, special
meetings of stockholders may be called at any time by only the Chief Executive
Officer (or if there is no Chief Executive Officer, the President) or the Board
of Directors. Business transacted at any special meeting of stockholders shall
be limited

-13-

to matters relating to the purpose or purposes stated in the notice of meeting.
Notwithstanding any other provision of law, this Restated Certificate of
Incorporation or the By-Laws of the Corporation, as amended, and notwithstanding
the fact that a lesser percentage may be specified by law, the affirmative vote
of the holders of at least seventy-five percent (75%) of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with this
Article THIRTEENTH.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Restated Certificate of Incorporation to be signed by
its Chairman this 28TH March, 1996.

HYBRIDON, INC.

By: /s/ E. Andrews Grinstead, III
----------------------------------
Chairman

[Corporate Seal]

-14-

CERTIFICATE OF AMENDMENT
OF
RESTATED
CERTIFICATE OF INCORPORATION
OF HYBRIDON, INC.

Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
--------------------------------------------------------------
HYBRIDON, INC. (the "Corporation"), organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:

By written action of the Board of Directors of the Corporation, dated
October 20, 1997, the Board of Directors duly adopted resolutions pursuant to
Sections 141(f) and 242 of the General Corporation Law of the State of Delaware
setting forth an amendment to the Restated Certificate of Incorporation of the
Corporation, as amended, and declaring said amendment to be advisable. The
stockholders of the Corporation duly approved, pursuant to said Section 242,
said proposed amendment at a Special Meeting of Stockholders held on November
18, 1997. The resolution setting forth the amendment to the Restated Certificate
of Incorporation is as follows:

RESOLVED:         That, subject to stockholder approval, the following paragraph
be inserted prior to the first paragraph of Article FOURTH of
the Certificate of Incorporation:

"That upon the filing date of the Certificate of
Amendment of Restated Certificate of Incorporation of the
Corporation (the "Effective Date"), a one-for-five reverse
split of the Corporation's Common Stock (as defined below)
shall become effective, such that each five shares of Common
Stock outstanding and held of record by each stockholder of
the Corporation (including treasury shares)

immediately prior to the Effective Date shall represent one
share of Common Stock from and after the Effective Date."

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by its Chairman of the Board of Directors, President
and Chief Executive Officer this 10th day of December, 1997.

HYBRIDON, INC.

By: /s/  E. Andrews Grinstead, III
--------------------------------------
E. Andrews Grinstead, III
Chairman of the Board of Directors,
President and Chief Executive Officer

-2-

CERTIFICATE OF DESIGNATION

for

SERIES A CONVERTIBLE PREFERRED STOCK

of

HYBRIDON, INC.

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

HYBRIDON INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify that
pursuant to the authority conferred on the board of directors of the Corporation
(the "Board of Directors") by the Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation") of the Corporation and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors adopted the following resolution establishing a
series of 1,500,000 shares of preferred stock of the Corporation designated as
"Series A Convertible Preferred Stock":

RESOLVED, that pursuant to the authority conferred on the
Board of Directors by the Certificate of Incorporation, a series of
preferred stock, par value $.01 per share, of the Corporation is hereby
established and created, and that the designation and number of shares
thereof and the voting and other powers, preferences and relative
participating, optional or other special rights of, the shares of such
series and the qualifications, limitations and restrictions thereof are
as follows:

Series A Convertible Preferred Stock

1. Designation and Amount and Definitions. (a) There shall be
a series of Preferred Stock designated as "Series A Convertible Preferred Stock"
and the number of shares constituting such series shall be 1,500,000. Such
series is referred to herein as the "Series A Preferred Stock". Notwithstanding
any other provision in this Certificate of Designation of the Series A Preferred
Stock (the "Certificate of Designation") to the contrary, such series shall be
senior to the common stock, par value $.001 per share of the Corporation (the
"Common Stock") with respect to dividends and the distribution of assets upon
liquidation, dissolution or winding up. Such number of shares may be increased
or decreased by resolution of the Board of Directors, subject to the provisions
of Section 7 hereof; provided, however, that no decrease shall reduce the number
of shares of Series A Preferred Stock to fewer than the number of shares then
issued and outstanding.

(b) As used in this Certificate of Designation, except as
otherwise provided in Subsection 4(c), the following terms shall have the
following meanings:

(i) The "Closing Bid Price" for any security for each
trading day shall be the reported per share closing bid price
of such security regular way on the Stock Market on such
trading day, or, if there were no transactions on such trading
day, the average of the reported closing bid and asked prices,
regular way, of such security on the relevant Stock Market on
such trading day.

(ii) "Fair Market Value" of any asset (including any
security) means the fair market value thereof as mutually
determined by the Corporation and the holders of a majority of
the Series A Preferred Stock then outstanding. If the
Corporation and the holders of a majority of the Series A
Preferred Stock then outstanding are unable to reach agreement
on any valuation matter, such valuation shall be submitted to
and determined by a nationally recognized independent
investment bank selected by the Board of Directors and the
holders of a majority of the Series A Preferred Stock then
outstanding (or, if such selection cannot be agreed upon
promptly, or in any event within ten days, then such valuation
shall be made by a nationally recognized independent
investment banking firm selected by the American Arbitration
Association in New York City in accordance with its rules),
the costs of which valuation shall be paid for by the
Corporation.

(iii) "Market Price" shall mean the average Closing
Bid Price for twenty (20) consecutive trading days, ending
with the trading day prior to the date as of which the Market
Price is being determined (with appropriate adjustments for
subdivisions or combinations of shares effected during such
period), provided that if the prices referred to in the
definition of Closing Bid Price cannot be determined on any
trading day, the Closing Bid Price for such trading day will
be deemed to equal Fair Market Value of such security on such
trading day.

(iv) "Registered Holders" shall mean, at any time,
the holders of record of the Series A Preferred Stock.

(v) The "Stock Market" shall mean, with respect to
any security, the principal national securities exchange on
which such security is listed or admitted to trading or, if
such security is not listed or admitted to trading on any
national securities exchange, shall mean The Nasdaq National
Market System ("NNM") or The Nasdaq SmallCap Market ("SCM"
and, together with NNM, "Nasdaq") or, if such security is not
quoted on Nasdaq, shall mean the OTC Bulletin Board or, if
such security is not quoted on the OTC Bulletin Board, shall
mean the over-the-counter market as furnished by any NASD
member firm selected from time to time by the Corporation for
that purpose.

(vi) A "trading day" shall mean a day on which the
relevant Stock Market is open for the transaction of business.

2. Dividends and Distributions. (a) The holders, as of the
Dividend Record Date (as defined below), of the Series A Preferred Stock shall
be entitled to receive semi-annual dividends on their respective shares of
Series A Preferred Stock (aggregating, for this purpose,

all shares of Series A Preferred Stock held of record or, to the Corporation's
knowledge, beneficially by such holder), payable, at the option of the
Corporation, in cash or additional shares of Series A Preferred Stock, at the
rate of 6.5% per annum (computed on the basis of a 360-day year of twelve 30 day
months) of the Dividend Base Amount (as defined below), payable semi-annually in
arrears; provided that, to the extent the declaration or payment of such
dividend is prohibited by applicable law, such dividend need not be paid but
shall nevertheless accrue and shall be paid promptly when applicable law
permits. Such dividends shall accrue from the date of issuance of such share and
shall be paid semi-annually on April 1 and October 1 of each year or, if any
such day is not a business day, on the next succeeding business day. Such
dividends shall be paid, at the election of the Corporation, either in cash or
additional duly authorized, fully paid and non assessable shares of Series A
Preferred Stock. In calculating the number of shares of Series A Preferred Stock
to be paid with respect to each dividend, the Series A Preferred Stock shall be
valued at $100.00 per share (subject to appropriate adjustment to reflect any
stock split, combination, reclassification or reorganization of the Series A
Preferred Stock). Notwithstanding the foregoing, the Corporation shall not be
required to issue fractional shares of Series A Preferred Stock; the Corporation
may elect, in its sole discretion, independently for each holder, whether such
number of shares (on an aggregated basis) will be rounded to the nearest whole
share (with .5 of a share rounded upward) or whether such holder will be given
cash in lieu of any fractional shares. The "Dividend Base Amount" of a share of
Series A Preferred Stock shall be $100.00 plus all accrued but unpaid dividends
(subject to appropriate adjustment to reflect any stock split, combination,
reclassification or reorganization of the Series A Preferred Stock). The
"Dividend Record Date" shall mean, for each semi-annual dividend, the March 15
or September 15, as the case may be, immediately preceding the dividend payment
date.

(b) In addition to the foregoing, subject to the rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors, out of
assets legally available for that purpose, dividends or distributions in cash,
stock or otherwise.

(c) The Corporation shall not declare any dividend or
distribution on any Junior Stock (as defined below) of the Corporation unless
all dividends required by Section 2(a) have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for such payment, on the Series A Preferred Stock.

(d) [Reserved]

(e) All dividends or distributions declared upon the Series A
Preferred Stock shall be declared pro rata per share.

(f) Any reference to "distribution" contained in this Section
2 shall not be deemed to include any distribution made in connection with or in
lieu of any Liquidation Event (as defined below).

(g) No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock which may be in arrears (it being understood that this provision does not
alter the Corporation's obligations under Section 2(a)).

(h) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series A
Preferred Stock, for any period unless all dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series A Preferred Stock.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series A Preferred Stock and any
other class or series of stock ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon such other stock shall be
declared pro rata so that the amounts of dividends per share declared on the
Series A Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of the
Series A Preferred Stock and on such other stock bear to each other.

(i) So long as any shares of the Series A Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series A Preferred Stock shall have been paid or set apart for payment.

(j) "Junior Stock" shall mean the Common Stock and any shares
of preferred stock of any series or class of the Corporation, whether presently
outstanding or hereafter issued, which are junior to the shares of Series A
Preferred Stock with respect to (i) the distribution of assets on any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, (ii)
dividends or (iii) voting.

3. Liquidation Preference. (a) In the event of a (i)
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, (ii) a sale or other disposition of all or substantially all of the
assets of the Corporation or (iii) any consolidation, merger, combination,
reorganization or other transaction in which the Corporation is not the
surviving entity or shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a "Merger
Transaction") (items (i), (ii) and (iii) of this sentence being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
debts and other liabilities of the Corporation, the holders of the Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to the Dividend Base Amount at such

time; provided, however, in the case of a Merger Transaction, such payment may
be made in cash, property (valued as provided in Subsection 3(b)) and/or
securities (valued as provided in Subsection 3(b)) of the entity surviving such
Merger Transaction. In the case of property or in the event that any such
securities are subject to an investment letter or other similar restriction on
transferability, the value of such property or securities shall be determined by
agreement between the Corporation and the holders of a majority of the Series A
Preferred Stock then outstanding. If upon any Liquidation Event, whether
voluntary or involuntary, the assets to be distributed to the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
shareholders of the full preferential amounts aforesaid, then all of the assets
of the Corporation to be distributed shall be so distributed ratably to the
holders of the Series A Preferred Stock on the basis of the number of shares of
Series A Preferred Stock held. Notwithstanding item (iii) of the first sentence
of this Subsection 3(a), any consolidation, merger, combination, reorganization
or other transaction in which the Corporation is not the surviving entity but
the stockholders of the Corporation immediately prior to such transaction own in
excess of 50% of the voting power of the corporation surviving such transaction
and own amongst themselves such interest in substantially the same proportions
as prior to such transaction, shall not be considered a Liquidation Event
provided that the surviving corporation shall make appropriate provisions to
ensure that the terms of this Certificate of Designation survive any such
transaction. All shares of Series A Preferred Stock shall rank as to payment
upon the occurrence of any Liquidation Event senior to the Common Stock and,
unless the terms of such series shall provide otherwise, senior to all other
series of the Corporation's preferred stock.

(b) Any securities or other property to be delivered to the
holders of the Series A Preferred Stock pursuant to Subsection 3(a) hereof shall
be valued as follows:

(i) Securities not subject to an investment letter or
other similar restriction on free marketability:

(A) If actively traded on a Stock Market,
the per share value shall be deemed to be the Market
Price of such securities as of the third day prior to
the date of valuation.

(B) If not actively traded on a Stock
Market, the value shall be the Fair Market Value of
such securities.

(ii) For securities for which there is an active
public market but which are subject to an investment letter or
other restrictions on free marketability, the value shall be
the Fair Market Value thereof, determined by discounting
appropriately the per share Market Price thereof.

(iii) For all other securities, the value shall be
the Fair Market Value thereof.

4. Conversion.

(a) Right of Conversion. Commencing after the expiration of 12
months following the Alternative Equity Closing Date (as hereinafter defined),
but not prior thereto, the shares of Series A Preferred Stock shall be
convertible, in whole or in part, at the option of the holder thereof and upon
notice to the Corporation as set forth in Subsection 4(b), into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided. The initial conversion price per share of Common Stock
(the "Conversion Price"), shall be equal to the product of 2.125 multiplied by
the per share price (the "Stated Common Price") of Common Stock sold by the
Corporation in connection with the Alternative Equity Offering (as such term is
defined in the Corporation's Offer to Exchange dated February 6, 1998 (the
"Original Offer to Exchange"), as amended by the Amendment thereto (the
"Amendment") dated March 30, 1998 (collectively, the "Offer to Exchange")) and
shall be subject to adjustment as provided herein. The rate at which each share
Series A Preferred Stock is convertible at any time into Common Stock (the
"Conversion Rate") shall be determined by dividing the then existing Conversion
Price (determined in accordance with this Section 4, including the last
paragraph hereof) into the Dividend Base Amount.

The Corporation shall prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Corporation setting forth the
Conversion Rate as of the date of the closing of the Alternative Equity Offering
(the "Alternative Equity Closing Date"), showing in reasonable detail the facts
upon which such Conversion Rate is based, and such certificate shall forthwith
be filed with the transfer agent of the Series A Preferred Stock.

(b) Conversion Procedures. Any holder of shares of Series A
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series A
Preferred Stock at the office of the transfer agent for the Series A Preferred
Stock, which certificate or certificates, if the Corporation shall so require,
shall be duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Series A Preferred Stock and specifying the name or names
(with address) in which a certificate or certificates evidencing shares of
Common Stock are to be issued. The Corporation need not deem a notice of
conversion to be received unless the holder complies with all the provisions
hereof. The Corporation will instruct the transfer agent (which may be the
Corporation) to make a notation of the date that a notice of conversion is
received, which date of receipt shall be deemed to be the date of receipt for
purposes hereof.

The Corporation shall, as soon as practicable after such
deposit of certificates evidencing shares of Series A Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Series A Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number
of full shares of Common Stock to which such person shall be entitled as
aforesaid, subject to Section 4(d). Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Series A Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock deliverable upon

conversion of such Series A Preferred Stock shall be treated for all purposes as
the record holder or holders of such Common Stock on such date; provided,
however, that the Corporation shall not be required to convert any shares of
Series A Preferred Stock while the stock transfer books of the Corporation are
closed for any purpose, but the surrender of Series A Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date. No adjustments in respect of
any dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion shall be made upon the conversion of any shares of
Series A Preferred Stock.

The Corporation shall at all times, reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series A Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series A Preferred
Stock.

All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
Subsection 4(g) hereof, a holder of Series A Preferred Stock may, at its
election, provide in its notice of conversion that the conversion of its shares
of Series A Preferred Stock shall be contingent upon the occurrence of the
record date or effectiveness of such event (as specified by such holder),
provided that such notice of conversion is received by the Corporation prior to
such record date or effective date, as the case may be.

(c) Adjustment of Conversion Rate and Conversion Price.

(i) As used in this Subsection 4(c), the following
terms shall have the following meanings:

"Capital Stock" of any Person means the Common Stock
or Preferred Stock of such Person. Unless otherwise stated
herein or the context otherwise requires, "Capital Stock"
means Capital Stock of the Corporation;

"Common Stock" of any Person other than the
Corporation means the common equity (however designated),
including, without limitation, common stock or partnership or
membership interests of, or participation or interests in such
Person (or equivalents thereof). "Common Stock" of the
Corporation means the Common Stock, par value $.001 per share,
of the Corporation, any successor class or classes of common
equity (however designated) of the Corporation into or for
which such Common Stock may hereafter be converted, exchanged
or reclassified and any class or classes of common equity
(however designated) of the Corporation which may be
distributed or issued with respect to such Common Stock or
successor class of classes to holders thereof generally.
Unless otherwise stated herein or the context requires
otherwise, "Common Stock" means Common Stock of the
Corporation;

"Current Market Price" means, when used with respect
to any security as of any date, the last sale price, regular
way, or, in case no such sale takes place on such date, the
average of the closing bid and asked prices, regular way, of
such security in either case as reported for consolidated
transactions on the New York Stock Exchange or, if such
security is not listed or admitted to trading on the New York
Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national
securities exchange on which such security is listed or
admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, as
reported on the Nasdaq National Market, or, if such security
is not listed or admitted to trading on the Nasdaq National
Market, as reported on the Nasdaq SmallCap Market, or if such
security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the
Nasdaq SmallCap Market, the average of the high bid and low
asked prices of such security in the over-the-counter market,
as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or such other system then in
use or, if such security is not quoted by any such
organization, the average of the closing bid and asked prices
of such security furnished by an NASD member firm selected by
the Corporation. If such security is not quoted by any such
organization and no such NASD member firm is able to provide
such prices, the Current Market Price of such security shall
be the Fair Market Value thereof;

"Fair Market Value" means, at any date as to any
asset, Property or right (including without limitation,
Capital Stock of any Person, evidence of indebtedness or other
securities, but excluding cash), the fair market value of such
item as determined in good faith by the Board of Directors,
whose determination shall be conclusive; provided, however,
that such determination is described in an Officers'
Certificate filed with the transfer agent and that, if there
is a Current Market Price for such item on such date, "Fair
Market Value" means such Current Market Price (without giving
effect to the last sentence of the definition thereof);

"GAAP" means, as of any date, generally accepted
accounting principles in the United States and does not
include any interpretations or regulations that have been
proposed but that have not become effective;

"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice
President of such Person;

"Officers' Certificate" means a certificate signed on
behalf of the Corporation by two Officers, one of whom must be
the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Corporation;

"Person" means any individual, corporation,
partnership, association, trust

or any other entity or organization, including a government or
political subdivision or any agency or instrumentality
thereof;

"Preferred Stock" of any Person means the class or
classes of equity, ownership or participation interests
(however designated) in such Person, including, without
limitation, stock, share, partnership and membership
interests, which are preferred as to the payment of dividends
or distributions by, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of,
such Person (or equivalent thereof) over interests of any
other class of interests of such Person. Unless otherwise
stated herein or the context otherwise requires, "Preferred
Stock" means Preferred Stock of the Corporation;

"Property" of any Person means any and all types of
real, personal, tangible, intangible or mixed property owned
by such Person whether or not included on the most recent
consolidated balance sheet of such Person in accordance with
GAAP;

"Subsidiary" of a Person on any date means any other
Person of whom such Person owns, directly or indirectly
through a Subsidiary or Subsidiaries of such Person, Capital
Stock with voting power, acting independently and under
ordinary circumstances, entitling such person to elect a
majority of the board of directors or other governing body of
such other Person. Unless otherwise stated herein or the
context otherwise requires, "Subsidiary" means a Subsidiary of
the Corporation.

(ii) If the Corporation shall (i) pay a dividend or
other distribution, in Common Stock, on any class of Capital
Stock of the Corporation, (ii) subdivide the outstanding
Common Stock into a greater number of shares by any means or
(iii) combine the outstanding Common Stock into a smaller
number of shares by any means including, without limitation, a
reverse stock split), then in each such case the Conversion
Price in effect immediately prior thereto shall be adjusted so
that the Registered Holder of any shares of Series A Preferred
Stock thereafter surrendered for conversion shall be entitled
to receive the number of shares of Common Stock that such
Registered Holder would have owned or have been entitled to
receive upon the happening of such event had such Series A
Preferred Stock been converted immediately prior to the
relevant record date or, if there is no such record date, the
effective date of such event. An adjustment made pursuant to
this Paragraph 4(c)(ii) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall
become effective immediately after the effective date of such
subdivision or combination, as the case may be.

(iii) If the Corporation shall (i) issue or
distribute (at a price per share less than the Current Market
Price per share of such Capital Stock on the date of such
issuance or distribution) Capital Stock generally to holders
of Common Stock or to holders of any class or series of
Capital Stock which is convertible

into or exchangeable or exercisable for Common Stock
(excluding an issuance or distribution of Common Stock
described in Paragraph 4(c)(ii)) or (ii) issue or distribute
generally to such holders rights, warrants, options or
convertible or exchangeable securities entitling the holder
thereof to subscribe for, purchase, convert into or exchange
for Capital Stock at a price per share less than the Current
Market Price per share of such Capital Stock on the date of
issuance or distribution, then, in each such case, at the
earliest of (A) the date the Corporation enters into a firm
contract for such issuance or distribution, (B) the record
date for the determination of stockholders entitled to receive
any such Capital Stock or any such rights, warrants, options
or convertible or exchangeable securities or (C) the date of
actual issuance or distribution of any such Capital Stock or
any such rights, warrants, options or convertible or
exchangeable securities, the Conversion Price shall be reduced
by multiplying the Conversion Price in effect immediately
prior to such earliest date by:

(A) if such Capital Stock is Common Stock, a
fraction the numerator of which is the number of
shares of Common Stock outstanding, on such earliest
date plus the number of shares of Common Stock which
could be purchased at the Current Market Price per
share of Common Stock on the date of such issuance or
distribution with the aggregate consideration (based
on the Fair Market Value thereof) received or
receivable by the Corporation either (A) in
connection with such issuance or distribution or (B)
upon the conversion, exchange, purchase or
subscription of all such rights, warrants, options or
convertible or exchangeable securities (the
"Aggregate Consideration"), and the denominator of
which is the number of shares of Common Stock
outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed
or to be issued upon the conversion, exchange,
purchase or subscription of all such rights,
warrants, options or convertible or exchangeable
securities; or

(B) if such Capital Stock is other than
Common Stock, a fraction the numerator of which is
the Current Market Price per share of Common Stock on
such earliest date minus an amount equal to (A) the
difference between (1) the Current Market Price per
share of such Capital Stock multiplied by the number
of shares of such Capital Stock to be so issued and
(2) the Aggregate Consideration, divided by (B) the
number of shares of Common Stock outstanding on such
date, and the denominator of which is the Current
Market Price per share of Common Stock on such
earliest date.

Such adjustment shall be made successively whenever
any such Capital Stock, rights, warrants, options or
convertible or exchangeable securities are so issued or
distributed. In determining whether any rights, warrants,
options or convertible or exchangeable securities entitle the
holders thereof to subscribe for, purchase, convert into or
exchange for shares of such Capital Stock at less than such
Current Market Price, there

shall be taken into account the Fair Market Value of any
consideration received or receivable by the Corporation for
such rights, warrants, options or convertible or exchangeable
securities. If any right, warrant,option or convertible or
exchangeable security, the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Paragraph
4(c)(iii), shall expire and shall not have been exercised, the
Conversion Price shall immediately upon such expiration be
recomputed to the Conversion Price which would have been in
effect if such right, warrant, option or convertible or
exchangeable securities had never been distributed or issued.
Notwithstanding anything contained in this paragraph to the
contrary, (i) the issuance of Capital Stock upon the exercise
of such rights, warrants or options or the conversion or
exchange of such convertible or exchangeable securities will
not cause an adjustment in the Conversion Price if no such
adjustment would have been required at the time such right,
warrant, option or convertible or exchangeable security was
issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or
exchange and/or the Capital Stock receivable thereupon are
changed after the time of the issuance or distribution of such
right, warrant, option or convertible or exchangeable security
then such change shall be deemed to be the expiration thereof
without having been exercised and the issuance or distribution
of new options, rights, warrants or convertible or
exchangeable securities and (ii) the issuance of convertible
preferred stock of the Corporation as a dividend on
convertible preferred stock of the Corporation will not cause
an adjustment in the Conversion Price if no such adjustment
would have been required at the time such underlying
convertible preferred stock was issued (or as a result of any
subsequent modification to the terms thereof) and the
conversion provisions of such convertible stock so issued as a
dividend are the same as in such underlying convertible
preferred stock.

Notwithstanding any contained in this Certificate of
Designation to the contrary, options, rights or warrants
issued or distributed by the Corporation, including options,
rights or warrants distributed prior to the date of filing of
this Certificate of Designation, to holders of Common Stock
generally which, until the occurrence of a specified event or
events (a "Trigger Event"), (i) are deemed to be transferred
with Common Stock, (ii) are not exercisable and (iii) are also
issued on a pro rata basis with respect to future issuances of
Common Stock, shall be deemed not to have been issued or
distributed for purposes of this Subsection 4(c) (and no
adjustment to the Conversion Price under this Subsection 4(c)
will be required) until the occurrence of the earliest Trigger
Event. Upon the occurrence of a Trigger Event, such options,
rights or warrants shall continue to be deemed not to have
been issued or distributed for purposes of this Subsection
4(c) (and no adjustment to the Conversion Price under this
Subsection 4(c) will be required) if and for so long as each
Registered Holder who thereafter converts such Registered
Holder's Series A Preferred Stock shall be entitled to receive
upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, a number of such options,
rights or warrants, as the case may be, equal to the number of
options, rights or warrants to which a holder of the number of
shares of

Common Stock equal to the number of shares of Common Stock
issuable upon conversion of such Registered Holder's Series A
Preferred Stock is entitled to receive at the time of such
conversion in accordance with the terms and provisions of, and
applicable to, such options, rights or warrants. Upon the
expiration of any such options, rights or warrants or at such
time, if any, as a Registered Holder is not entitled to
receive such options, rights or warrants upon conversion of
such Registered Holder's Series A Preferred Stock, an
adjustment (if any is required) to the Conversion Price shall
be made in accordance with this Paragraph 4(c)(iii) with
respect to the issuance of all such options, rights and
warrants as of the date of issuance thereof, but subject to
the provisions of the preceding paragraph, if any such option,
right or warrant, including any such options right or warrants
distributed prior to the date of filing of this Certificate of
Designation, are subject to events, upon the occurrence of
which such options, rights or warrants become exercisable to
purchase different securities, evidence of indebtedness, cash,
Properties or other assets or different amounts thereof, then,
subject to the preceding provision of this paragraph, the date
of the occurrence of any and each such event shall be deemed
to be the date of distribution and record date with respect to
new options, right or warrants with such new purchase rights
(and a termination or expiration of the existing options,
rights or warrants without exercise thereof). In addition, in
the event of any distribution (or deemed distribution) of
options, rights or warrants, or any Trigger Event or other
event of the type described in the preceding sentence, that
required (or would have required but for the provisions of
Paragraph 4(c)(vi) or this paragraph) an adjustment to the
Conversion Price under this Subsection 4(c) and such options,
rights or warrants shall thereafter have been redeemed or
repurchased without having been exercised, then the Conversion
Price shall be adjusted upon such redemption or repurchase to
give effect to such distribution, Trigger Event or other
event, as the case may, as though it had instead been a cash
distribution, equal on a per share basis to the result of the
aggregate redemption or repurchase price received by holders
of such options, rights or warrants divided by the number of
shares of Common Stock outstanding as of the date of such
repurchase or redemption, made to holders of Common Stock
generally as of the date of such redemption or repurchase.

(iv) If the Corporation shall pay or distribute, as a
dividend or otherwise, generally to holders of Common Stock or
any class or series of Capital Stock which is convertible into
or exercisable or exchangeable for Common Stock any assets,
Properties or rights (including, without limitation, evidences
of indebtedness of the Corporation, any Subsidiary or any
other Person, cash or Capital Stock or other securities of the
Corporation, any Subsidiary or any other Person, but excluding
payments and distributions as described in Paragraphs 4(c)(ii)
or (iii), dividends and distributions in connection with a
Liquidation Event and distributions consisting solely of cash
described in Paragraph 4(c)(v)), then in each such case the
Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately prior to the date of
such payment or distribution by a fraction, the numerator of
which is the Current Market Price per share of Common Stock on
the record

date for the determination of stockholders entitled to receive
such payment or distribution less the Fair Market Value per
share of Common Stock on such record date of the assets,
Properties or rights so paid or distributed, and the
denominator of which is the Current Market Price per share of
Common Stock on such record date. Such adjustment shall become
effective immediately after such record date. For purposes of
this Paragraph 4(c)(iv), such Fair Market Value per share
shall equal the aggregate Fair Market Value on such record
date of the assets, Properties or rights so paid or
distributed divided by the number of shares of Common Stock
outstanding on such record date. For all purposes of this
Certificate of Designation, adjustments to any security's
conversion or exercise price pursuant to such security's
original terms shall not be deemed a distribution or dividend
to holders thereof.

(v) If the Corporation shall, by dividend or
otherwise, make a distribution (other than in connection with
the liquidation, dissolution or winding up of the Corporation
in its entirety), generally to holders of Common Stock or any
class or series of Capital Stock which is convertible into or
exercisable or exchangeable for Common Stock, consisting
solely of cash where (x) the sum of (i) the aggregate amount
for such cash plus (ii) the aggregate amount of all cash so
distributed (by dividend or otherwise) to such holders within
the 12-month period ending on the record date for determining
stockholder entitled to receive such distribution with respect
to which no adjustment has been made to the Conversion Price
pursuant to this Paragraph 4(c)(v) exceeds (y) 10% of the
result of the multiplication of (1) the Current Market Price
per share of Common Stock on such record date times (2) the
number of shares of Common Stock outstanding on such record
date, then the Conversion Price shall be reduced, effective
immediately prior to the opening of business on the day
following such record date, by multiplying the Conversion
Price in effect immediately prior to the close of business on
the day prior to such record date by a fraction, the numerator
of which is the Current Market Price per share of Common Stock
on such record date less the aggregate amount of cash per
share so distributed and the denominator of which is such
Current Market Price; provided, however, that, if the
aggregate amount of cash per share is equal to or greater than
such Current Market Price, then, in lieu of the foregoing
adjustment, adequate provisions shall be made so that each
Registered Holder shall have the right to receive upon
conversion (with respect to each share of Common Stock issued
upon such conversion and in addition to the Common Stock
issuable upon conversion) the aggregate amount of cash per
share such Registered Holder would have received had such
Registered Holder's Series A Preferred Stock been converted
immediately prior to such record date. In no event shall the
Conversion Price be increased pursuant to this Paragraph
4(c)(v); provided, however, that if such distribution is not
so made, the Conversion Price shall be adjusted to be the
Conversion Price which would have been in effect if such
distribution had not been declared. For purposes of this
Paragraph 4(c)(v), such aggregate amount of cash per share
shall equal such sum divided by the number of shares of Common
Stock outstanding on such record date.

(vi) The provisions of this Subsection 4(c) shall
similarly apply to all successive events of the type described
in this Subsection 4(c). Notwithstanding anything contained
herein to the contrary, no adjustment in the Conversion Price
shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Conversion Price
then in effect; provided, however, that any adjustments which
by reason of this Paragraph 4(c)(vi) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 4
shall be made by the Corporation and shall be made to the
nearest cent or to the nearest one hundredth of a share, as
the case may be, and the transfer agent shall be entitled to
rely conclusively thereon. Except as provided in this Section
4, no adjustment in the Conversion Price will be made for the
issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to
purchase Common Stock or any securities so convertible or
exchangeable.

(vii) Whenever the Conversion Price is adjusted as
provided herein, the Corporation shall promptly file with the
transfer agent an Officers' Certificate setting forth the
Conversion Price in effect after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such Officers'
Certificate, the Corporation shall give or cause to be given
to each Registered Holder a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price
and the date on which such adjustment becomes effective.

(viii) Notwithstanding anything contained herein to
the contrary, in any case in which this Subsection 4(c)
provides that an adjustment in the Conversion Price shall
become effective immediately after a record date for an event,
the Corporation may defer until the occurrence of such event
(i) issuing to the Registered Holder of any Series A Preferred
Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the number of shares of
Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such Registered
Holder any amount in cash in lieu of any fractional share of
Common Stock pursuant to Subsection 4(d).

(ix) Notwithstanding any other provision hereof, no adjustment
to the Conversion Price shall be made upon the issuance or
exercise or conversion of (1) options or warrants to purchase,
in the aggregate, up to 25% of the securities sold in the
offerings of securities of the Corporation described in the
Original Offer to Exchange or any options or warrants
described in the Amendment in respect of the Alternative
Equity Offering, in each case issued to (or to the designee
of) any placement agent or financial advisor (such options or
warrants, the "Offering Warrants"), (2) any equity securities
or warrants of the Corporation (including, without limitation,
the Series A Preferred Stock, warrants and equity securities
underlying warrants) issued in exchange for 9% Convertible
Subordinated

Notes due 2004 (the "9% Notes") of the Corporation or accrued
interest thereon or pursuant to the conversion or exercise
provisions thereof, (3) any warrants issued in connection with
the offerings described in the Original Offer to Exchange or
the Amendment (collectively, the "Offering"), (4) any warrants
issued to Forum Capital Markets, LLC ("Forum") in exchange for
or in addition to, or any amendment to, any warrants held by
Forum, in each case, pursuant to a letter agreement dated
January 5, 1998, between the Corporation and Forum, and any
other warrants to purchase Common Stock or shares of Common
Stock issued to Forum or its designee, (5) any Series A
Preferred Stock issued in the Offering, (6) any Capital Stock
issued or cash paid as dividends on the Series A Preferred
Stock or (7) any Capital Stock issued or cash paid upon the
mandatory conversion or redemption of any Series A Preferred
Stock in accordance with Section 5 of this Certificate of
Designation.

(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Series A Preferred Stock. If more than one certificate evidencing shares of
Series A Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of such aggregate number of shares
of Series A Preferred Stock, the Corporation may elect, in its sole discretion,
independently for each holder, whether such number of shares of Common Stock
will be rounded to the nearest whole share (with a .5 of a share rounded upward)
or whether such holder will be given cash, in lieu of any fractional share, in
an amount equal to the same fraction of the Market Price of the Common Stock as
of the close of business on the day of conversion.

(e) [Reserved]

(f) Reservation of Shares; Transfer Taxes, Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of its Common
Stock free of preemptive rights as shall be sufficient to effect the conversion
of all shares of Series A Preferred Stock from time to time outstanding. The
Corporation shall use its best efforts from time to time, in accordance with the
laws of the State of Delaware to increase the authorized number of shares of
Common Stock if at any time the number of shares of authorized, unissued and
unreserved Common Stock shall not be sufficient to permit the conversion of all
the then-outstanding shares of Series A Preferred Stock.

The Corporation shall pay any and all issue or other taxes
(excluding any income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of the Series A Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
Common Stock (or other securities or assets) in a name other than that in which
the shares of Series A Preferred Stock so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount

of such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid or need not be paid.

(g) Prior Notice of Certain Events. In case:

(i) the Corporation shall declare any dividend (or
any other distribution); or

(ii) the Corporation shall authorize the granting to
the holders of Common Stock of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any
other rights or warrants; or

(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding Common
Stock, or a change in par value, or from par value to no par
value, or from no par value to par value); or

(iv) of any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of
the Corporation or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
other property; or

(v) of any Liquidation Event;

then the Corporation shall cause to be filed with the transfer agent for the
Series A Preferred Stock, and shall cause to be mailed to the Registered
Holders, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least 20 days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend. distribution or granting of
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined and a description of the cash,
securities or other property to be received by such holders upon such dividend,
distribution or granting of rights or warrants or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange or
Liquidation Event is expected to become effective, the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such exchange or Liquidation Event and the consideration, including securities
or other property, to be received by such holders upon such exchange; provided,
however, that no failure to mail such notice or any defect therein or in the
mailing thereof shall affect the validity of the corporate action required to be
specified in such notice.

(h) Other Changes in Conversion Rate. The Corporation from
time to time may increase the Conversion Rate by any amount for any period of
time if the period is at least 20 days and if the increase is irrevocable during
the period. Whenever the Conversion Rate is so increased, the Corporation shall
mail to the Registered Holders a notice of the increase at least 15 days before
the date the increased Conversion Rate takes effect, and such notice shall

state the increased Conversion Rate and the period it will be in effect.

The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this Section 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.

Notwithstanding anything to the contrary herein, in no case
shall the Conversion Price be adjusted to an amount less than $.001 per share,
the current par value of the Common Stock into which the Series A Preferred
Stock is convertible.

(i) Ambiguities/Errors. The Board of Directors of the
Corporation shall have the power to resolve any ambiguity or correct any error
in the provisions relating to the convertibility of the Series A Preferred
Stock, and its actions in so doing shall be final and conclusive.

5. Mandatory Conversion and Redemption. (a) At any time after
the expiration of 12 months after the Alternative Equity Closing Date, the
Corporation at its option, may cause the Series A Preferred Stock to be
converted in whole or in part, on a pro rata basis, into fully paid and
nonassessable shares of Common Stock using a conversion price equal to 200% of
the Stated Common Price if the Closing Bid Price (or, if the price referenced in
the definition of Closing Bid Price cannot be determined, the Fair Market Value)
of the Common Stock shall have equalled or exceeded 250% of the Conversion Price
for at least 20 trading days in any 30 consecutive trading day period ending
three days prior to the date of notice of conversion (such event, the "Market
Trigger"). Any shares of Series A

Preferred Stock so converted shall be treated as having been surrendered by the
holder thereof for conversion pursuant to Section 4 on the date of such
mandatory conversion (unless previously converted at the option of the holder).

(b) At any time after April 1, 2000, the Corporation, at its
option, may redeem the Series A Preferred Stock for cash equal to the Dividend
Base Amount at such time, if the Market Trigger has occurred in the period
ending three days prior to the date of notice of redemption (unless previously
converted at the option of the holder).

(c) No greater than 60 nor fewer than 20 days prior to the
date of any such mandatory conversion or redemption, notice by first class mail,
postage prepaid, shall be given to the holders of record of the Series A
Preferred Stock to be converted or redeemed, addressed to such holders at their
last addresses as shown on the stock transfer books of the Corporation. Each
such notice shall specify the date fixed for conversion or redemption, the place
or places for surrender of shares of Series A Preferred Stock and the then
effective Conversion Rate pursuant to Section 4.

Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given by the Corporation on the date
deposited in the mail, whether or not

the holder of the Series A Preferred Stock receives such notice; and failure
properly to give such notice by mail, or any defect in such notice, to the
holders of the shares to be converted or redeemed shall not affect the validity
of the proceedings for the conversion or redemption of any other shares of
Series A Preferred Stock. On or after the date fixed for conversion or
redemption (the "Take-Out Date") as stated in such notice, each holder of shares
called to be converted or redeemed shall surrender the certificate evidencing
such shares to the Corporation at the place designated in such notice for
conversion or redemption. After the mailing of such notice, but before the
Take-Out Date as stated therein, all rights whatsoever with respect to the
shares so called for conversion or redemption (except the right of the holders
to convert such shares pursuant to Section 4 and to have such shares converted
or redeemed, as the case may be, upon surrender of their certificates therefor,
pursuant to this Section 5) shall terminate. On or after the Take-Out Date,
notwithstanding that the certificates evidencing any shares properly called for
conversion or redemption shall not have been surrendered, such shares shall no
longer be deemed outstanding and all rights whatsoever with respect to the
shares so called for conversion or redemption (except the right of the holders
to have such shares converted or redeemed, as the case may be, upon surrender of
their certificates therefor, pursuant to this Section 5) shall terminate.

6. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series A Preferred Stock, when issued, shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series A Preferred Stock, all shares of Series
A Preferred Stock converted into Common Stock or redeemed pursuant to Section 5
and (ii) from the date of registration of transfer, all shares of Series A
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.

7. Class Voting Rights. The Corporation shall not, without the
affirmative vote or consent of the holders of at least 50% of all outstanding
Series A Preferred Stock, voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws of the
Corporation so as adversely to affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series A Preferred Stock (it
being understood that the issuance of securities ranking prior to, or pari passu
with, the Series A Preferred Stock (A) upon a Liquidation Event or (B) with
respect to the payment of dividends or distributions shall not be considered
adversely to affect such relative rights, preferences, qualifications,
limitations or restrictions); or (ii) authorize or issue, or increase the
authorized amount of, Series A Preferred Stock, other than Series A Preferred
Stock issuable in connection with the

Offering, issuable in exchange for 9% Notes or accrued interest thereon or
issuable as dividends on Series A Preferred Stock.

8. Status of Acquired Shares. Shares of Series A Preferred
Stock received upon conversion or redemption pursuant to Section 4 or Section 5
or otherwise acquired by the Corporation will be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
class, and may thereafter be issued, but not as shares of Series A Preferred
Stock.

9. Preemptive Rights. The Series A Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.

10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.

11. Restrictions on Change of Control. Notwithstanding
anything to the contrary contained in this Certificate of Designation, without
the prior written consent of the Corporation, so long as any 9% Notes remain
outstanding under that certain Indenture dated as of March 26, 1997 (as amended,
the "Indenture") in respect of the 9% Notes, no holder of Series A Preferred
Stock shall have voting rights granted hereunder, be entitled to receive any
voting securities of the Corporation pursuant hereto or be entitled to exercise
any of the conversion rights set forth herein (each, a "Restricted Event"), to
the extent that any such Restricted Event could, in the Corporation's reasonable
judgment, either alone or in conjunction with other issuances or holdings of
capital stock, warrants or convertible securities of the Corporation, result in
a Change of Control (as defined in the Indenture).

[Signature page follows]

IN WITNESS WHEREOF, E. Andrews Grinstead, III, President and
Chief Executive Officer of the Corporation, acting for and on behalf of the
Corporation, has hereunto subscribed his name this 5th day of May, 1998.

HYBRIDON, INC.

By: /s/ E. Andrews Grinstead, III
------------------------------------------
Name:    E. Andrews Grinstead, III
Title:  President and Chief Executive Officer

CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION

OF

HYBRIDON, INC.

It is hereby certified that:

1. The name of the corporation (hereinafter called the "Corporation")
is Hybridon, Inc.

2. The Certificate of Incorporation of the Corporation is hereby
amended by inserting a new sentence at the end of paragraph 4 of Subsection A of
Articles FOURTH thereof so that said paragraph as so amended shall read as
follows:

"4. LIQUIDATION. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock
will be entitled to receive all assets of the Corporation available for
distribution to its stockholders, subject to any preferential rights of
any then outstanding Preferred Stock. Notwithstanding the foregoing,
and notwithstanding any amendments to, or resolutions of the Board of
Directors in connection with, this Certificate of Incorporation, the
transaction between the Corporation and Boston Biosystems, Inc.
pursuant to that certain Asset Purchase Agreement of June 29, 2000,
shall not constitute a dissolution or liquidation of the Corporation
such as would entitle any holder of the Series A Preferred Stock to a
preferred distribution."

3.       Paragraph 3 of the Certificate of Designation of the Corporation shall
be amended by inserting a new sentence at the end of the paragraph such
that said paragraph shall read as follows:

"3(c) Notwithstanding the foregoing, and notwithstanding any
amendments to, or resolutions of the Board of Directors in connection
with, this Certificate of Incorporation or Certificate of Designation,
the transaction between the Corporation and Boston Biosystems, Inc.
pursuant to that certain Asset Purchase Agreement dated as of June 29,
2000, shall not constitute a Liquidation Event of the Corporation such
as would entitle any holder of any series of Series A Preferred Stock
to any preferred distribution."

4.       Every other Article and provision in the Certificate of Incorporation
of the Corporation remains in full force and effect.

5.       The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be duly signed by its President this 19th day of September, 2000.

HYBRIDON, INC.

By:  /s/ Robert G. Andersen
---------------------------------------
Robert G. Andersen, Vice President
and CFO

CERTIFICATE OF DESIGNATION
for
SERIES B CONVERTIBLE PREFERRED STOCK
of
HYBRIDON, INC.

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

HYBRIDON, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), does hereby certify that
pursuant to the authority conferred on the board of directors of the Corporation
(the "Board of Directors") by the Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation") of the Corporation and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors adopted the following resolution establishing a
series of 85,000 shares of preferred stock of the Corporation designated as
"Series B Convertible Preferred Stock":

RESOLVED, that pursuant to the authority conferred on the
Board of Directors by the Certificate of Incorporation, a series of
preferred stock, par value $.01 per share, of the Corporation is hereby
established and created, and that the designation and number of shares
thereof and the voting and other powers, preferences and relative
participating, optional or other special rights of, the shares of such
series and the qualifications, limitations and restrictions thereof are
as follows:

Series B Convertible Preferred Stock

1. Designation and Amount and Definitions. (a) There shall be
a series of Preferred Stock designated as "Series B Convertible Preferred Stock"
and the number of shares constituting such series shall be 85,000. Such series
is referred to herein as the "Series B Preferred Stock". Notwithstanding any
other provision in this Certificate of Designation of the Series B Preferred
Stock (the "Certificate of Designation") to the contrary, such series shall be
senior to the common stock, par value $.001 per share of the Corporation (the
"Common Stock"), and the Series A Convertible Preferred Stock, $.01 par value
per share, of the Corporation (the "Series A Preferred Stock"), with respect to
dividends and the distribution of assets upon liquidation, dissolution or
winding up. Such number of shares may be increased or decreased by resolution of
the Board of Directors, subject to the provisions of Section 7 hereof; provided,
however, that no decrease shall reduce the number of shares of Series B
Preferred Stock to fewer than the number of shares then issued and outstanding.

(b) As used in this Certificate of Designation, except as
otherwise provided in Subsection 4(c), the following terms shall have the
following meanings:

(i) "Closing Bid Price" for any security for each
trading day shall be the reported per share closing bid price
of such security regular way on the Stock Market on such
trading day, or, if there were no transactions on such trading
day, the average of the reported closing bid and asked prices,
regular way, of such security on the relevant Stock Market on
such trading day.

(ii) "Fair Market Value" of any asset (including any
security) means the fair market value thereof as mutually
determined by the Corporation and the holders of a majority of
the Series B Preferred Stock then outstanding. If the
Corporation and the holders of a majority of the Series B
Preferred Stock then outstanding are unable to reach agreement
on any valuation matter, such valuation shall be submitted to
and determined by a nationally recognized independent
investment bank selected by the Board of Directors and the
holders of a majority of the Series B Preferred Stock then
outstanding (or, if such selection cannot be agreed upon
promptly, or in any event within ten (10) days, then such
valuation shall be made by a nationally recognized independent
investment banking firm selected by the American Arbitration
Association in New York City in accordance with its rules),
the costs of which valuation shall be paid for by the
Corporation.

(iii) "Market Price" shall mean the average Closing
Bid Price for twenty (20) consecutive trading days, ending
with the trading day prior to the date as of which the Market
Price is being determined (with appropriate adjustments for
subdivisions or combinations of shares effected during such
period), provided that if the prices referred to in the
definition of Closing Bid Price cannot be determined on any
trading day, the Closing Bid Price for such trading day will
be deemed to equal Fair Market Value of such security on such
trading day.

(iv) "Registered Holders" shall mean, at any time,
the holders of record of the Series B Preferred Stock.

(v) "Stock Market" shall mean, with respect to any
security, the principal national securities exchange on which
such security is listed or admitted to trading or, if such
security is not listed or admitted to trading on any national
securities exchange, shall mean The Nasdaq National Market
System ("NNM") or The Nasdaq SmallCap Market ("SCM" and,
together with NNM, "Nasdaq") or, if

such security is not quoted on Nasdaq, shall mean the OTC
Bulletin Board or, if such security is not quoted on the OTC
Bulletin Board, shall mean the over-the-counter market as
furnished by any NASD member firm selected from time to time
by the Corporation for that purpose.

(vi) "Trading Day" shall mean a day on which the
relevant Stock Market is open for the transaction of business.

2. Dividends and Distributions. (a) The holders, as of the
Dividend Record Date (as defined below), of the Series B Preferred Stock shall
be entitled to receive semi-annual dividends on their respective shares of
Series B Preferred Stock (aggregating, for this purpose, all shares of Series B
Preferred Stock held of record or, to the Corporation's knowledge, beneficially
by such holder), payable, at the option of the Corporation, in cash or
additional shares of Series B Preferred Stock, at the rate of 8% per annum
(computed on the basis of a 360-day year of twelve 30 day months) of the
Dividend Base Amount (as defined below), payable semi-annually in arrears;
provided that, to the extent the declaration or payment of such dividend is
prohibited by applicable law, such dividend need not be paid but shall
nevertheless accrue and shall be paid promptly when applicable law permits. Such
dividends shall accrue (i) from March 6, 2001 for shares of Series B Preferred
Stock issued within thirty days of the date of the filing of this Certificate of
Designation, or (ii) from the date of issuance for shares of Series B Preferred
Stock issued after thirty days from the date of filing of this Certificate of
Designation, and shall be paid semi-annually on April 1 and October 1 of each
year or, if any such day is not a business day, on the next succeeding business
day. Such dividends shall be paid, at the election of the Corporation, either in
cash or additional duly authorized, fully paid and non assessable shares of
Series B Preferred Stock. In calculating the number of shares of Series B
Preferred Stock to be paid with respect to each dividend, the Series B Preferred
Stock shall be valued at $100.00 per share (subject to appropriate adjustment to
reflect any stock split, combination, reclassification or reorganization of the
Series B Preferred Stock). Notwithstanding the foregoing, the Corporation shall
not be required to issue fractional shares of Series B Preferred Stock; the
Corporation may elect, in its sole discretion, independently for each holder,
whether such number of shares (on an aggregated basis) will be rounded to the
nearest whole share (with .5 of a share rounded upward) or whether such holder
will be given cash in lieu of any fractional shares. The "Dividend Base Amount"
of a share of Series B Preferred Stock shall be $100.00 plus all accrued but
unpaid dividends (subject to appropriate adjustment to reflect any stock split,
combination, reclassification or reorganization of the Series B Preferred
Stock). The "Dividend Record Date" shall mean, for each semi-annual dividend,
the March 15 or September 15, as the case may be, immediately preceding the
dividend payment date.

(b) In addition to the foregoing, subject to the rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series B Preferred Stock with
respect to dividends, and prior to the rights of the holders of Common Stock,
Series A Preferred Stock and any other series or class of capital stock, the
holders of shares of Series B Preferred Stock shall be entitled to receive, as,
when and if declared by the Board of Directors, out of assets legally available
for that purpose, dividends or distributions in cash, stock or otherwise.

(c) The Corporation shall not declare or pay any dividend or
distribution on any Junior Stock (as defined below) of the Corporation unless
all dividends required by Section 2(a) have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for such payment, on the Series B Preferred Stock.

(d) [Reserved]

(e) All dividends or distributions declared upon the Series B
Preferred Stock shall be declared pro rata per share.

(f) Any reference to "distribution" contained in this Section
2 shall not be deemed to include any distribution made in connection with or in
lieu of any Liquidation Event (as defined below).

(g) No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series B Preferred
Stock which may be in arrears (it being understood that this provision does not
alter the Corporation's obligations under Section 2(a)).

(h) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series B
Preferred Stock, for any period unless all dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series B Preferred Stock.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series B Preferred Stock and any
other class or series of stock ranking on a parity as to dividends with the
Series B Preferred Stock, all dividends declared upon such other stock shall be
declared pro rata so that the amounts of dividends per share declared on the
Series B Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share

on the shares of the Series B Preferred Stock and on such other stock bear to
each other.

(i) So long as any shares of the Series B Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series B Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series B Preferred Stock shall have been paid or set apart for payment.

(j) "Junior Stock" shall mean the Common Stock, Series A
Preferred Stock, and any shares of preferred stock of any series or class of the
Corporation, whether presently outstanding or hereafter issued, which are junior
to the shares of Series B Preferred Stock with respect to (i) the distribution
of assets on any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, (ii) dividends or (iii) voting.

3. Liquidation Preference. (a) In the event of a (i)
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, (ii) a sale or other disposition of all or substantially all of the
assets of the Corporation or (iii) any consolidation, merger, combination,
reorganization or other transaction in which the Corporation is not the
surviving entity or shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a "Merger
Transaction") (items (i), (ii) and (iii) of this sentence being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
debts and other liabilities of the Corporation, the holders of the Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to the Dividend Base Amount at such
time; provided, however, in the case of a Merger Transaction, such payment may
be made in cash, property (valued as provided in Subsection 3(b)) and/or
securities (valued as provided in Subsection 3(b)) of the entity surviving such
Merger Transaction. In the case of property or in the event that any such
securities are subject to an investment letter or other similar restriction on
transferability, the value of such property or securities shall be determined by
agreement between the Corporation and the holders of a majority of the Series B
Preferred Stock then outstanding. If upon any Liquidation Event, whether
voluntary or involuntary, the assets to be distributed to the holders of the
Series B Preferred Stock shall be insufficient to

permit the payment to such shareholders of the full preferential amounts
aforesaid, then all of the assets of the Corporation to be distributed shall be
so distributed ratably to the holders of the Series B Preferred Stock on the
basis of the number of shares of Series B Preferred Stock held. Notwithstanding
item (iii) of the first sentence of this Subsection 3(a), any consolidation,
merger, combination, reorganization or other transaction in which the
Corporation is not the surviving entity but the stockholders of the Corporation
immediately prior to such transaction own in excess of 50% of the voting power
of the corporation surviving such transaction and own amongst themselves such
interest in substantially the same proportions as prior to such transaction,
shall not be considered a Liquidation Event provided that the surviving
corporation shall make appropriate provisions to ensure that the terms of this
Certificate of Designation survive any such transaction. All shares of Series B
Preferred Stock shall rank as to payment upon the occurrence of any Liquidation
Event senior to the Common Stock, the Series A Preferred Stock, and, unless the
terms of such series shall provide otherwise, senior to all other series of the
Corporation's preferred stock.

(b) Any securities or other property to be delivered to the
holders of the Series B Preferred Stock pursuant to Subsection 3(a) hereof shall
be valued as follows:

(i) Securities not subject to an investment letter or
other similar restriction on free marketability:

(A) If actively traded on a Stock Market,
the per share value shall be deemed to be the Market Price of
such securities as of the third day prior to the date of
valuation.

(B) If not actively traded on a Stock
Market, the value shall be the Fair Market Value of such
securities.

(ii) For securities for which there is an active
public market but which are subject to an investment letter or
other restrictions on free marketability, the value shall be
the Fair Market Value thereof, determined by discounting
appropriately the per share Market Price thereof.

(iii) For all other securities, the value shall be
the Fair Market Value thereof.

4.  Conversion.

(a) Right of Conversion. The shares of Series B Preferred
Stock are convertible, in whole or in part, at the option of the holder thereof
and upon notice to the Corporation as set forth in Subsection 4(b), into fully
paid and nonassessable shares of Common Stock and such other securities and
property as hereinafter provided. The initial conversion price per share of
Common Stock (the "Conversion Price"), shall be $.50, subject to adjustment as
provided herein. The rate at which each share of Series B Preferred Stock is
convertible at any time into Common Stock (the "Conversion Rate") shall be
determined by dividing the then existing Conversion Price (determined in
accordance with this Section 4, including the last paragraph hereof) into the
Dividend Base Amount.

(b) Conversion Procedures. Any holder of shares of Series B
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series B
Preferred Stock at the office of the transfer agent for the Series B Preferred
Stock, which certificate or certificates, if the Corporation shall so require,
shall be duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Series B Preferred Stock and specifying the name or names
(with address) in which a certificate or certificates evidencing shares of
Common Stock are to be issued. The Corporation need not deem a notice of
conversion to be received unless the holder complies with all the provisions
hereof. The Corporation will instruct the transfer agent (which may be the
Corporation) to make a notation of the date that a notice of conversion is
received, which date of receipt shall be deemed to be the date of receipt for
purposes hereof.

The Corporation shall, as soon as practicable after such
deposit of certificates evidencing shares of Series B Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Series B Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number
of full shares of Common Stock to which such person shall be entitled as
aforesaid, subject to Section 4(d). Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock deliverable upon
conversion of such Series B Preferred Stock shall be treated for all purposes as
the record holder or holders of such Common Stock on such date; provided,
however, that the Corporation shall not be required to convert any shares of
Series B Preferred Stock while the stock transfer books of the Corporation are
closed for any purpose, but the surrender of Series B Preferred Stock for
conversion during any period while such books are so closed shall become
effective for

conversion immediately upon the reopening of such books as if the surrender had
been made on the date of such reopening, and the conversion shall be at the
conversion rate in effect on such date. No adjustments in respect of any
dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion shall be made upon the conversion of any shares of
Series B Preferred Stock.

The Corporation shall at all times, reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series B Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series B Preferred
Stock.

All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
Subsection 4(g) hereof, a holder of Series B Preferred Stock may, at its
election, provide in its notice of conversion that the conversion of its shares
of Series B Preferred Stock shall be contingent upon the occurrence of the
record date or effectiveness of such event (as specified by such holder),
provided that such notice of conversion is received by the Corporation prior to
such record date or effective date, as the case may be.

(c) Adjustment of Conversion Rate and Conversion Price.

(i) As used in this Subsection 4(c), the following
terms shall have the following meanings:

"Capital Stock" of any Person means the Common Stock
or Preferred Stock of such Person. Unless otherwise stated
herein or the context otherwise requires, "Capital Stock"
means Capital Stock of the Corporation; "Common Stock" of any
Person other than the Corporation means the common equity
(however designated), including, without limitation, common
stock or partnership or membership interests of, or
participation or interests in such Person (or equivalents
thereof).

"Common Stock" of the Corporation means the Common
Stock, par value $.001 per share, of the Corporation, any
successor class or classes of common equity (however
designated) of the Corporation into or for which such Common
Stock may hereafter be converted, exchanged or reclassified
and any class or classes of common equity (however designated)
of the Corporation which may be distributed or issued with
respect to such Common Stock or successor class of classes to
holders thereof generally. Unless otherwise stated herein or
the

context requires otherwise, "Common Stock" means Common Stock
of the Corporation;

"Current Market Price" means, when used with respect
to any security as of any date, the last sale price, regular
way, or, in case no such sale takes place on such date, the
average of the closing bid and asked prices, regular way, of
such security in either case as reported for consolidated
transactions on the New York Stock Exchange or, if such
security is not listed or admitted to trading on the New York
Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national
securities exchange on which such security is listed or
admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, as
reported on the Nasdaq National Market, or, if such security
is not listed or admitted to trading on the Nasdaq National
Market, as reported on the Nasdaq SmallCap Market, or if such
security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the
Nasdaq SmallCap Market, the average of the high bid and low
asked prices of such security in the over-the-counter market,
as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or such other system then in
use or, if such security is not quoted by any such
organization, the average of the closing bid and asked prices
of such security furnished by an NASD member firm selected by
the Corporation. If such security is not quoted by any such
organization and no such NASD member firm is able to provide
such prices, the Current Market Price of such security shall
be the Fair Market Value thereof;

"Fair Market Value" means, at any date as to any
asset, Property or right (including without limitation,
Capital Stock of any Person, evidence of indebtedness or other
securities, but excluding cash), the fair market value of such
item as determined in good faith by the Board of Directors,
whose determination shall be conclusive; provided, however,
that such determination is described in an Officers'
Certificate filed with the transfer agent and that, if there
is a Current Market Price for such item on such date, "Fair
Market Value" means such Current Market Price (without giving
effect to the last sentence of the definition thereof);

"GAAP" means, as of any date, generally accepted
accounting principles in the United States and does not
include any

interpretations or regulations that have been proposed but
that have not become effective;

"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice
President of such Person;

"Officers' Certificate" means a certificate signed on
behalf of the Corporation by two Officers, one of whom must be
the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Corporation;

"Person" means any individual, corporation,
partnership, association, trust or any other entity or
organization, including a government or political subdivision
or any agency or instrumentality thereof;

"Preferred Stock" of any Person means the class or
classes of equity, ownership or participation interests
(however designated) in such Person, including, without
limitation, stock, share, partnership and membership
interests, which are preferred as to the payment of dividends
or distributions by, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of,
such Person (or equivalent thereof) over interests of any
other class of interests of such Person. Unless otherwise
stated herein or the context otherwise requires, "Preferred
Stock" means Preferred Stock of the Corporation;

"Property" of any Person means any and all types of
real, personal, tangible, intangible or mixed property owned
by such Person whether or not included on the most recent
consolidated balance sheet of such Person in accordance with
GAAP;

"Subsidiary" of a Person on any date means any other
Person of whom such Person owns, directly or indirectly
through a Subsidiary or Subsidiaries of such Person, Capital
Stock with voting power, acting independently and under
ordinary circumstances, entitling such person to elect a
majority of the board of directors or other governing body of
such other Person. Unless otherwise stated herein or the
context otherwise requires, "Subsidiary" means a Subsidiary of
the Corporation.

(ii) If the Corporation shall (i) pay a dividend or
other distribution, in Common Stock, on any class of Capital
Stock of the Corporation, (ii) subdivide the outstanding
Common Stock into a greater number of shares by any means or
(iii) combine the outstanding Common Stock into a smaller
number of shares by any means including, without limitation, a
reverse stock split), then in each such case the Conversion
Price in effect immediately prior thereto shall be adjusted so
that the Registered Holder of any shares of Series B Preferred
Stock thereafter surrendered for conversion shall be entitled
to receive the number of shares of Common Stock that such
Registered Holder would have owned or have been entitled to
receive upon the happening of such event had such Series B
Preferred Stock been converted immediately prior to the
relevant record date or, if there is no such record date, the
effective date of such event. An adjustment made pursuant to
this Paragraph 4(c)(ii) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall
become effective immediately after the effective date of such
subdivision or combination, as the case may be.

(iii) If the Corporation shall (i) issue or
distribute (at a price per share less than the Current Market
Price per share of such Capital Stock on the date of such
issuance or distribution) Capital Stock generally to holders
of Common Stock or to holders of any class or series of
Capital Stock which is convertible into or exchangeable or
exercisable for Common Stock (excluding an issuance or
distribution of Common Stock described in Paragraph 4(c)(ii))
or (ii) issue or distribute generally to such holders rights,
warrants, options or convertible or exchangeable securities
entitling the holder thereof to subscribe for, purchase,
convert into or exchange for Capital Stock at a price per
share less than the Current Market Price per share of such
Capital Stock on the date of issuance or distribution, then,
in each such case, at the earliest of (A) the date the
Corporation enters into a firm contract for such issuance or
distribution, (B) the record date for the determination of
stockholders entitled to receive any such Capital Stock or any
such rights, warrants, options or convertible or exchangeable
securities or (C) the date of actual issuance or distribution
of any such Capital Stock or any such rights, warrants,
options or convertible or exchangeable securities, the
Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately prior to such earliest
date by:

(A) if such Capital Stock is Common Stock, a
fraction the numerator of which is the number of
shares of Common Stock outstanding, on such earliest
date plus the number of shares of Common Stock which
could be purchased at the Current Market Price per
share of Common Stock on the date of such issuance or
distribution with the aggregate consideration (based
on the Fair Market Value thereof) received or
receivable by the Corporation either (A) in
connection with such issuance or distribution or (B)
upon the conversion, exchange, purchase or
subscription of all such rights, warrants, options or
convertible or exchangeable securities (the
"Aggregate Consideration"), and the denominator of
which is the number of shares of Common Stock
outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed
or to be issued upon the conversion, exchange,
purchase or subscription of all such rights,
warrants, options or convertible or exchangeable
securities; or

(B) if such Capital Stock is other than
Common Stock, a fraction the numerator of which is
the Current Market Price per share of Common Stock on
such earliest date minus an amount equal to (A) the
difference between (1) the Current Market Price per
share of such Capital Stock multiplied by the number
of shares of such Capital Stock to be so issued and
(2) the Aggregate Consideration, divided by (B) the
number of shares of Common Stock outstanding on such
date, and the denominator of which is the Current
Market Price per share of Common Stock on such
earliest date.

Such adjustment shall be made successively whenever any such
Capital Stock, rights, warrants, options or convertible or
exchangeable securities are so issued or distributed. In
determining whether any rights, warrants, options or
convertible or exchangeable securities entitle the holders
thereof to subscribe for, purchase, convert into or exchange
for shares of such Capital Stock at less than such Current
Market Price, there shall be taken into account the Fair
Market Value of any consideration received or receivable by
the Corporation for such rights, warrants, options or
convertible or exchangeable securities. If any right, warrant,
option or convertible or exchangeable security, the issuance
of which resulted in an adjustment in the Conversion Price
pursuant to this Paragraph 4(c)(iii), shall expire and shall
not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed to the
Conversion Price which would have

been in effect if such right, warrant, option or convertible
or exchangeable securities had never been distributed or
issued. Notwithstanding anything contained in this paragraph
to the contrary, (i) the issuance of Capital Stock upon the
exercise of such rights, warrants or options or the conversion
or exchange of such convertible or exchangeable securities
will not cause an adjustment in the Conversion Price if no
such adjustment would have been required at the time such
right, warrant, option or convertible or exchangeable security
was issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or
exchange and/or the Capital Stock receivable thereupon are
changed after the time of the issuance or distribution of such
right, warrant, option or convertible or exchangeable security
then such change shall be deemed to be the expiration thereof
without having been exercised and the issuance or distribution
of new options, rights, warrants or convertible or
exchangeable securities and (ii) the issuance of convertible
preferred stock of the Corporation as a dividend on
convertible preferred stock of the Corporation will not cause
an adjustment in the Conversion Price if no such adjustment
would have been required at the time such underlying
convertible preferred stock was issued (or as a result of any
subsequent modification to the terms thereof) and the
conversion provisions of such convertible stock so issued as a
dividend are the same as in such underlying convertible
preferred stock.

Notwithstanding any contained in this Certificate of
Designation to the contrary, options, rights or warrants
issued or distributed by the Corporation, including options,
rights or warrants distributed prior to the date of filing of
this Certificate of Designation, to holders of Common Stock
generally which, until the occurrence of a specified event or
events (a "Trigger Event"), (i) are deemed to be transferred
with Common Stock, (ii) are not exercisable and (iii) are also
issued on a pro rata basis with respect to future issuances of
Common Stock, shall be deemed not to have been issued or
distributed for purposes of this Subsection 4(c) (and no
adjustment to the Conversion Price under this Subsection 4(c)
will be required) until the occurrence of the earliest Trigger
Event. Upon the occurrence of a Trigger Event, such options,
rights or warrants shall continue to be deemed not to have
been issued or distributed for purposes of this Subsection
4(c) (and no adjustment to the Conversion Price under this
Subsection 4(c) will be required) if and for so long as each
Registered Holder who thereafter converts such Registered
Holder's Series B Preferred Stock shall be entitled to receive
upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion,

a number of such options, rights or warrants, as the case may
be, equal to the number of options, rights or warrants to
which a holder of the number of shares of Common Stock equal
to the number of shares of Common Stock issuable upon
conversion of such Registered Holder's Series B Preferred
Stock is entitled to receive at the time of such conversion in
accordance with the terms and provisions of, and applicable
to, such options, rights or warrants. Upon the expiration of
any such options, rights or warrants or at such time, if any,
as a Registered Holder is not entitled to receive such
options, rights or warrants upon conversion of such Registered
Holder's Series B Preferred Stock, an adjustment (if any is
required) to the Conversion Price shall be made in accordance
with this Paragraph 4(c)(iii) with respect to the issuance of
all such options, rights and warrants as of the date of
issuance thereof, but subject to the provisions of the
preceding paragraph, if any such option, right or warrant,
including any such options right or warrants distributed prior
to the date of filing of this Certificate of Designation, are
subject to events, upon the occurrence of which such options,
rights or warrants become exercisable to purchase different
securities, evidence of indebtedness, cash, Properties or
other assets or different amounts thereof, then, subject to
the preceding provision of this paragraph, the date of the
occurrence of any and each such event shall be deemed to be
the date of distribution and record date with respect to new
options, right or warrants with such new purchase rights (and
a termination or expiration of the existing options, rights or
warrants without exercise thereof). In addition, in the event
of any distribution (or deemed distribution) of options,
rights or warrants, or any Trigger Event or other event of the
type described in the preceding sentence, that required (or
would have required but for the provisions of Paragraph
4(c)(vi) or this paragraph) an adjustment to the Conversion
Price under this Subsection 4(c) and such options, rights or
warrants shall thereafter have been redeemed or repurchased
without having been exercised, then the Conversion Price shall
be adjusted upon such redemption or repurchase to give effect
to such distribution, Trigger Event or other event, as the
case may, as though it had instead been a cash distribution,
equal on a per share basis to the result of the aggregate
redemption or repurchase price received by holders of such
options, rights or warrants divided by the number of shares of
Common Stock outstanding as of the date of such repurchase or
redemption, made to holders of Common Stock generally as of
the date of such redemption or repurchase.

(iv) If the Corporation shall pay or distribute, as a
dividend or otherwise, generally to holders of Common Stock or
any class or series of Capital Stock which is convertible into
or exercisable or exchangeable for Common Stock any assets,
Properties or rights (including, without limitation, evidences
of indebtedness of the Corporation, any Subsidiary or any
other Person, cash or Capital Stock or other securities of the
Corporation, any Subsidiary or any other Person, but excluding
payments and distributions as described in Paragraphs 4(c)(ii)
or (iii), dividends and distributions in connection with a
Liquidation Event and distributions consisting solely of cash
described in Paragraph 4(c)(v)), then in each such case the
Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately prior to the date of
such payment or distribution by a fraction, the numerator of
which is the Current Market Price per share of Common Stock on
the record date for the determination of stockholders entitled
to receive such payment or distribution less the Fair Market
Value per share of Common Stock on such record date of the
assets, Properties or rights so paid or distributed, and the
denominator of which is the Current Market Price per share of
Common Stock on such record date. Such adjustment shall become
effective immediately after such record date. For purposes of
this Paragraph 4(c)(iv), such Fair Market Value per share
shall equal the aggregate Fair Market Value on such record
date of the assets, Properties or rights so paid or
distributed divided by the number of shares of Common Stock
outstanding on such record date. For all purposes of this
Certificate of Designation, adjustments to any security's
conversion or exercise price pursuant to such security's
original terms shall not be deemed a distribution or dividend
to holders thereof.

(v) If the Corporation shall, by dividend or
otherwise, make a distribution (other than in connection with
the liquidation, dissolution or winding up of the Corporation
in its entirety), generally to holders of Common Stock or any
class or series of Capital Stock which is convertible into or
exercisable or exchangeable for Common Stock, consisting
solely of cash where (x) the sum of (i) the aggregate amount
for such cash plus (ii) the aggregate amount of all cash so
distributed (by dividend or otherwise) to such holders within
the 12-month period ending on the record date for determining
stockholder entitled to receive such distribution with respect
to which no adjustment has been made to the Conversion Price
pursuant to this Paragraph 4(c)(v) exceeds (y) 10% of the
result of the multiplication of (1) the Current Market Price
per share of Common Stock on such record date times (2)

the number of shares of Common Stock outstanding on such
record date, then the Conversion Price shall be reduced,
effective immediately prior to the opening of business on the
day following such record date, by multiplying the Conversion
Price in effect immediately prior to the close of business on
the day prior to such record date by a fraction, the numerator
of which is the Current Market Price per share of Common Stock
on such record date less the aggregate amount of cash per
share so distributed and the denominator of which is such
Current Market Price; provided, however, that, if the
aggregate amount of cash per share is equal to or greater than
such Current Market Price, then, in lieu of the foregoing
adjustment, adequate provisions shall be made so that each
Registered Holder shall have the right to receive upon
conversion (with respect to each share of Common Stock issued
upon such conversion and in addition to the Common Stock
issuable upon conversion) the aggregate amount of cash per
share such Registered Holder would have received had such
Registered Holder's Series B Preferred Stock been converted
immediately prior to such record date. In no event shall the
Conversion Price be increased pursuant to this Paragraph
4(c)(v); provided, however, that if such distribution is not
so made, the Conversion Price shall be adjusted to be the
Conversion Price which would have been in effect if such
distribution had not been declared. For purposes of this
Paragraph 4(c)(v), such aggregate amount of cash per share
shall equal such sum divided by the number of shares of Common
Stock outstanding on such record date.

(vi) The provisions of this Subsection 4(c) shall
similarly apply to all successive events of the type described
in this Subsection 4(c). Notwithstanding anything contained
herein to the contrary, no adjustment in the Conversion Price
shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Conversion Price
then in effect; provided, however, that any adjustments which
by reason of this Paragraph 4(c)(vi) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 4
shall be made by the Corporation and shall be made to the
nearest cent or to the nearest one hundredth of a share, as
the case may be, and the transfer agent shall be entitled to
rely conclusively thereon. Except as provided in this Section
4, no adjustment in the Conversion Price will be made for the
issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to
purchase Common Stock or any securities so convertible or
exchangeable.

(vii) Whenever the Conversion Price is adjusted as
provided herein, the Corporation shall promptly file with the
transfer agent an Officers' Certificate setting forth the
Conversion Price in effect after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such Officers'
Certificate, the Corporation shall give or cause to be given
to each Registered Holder a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price
and the date on which such adjustment becomes effective.

(viii) Notwithstanding anything contained herein to
the contrary, in any case in which this Subsection 4(c)
provides that an adjustment in the Conversion Price shall
become effective immediately after a record date for an event,
the Corporation may defer until the occurrence of such event
(i) issuing to the Registered Holder of any Series B Preferred
Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the number of shares of
Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such Registered
Holder any amount in cash in lieu of any fractional share of
Common Stock pursuant to Subsection 4(d).

(ix) Notwithstanding any other provision hereof, no
adjustment to the Conversion Price shall be made upon the
issuance or exercise or conversion of (1) any Capital Stock
issued or cash paid as dividends on the Series B Preferred
Stock, or (2) any Capital Stock issued or cash paid upon the
mandatory conversion or redemption of any Series B Preferred
Stock in accordance with Section 5 of this Certificate of
Designation.

(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Series B Preferred Stock. If more than one certificate evidencing shares of
Series B Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of such aggregate number of shares
of Series B Preferred Stock, the Corporation may elect, in its sole discretion,
independently for each holder, whether such number of shares of Common Stock
will be rounded to the nearest whole share (with a .5 of a share rounded upward)
or whether such holder will be given cash, in

lieu of any fractional share, in an amount equal to the same fraction of the
Market Price of the Common Stock as of the close of business on the day of
conversion.

(e) [Reserved]

(f) Reservation of Shares; Transfer Taxes, Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series B Preferred Stock, such number of shares of its Common
Stock free of preemptive rights as shall be sufficient to effect the conversion
of all shares of Series B Preferred Stock from time to time outstanding. The
Corporation shall use its best efforts from time to time, in accordance with the
laws of the State of Delaware to increase the authorized number of shares of
Common Stock if at any time the number of shares of authorized, unissued and
unreserved Common Stock shall not be sufficient to permit the conversion of all
the then-outstanding shares of Series B Preferred Stock.

The Corporation shall pay any and all issue or other taxes
(excluding any income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of the Series B Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
Common Stock (or other securities or assets) in a name other than that in which
the shares of Series B Preferred Stock so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid or need not be
paid.

(g) Prior Notice of Certain Events. In case:

(i) the Corporation shall declare any dividend (or
any other distribution); or

(ii) the Corporation shall authorize the granting to
the holders of Common Stock or the Series A Preferred Stock of
rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants; or

(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding Common
Stock, or a change in par value, or from par value to no par
value, or from no par value to par value); or

19

(iv) of any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of
the Corporation or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
other property; or

(v) of any Liquidation Event;

then the Corporation shall cause to be filed with the transfer agent for the
Series B Preferred Stock, and shall cause to be mailed to the Registered
Holders, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least twenty (20) days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock or Series A Preferred Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange or Liquidation Event is expected to become effective,
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such exchange or Liquidation Event and the
consideration, including securities or other property, to be received by such
holders upon such exchange; provided, however, that no failure to mail such
notice or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice.

(h) Other Changes in Conversion Rate. The Corporation from time
to time may increase the Conversion Rate by any amount for any period of time if
the period is at least 20 days and if the increase is irrevocable during the
period. Whenever the Conversion Rate is so increased, the Corporation shall mail
to the Registered Holders a notice of the increase at least 15 days before the
date the increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period it will be in effect.

The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this Section 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.

Notwithstanding anything to the contrary herein, in no case
shall the Conversion Price be adjusted to an amount less than $.001 per share,
the current par value of the Common Stock into which the Series B Preferred
Stock is convertible.

(i) Ambiguities/Errors. The Board of Directors of the
Corporation shall have the power to resolve any ambiguity or correct any error
in the provisions relating to the convertibility of the Series B Preferred
Stock, and its actions in so doing shall be final and conclusive.

5. Mandatory Conversion and Redemption. (a) In the event the
Corporation causes the Series A Preferred Stock to be converted in whole or in
part, into fully paid and nonassessable shares of Common Stock, then the
Corporation shall also convert the Series B Preferred Stock, in whole or in
part, on a pro rata basis among holders of the Series B Preferred Stock, into
fully paid and nonassessable shares of Common Stock using a conversion price of
$.50. Any shares of Series B Preferred Stock so converted shall be treated as
having been surrendered by the holder thereof for conversion pursuant to Section
4 on the date of such mandatory conversion (unless previously converted at the
option of the holder).

(b) If, at any time, the Corporation redeems the Series A
Preferred Stock, the Corporation may, at its option, redeem the Series B
Preferred Stock, in whole or in part, on a pro rata basis among holders of the
Series B Preferred Stock.

(c) No greater than 60 nor fewer than 20 days prior to the
date of any such mandatory conversion or redemption, notice by first class mail,
postage prepaid, shall be given to the holders of record of the Series B
Preferred Stock to be converted or redeemed, addressed to such holders at their
last addresses as shown on the stock transfer books of the Corporation. Each
such notice shall specify the date fixed for conversion or redemption, the place
or places for surrender of shares of Series B Preferred Stock and the then
effective Conversion Rate pursuant to Section 4.

Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given by the Corporation on the date
deposited in the mail, whether or not the holder of the Series B Preferred Stock
receives such notice; and failure properly to give such notice by mail, or any
defect in such notice, to the holders of the shares to be converted or redeemed
shall not affect the validity of the proceedings for the conversion or
redemption of any other shares of Series B Preferred Stock. On or after the date
fixed for conversion or redemption (the "Take-Out Date") as stated in such
notice, each holder of shares called to be converted or

redeemed shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice for conversion or redemption.
After the mailing of such notice, but before the Take-Out Date as stated
therein, all rights whatsoever with respect to the shares so called for
conversion or redemption (except the right of the holders to convert such shares
pursuant to Section 4 and to have such shares converted or redeemed, as the case
may be, upon surrender of their certificates therefor, pursuant to this Section
5) shall terminate. On or after the Take-Out Date, notwithstanding that the
certificates evidencing any shares properly called for conversion or redemption
shall not have been surrendered, such shares shall no longer be deemed
outstanding and all rights whatsoever with respect to the shares so called for
conversion or redemption (except the right of the holders to have such shares
converted or redeemed, as the case may be, upon surrender of their certificates
therefor, pursuant to this Section 5) shall terminate.

6. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series B Preferred Stock, when issued, shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series B Preferred Stock, all shares of Series
B Preferred Stock converted into Common Stock or redeemed pursuant to Section 5
and (ii) from the date of registration of transfer, all shares of Series B
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.

7. Class Voting Rights. The Corporation shall not, without the
affirmative vote or consent of the holders of at least 50% of all outstanding
Series B Preferred Stock, voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws of the
Corporation so as to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series B Preferred Stock;
(ii) authorize or issue, or increase the authorized amount of, Series B
Preferred Stock, other than Series B Preferred Stock issuable in exchange for 8%
Notes or accrued interest thereon or issuable as dividends on Series B Preferred
Stock; or (iii) issue securities ranking prior to, or pari passu with the Series
B Preferred Stock.

8. Status of Acquired Shares. Shares of Series B Preferred
Stock received upon conversion or redemption pursuant to Section 4 or Section 5
or otherwise acquired by the Corporation will be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
class, and may thereafter be issued, but not as shares of Series B Preferred
Stock.

9. Preemptive Rights. The Series B Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.

10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.

IN WITNESS WHEREOF, Sudhir Agrawal, President and Acting Chief
Executive Officer of the Corporation, acting for and on behalf of the
Corporation, has hereunto subscribed his name this 15 day of March, 2001.

HYBRIDON, INC.

By:     //Sudhir Agrawal
------------------------------------------------
Name:  Sudhir Agrawal
Title: President and Acting Chief Executive
Officer

HYBRIDON, INC.

CERTIFICATE OF ELIMINATION
OF NUMBER OF SHARES OF PREFERRED STOCK
DESIGNATED AS
SERIES B CONVERTIBLE PREFERRED STOCK

Hybridon, Inc., a Delaware corporation (the "Corporation"), pursuant to
authority conferred upon the Board of Directors of the Corporation by the
Corporation's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware (the
"Delaware Law"), certifies that the Board of Directors of the Corporation duly
adopted the following resolution:

"RESOLVED:                 That no shares of the Corporation's Series B
Convertible Preferred Stock (the "Series B Preferred
Stock") are outstanding and no shares of Series B
Preferred Stock will be issued subject to the
Certificate of Designation dated March 28, 2001 with
respect to such series (the "Series B Certificate of
Designation"); and that the proper officers of the
Corporation be and hereby are authorized and directed
in the name and on behalf of the Corporation to
execute and file a certificate with the Secretary of
State of the State of Delaware pursuant to Section
151(g) of the Delaware Law setting forth the text of
this resolution, upon the filing and effectiveness of
which all matters are set forth in the Series B
Certificate of Designation shall be deemed to have
been eliminated from the Certificate of Incorporation
and the 85,000 shares of Preferred Stock previously
designated as Series B Preferred Stock shall resume
their status as undesignated shares of Preferred
Stock available for future issuance in accordance
with the Certificate of Incorporation."

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
hereto and this Certificate to be signed by its Chief Executive Officer this
10th day of December, 2001.

HYBRIDON, INC.

By:  /s/ Stephen R. Seiler
Stephen R. Seiler
Chief Executive Officer

CERTIFICATE OF DESIGNATIONS
OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
OF
HYBRIDON, INC.
------------------------------

Hybridon, Inc., a corporation organized and existing under the laws of the State
of Delaware (hereinafter called the "Corporation"), hereby certifies that the
following resolution was adopted by the Board of Directors of the Corporation at
a meeting duly called and held on December 10, 2001:

RESOLVED: That pursuant to the authority granted to and vested in the Board of
Directors of the Corporation (hereinafter called the "Board") in accordance with
the provisions of the Certificate of Incorporation, as amended, the Board hereby
creates a series of Preferred Stock, $.01 par value per share (the "Preferred
Stock"), of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows:

Series C Junior Participating Preferred Stock:

Section 1. Designation and Amount. The shares of such series shall be designated
as "Series C Junior Participating Preferred Stock" (the "Series C Preferred
Stock") and the number of shares constituting the Series C Preferred Stock shall
be one hundred thousand (100,000). Such number of shares may be increased or
decreased by resolution of the Board prior to issuance; provided, that no
decrease shall reduce the number of shares of Series C Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series C Preferred Stock.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
C Preferred Stock with respect to dividends, the holders of shares of Series C
Preferred Stock, in preference to the holders of Common Stock, par value $.001
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board out
of funds of the Corporation legally available for the payment of dividends,
quarterly dividends payable in cash on the last day of each fiscal quarter of
the Corporation in each year (each such date being

-1-

referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series C Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series C Preferred Stock.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event. In
the event the Corporation shall at any time declare or pay any dividend on the
Series C Preferred Stock payable in shares of Series C Preferred Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Series C Preferred Stock (by reclassification or otherwise than by payment of a
dividend in shares of Series C Preferred Stock) into a greater or lesser number
of shares of Series C Preferred Stock, then in each such case the amount to
which holders of shares of Series C Preferred Stock were entitled immediately
prior to such event under clause (b) of the first sentence of this Section 2(A)
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Series C Preferred Stock that were outstanding
immediately prior to such event and the denominator of which is the number of
shares of Series C Preferred Stock outstanding immediately after such event.

(B) The Corporation shall declare a dividend or distribution on the Series C
Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock) and the Corporation shall pay such
dividend or distribution on the Series C Preferred Stock before the dividend or
distribution declared on the Common Stock is paid or set apart; provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series C Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series C Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment

-2-

Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series C
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
may fix a record date for the determination of holders of shares of Series C
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.

Section 3. Voting Rights. The holders of shares of Series C Preferred Stock
shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of
Series C Preferred Stock shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series C Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event. In the event the Corporation shall at any time declare or
pay any dividend on the Series C Preferred Stock payable in shares of Series C
Preferred Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Series C Preferred Stock (by reclassification or otherwise
than by payment of a dividend in shares of Series C Preferred Stock) into a
greater or lesser number of shares of Series C Preferred Stock, then in each
such case the number of votes per share to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Series C Preferred Stock that were outstanding immediately prior to
such event and the denominator of which is the number of shares of Series C
Preferred Stock outstanding immediately after such event.

(B) Except as otherwise provided herein, in the Certificate of Incorporation or
by law, the holders of shares of Series C Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

(C) (i) If at any time dividends on any Series C Preferred Stock shall be in
arrears in an amount equal to six quarterly dividends thereon, the holders of
the Series C Preferred Stock, voting as a separate series from all other series
of Preferred Stock and classes of capital stock, shall be entitled to elect two
members of the Board in addition to any Directors elected by any other series,
class or classes of securities and the authorized number of Directors

-3-

will automatically be increased by two. Promptly thereafter, the Board of the
Corporation shall, as soon as may be practicable, call a special meeting of
holders of Series C Preferred Stock for the purpose of electing such members of
the Board. Such special meeting shall in any event be held within 45 days of the
occurrence of such arrearage.

(ii) During any period when the holders of Series C Preferred Stock, voting as a
separate series, shall be entitled and shall have exercised their right to elect
two Directors, then, and during such time as such right continues, (a) the then
authorized number of Directors shall be increased by two, and the holders of
Series C Preferred Stock, voting as a separate series, shall be entitled to
elect the additional Directors so provided for, and (b) each such additional
Director shall not be a member of any existing class of the Board, but shall
serve until the next annual meeting of stockholders for the election of
Directors, or until his successor shall be elected and shall qualify, or until
his right to hold such office terminates pursuant to the provisions of this
Section 3(C).

(iii) A Director elected pursuant to the terms hereof may be removed with or
without cause by the holders of Series C Preferred Stock entitled to vote in an
election of such Director.

(iv) If, during any interval between annual meetings of stockholders for the
election of Directors and while the holders of Series C Preferred Stock shall be
entitled to elect two Directors, there is no such Director in office by reason
of resignation, death or removal, then, promptly thereafter, the Board shall
call a special meeting of the holders of Series C Preferred Stock for the
purpose of filling such vacancy and such vacancy shall be filled at such special
meeting. Such special meeting shall in any event be held within 45 days of the
occurrence of such vacancy.

(v) At such time as the arrearage is fully cured, and all dividends accumulated
and unpaid on any shares of Series C Preferred Stock outstanding are paid, and,
in addition thereto, at least one regular dividend has been paid subsequent to
curing such arrearage, the term of office of any Director elected pursuant to
this Section 3(C), or his successor, shall automatically terminate, and the
authorized number of Directors shall automatically decrease by two, the rights
of the holders of the shares of the Series C Preferred Stock to vote as provided
in this Section 3(C) shall cease, subject to renewal from time to time upon the
same terms and conditions, and the holders of shares of the Series C Preferred
Stock shall have only the limited voting rights elsewhere herein set forth.

(D) Except as set forth herein, or as otherwise provided by law, holders of
Series C Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

-4-

(A) Whenever quarterly dividends or other dividends or distributions payable on
the Series C Preferred Stock as provided in Section 2 are in arrears, thereafter
and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series C Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Preferred Stock, except dividends
paid ratably on the Series C Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to the
Series C Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of
Series C Preferred Stock, or any shares of stock ranking on a parity with the
Series C Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board) to all holders of such
shares upon such terms as the Board, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series C Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation, or in any other Certificate of Designations creating a series
of Preferred Stock or any similar stock or as otherwise required by law.

-5-

Section 6. Liquidation, Dissolution or Winding Up.

(A) Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series C Preferred Stock unless, prior thereto, the holders of shares of Series
C Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series C
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series C Preferred Stock, except distributions made ratably on the Series C
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.

(B) Neither the consolidation, merger or other business combination of the
Corporation with or into any other corporation nor the sale, lease, exchange or
conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.

(C) In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series C Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of paragraph (A) of this Section 6 shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event. In the event the Corporation shall at any time declare or pay any
dividend on the Series C Preferred Stock payable in shares of Series C Preferred
Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Series C Preferred Stock (by reclassification or otherwise than by
payment of a dividend in shares of Series C Preferred Stock) into a greater or
lesser number of shares of Series C Preferred Stock, then in each such case the
aggregate amount to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of
paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of Series C Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series C Preferred Stock outstanding
immediately after such event.

Section 7. Consolidation, Merger, etc. Notwithstanding anything to the contrary
contained herein, in case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share

-6-

of Series C Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series C Preferred Stock payable
in shares of Series C Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series C Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
C Preferred Stock) into a greater or lesser number of shares of Series C
Preferred Stock, then in each such case the amount set forth in the first
sentence of this Section 7 with respect to the exchange or change of shares of
Series C Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series C Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series C Preferred Stock outstanding
immediately after such event.

Section 8. No Redemption. The shares of Series C Preferred Stock shall not be
redeemable.

Section 9. Rank. The Series C Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Preferred Stock issued either before or after the issuance of
the Series C Preferred Stock (including, without limitation, the Series A
Convertible Preferred Stock $.01 par value, of the Company established pursuant
to the Certificate of Designation for Series A Convertible preferred Stock dated
May 5, 1998), unless the terms of any such series shall provide otherwise.

Section 10. Amendment. At such time as any shares of Series C Preferred Stock
are outstanding, the Certificate of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series C Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series C Preferred Stock, voting
together as a single class.

Section 11. Fractional Shares. Series C Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series C Preferred Stock.

-7-

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of
the Corporation by its Chief Executive Officer this 10th day of December, 2001.

HYBRIDON, INC.

By:  /s/ Stephen R. Seiler
Name:  Stephen R. Seiler
Title:  Chief Executive Officer

-8-

CERTIFICATE OF INCREASE

OF

SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

OF

HYBRIDON, INC.

(Pursuant to Section 151(g) of the
Delaware General Corporation Law)

Hybridon, Inc., a corporation organized and existing under the Delaware
General Corporation Law (the "Corporation") does hereby certify:

FIRST:      In a Certificate of Designations filed with the Secretary of State
of the State of Delaware on December 10, 2001, pursuant to Section
151 of the Delaware General Corporation Law, the Corporation was
authorized to issue 100,000 shares of Series C Junior Participating
Preferred Stock as a series of the Corporation's authorized
Preferred Stock, par value $.01 per share; and

SECOND:     The board of directors of the Corporation, by resolution adopted
June 22, 2003, duly authorized and directed that the number of
shares of the Corporation's Series C Junior Participating Preferred
Stock be increased from 100,000 shares to 150,000 shares.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be signed by its duly authorized officer this 4th day of December,
2003.

By:  /s/Stephen R. Seiler
---------------------------------
Name: Stephen R. Seiler
Title: Chief Executive Officer

CERTIFICATE OF AMENDMENT

OF

RESTATED CERTIFICATE OF INCORPORATION

OF

HYBRIDON, INC.

Hybridon, Inc. (hereinafter called the "Corporation"), organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:

By action of the Board of Directors of the Corporation at a meeting a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth amendments to the Certificate of Incorporation
of the Corporation and declaring said amendments to be advisable. The
stockholders of the Corporation duly approved said proposed amendments at a
meeting in accordance with Section 242 of the General Corporation Law of the
State of Delaware. The resolutions setting forth the amendments are as follows:

RESOLVED:   That Section 2(a) of the Certificate of Designation of the Series A
Convertible Preferred Stock of the Corporation filed on May 6, 1998
is hereby amended by deleting the reference to "6.5%" therein and
inserting in lieu thereof "1.0%".

RESOLVED:   That Section 3(a) of the Certificate of Designation of the Series A
Convertible Preferred Stock of the Corporation filed on May 6, 1998
is hereby amended by deleting the first sentence of Section 3(a) in
its entirety and inserting in lieu thereof the following sentence:

"3. Liquidation Preference. (a) In the event of a (i) liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
(ii) a sale or other disposition of all or substantially all of the assets of
the Corporation or (iii) any consolidation, merger, combination, reorganization
or other transaction in which the Corporation is not the surviving entity or
shares of Common Stock constituting in excess of 50% of the voting power of the
Corporation are exchanged for or changed into stock or securities of another
entity, cash and/or any other property (a "Merger Transaction") (items (i), (ii)
and (iii) of this sentence being collectively referred to as a "Liquidation
Event"), after payment or provision for payment of debts and other liabilities
of the Corporation, the holders of the Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, whether such assets are capital, surplus, or
earnings, before any payment or declaration and setting apart for payment of any
amount shall be made in respect of any Junior Stock of the Corporation, an
amount equal to $1.00 per share (subject to appropriate adjustment in the event
of any stock split, stock dividend, combination or other similar
recapitalization affecting the Series A Preferred Stock), plus any dividends
declared or accrued but unpaid on such shares; provided, however, in the case of
a Merger Transaction, such payment may be made in cash, property (valued as
provided in Subsection 3(b)) and/or securities (valued as provided in Subsection
3(b)) of the entity surviving such Merger Transaction."

RESOLVED:   That Section 4(a) of the Certificate of Designation of the Series A
Convertible Preferred Stock of the Corporation filed on May 6, 1998
is hereby amended by deleting the first paragraph of Section 4(a) in
its entirety and inserting in lieu thereof the following paragraph:

"(a) Right of Conversion. Commencing after the expiration of 12 months
following the Alternative Equity Closing Date (as hereinafter defined), but not
prior thereto, the shares of Series A Preferred Stock shall be convertible, in
whole or in part, at the option of the holder thereof and upon notice to the
Corporation as set forth in Subsection 4(b), into fully paid and nonassessable
shares of Common Stock and such other securities and property as hereinafter
provided. The initial conversion price per share of Common Stock (the
"Conversion Price"), shall be equal to the product of 2.125 multiplied by the
per share price (the "Stated Common Price") of Common Stock sold by the
Corporation in connection with the Alternative Equity Offering (as such term is
defined in the Corporation's Offer to Exchange dated February 6, 1998 (the
"Original Offer to Exchange"), as amended by the Amendment thereto (the
"Amendment") dated March 30, 1998 (collectively, the "Offer to Exchange")) and
shall be subject to adjustment as provided herein. The rate at which each share
of Series A Preferred Stock is convertible at any time into Common Stock (the
"Conversion Rate") shall be determined by dividing the then existing Conversion
Price (determined in accordance with this Section 4, including the last
paragraph hereof) into the Dividend Base Amount; provided, however, that, during
the period beginning on the date of the filing of this Certificate of Amendment
and ending on the date 60 days after the date of the filing of this Certificate
of Amendment (the "Early Conversion Period"), the Conversion Rate shall be
determined by dividing the Conversion Price (in effect as of the first day of
the Early Conversion Period) into an amount equal to 125% of the Dividend Base
Amount. For illustrative purposes only, if the Conversion Price equals $4.25 and
the Dividend Base Amount equals $100.00, then each share of Series A Preferred
Stock will be convertible into 23.53 shares of Common Stock ($100.00 / $4.25);
provided, however, that during the Early Conversion Period, each share of Series
A Preferred Stock will be convertible into 29.41 shares of Common Stock ($125.00
/ $4.25)."

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its authorized officer on the 4th day of December,
2003.

By:   /s/Stephen R. Seiler
------------------------------------
Name: Stephen R. Seiler
Title: Chief Executive Officer

CERTIFICATE OF AMENDMENT 
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HYBRIDON, INC.

Hybridon, Inc. (hereinafter called the "Corporation"), organized and 
existing under and by virtue of the General Corporation Law of the State 
of Delaware, does hereby certify as follows:

At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of 
the State of Delaware, setting forth an amendment to the Restated Certificate
of Incorporation of the Corporation, as amended to date (the "Certificate of 
Incorporation"), and declaring said amendment to be advisable.  The 
stockholders of the Corporation duly approved said proposed amendment in 
accordance with Section 242 of the General Corporation Law of the State of 
Delaware at a meeting of stockholders held on June 24, 2004.  The resolution 
setting forth the amendment is as follows:

RESOLVED:  That the first paragraph of Article FOURTH of the Certificate of
Incorporation be and hereby is amended and restated in its 
entirety so that the same shall read as follows:

"FOURTH.  The total number of shares of all classes of stock
which the Corporation shall have authority to issue is (i) 
One Hundred Eighty Five Million (185,000,000) shares of 
Common Stock, $.001 par value per share ("Common Stock"), 
and (ii) Five Million (5,000,000) shares of Preferred Stock,
$.01 par value per share ("Preferred Stock"), which may be 
issued from time to time in one or more series as set forth
in Part B of this Article FOURTH."

IN WITNESS WHEREOF, the Corporation has caused this Certificate of 
Amendment to be signed by its Chief Executive Officer on this 25th day of 
June 2004.

HYBRIDON, INC.

/s/ Stephen R. Seiler
---------------------- 
Name:  Stephen R. Seiler
Title:  Chief Executive Officer

CERTIFICATE OF INCREASE

OF

SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

OF

HYBRIDON, INC.

(Pursuant to Section 151(g) of the
Delaware General Corporation Law)

Hybridon, Inc., a corporation organized and existing under the Delaware
General Corporation Law (the "Corporation") does hereby certify:

FIRST:      In a Certificate of Designations filed with the Secretary of State
of the State of Delaware on December 10, 2001, pursuant to Section
151 of the Delaware General Corporation Law, the Corporation was
authorized to issue 100,000 shares of Series C Junior Participating
Preferred Stock as a series of the Corporation's authorized
Preferred Stock, par value $.01 per share;

SECOND:     In a Certificate of Increase filed with the Secretary of State of
the State of Delaware on December 4, 2003, pursuant to Section 151
of the Delaware General Corporation Law, the number of authorized
shares of the Corporation's Series C Junior Participating Preferred
Stock was increased from 100,000 to 150,000; and

THIRD:      The board of directors of the Corporation, by resolution adopted
March 15, 2005, duly authorized and directed that the number of
authorized shares of the Corporation's Series C Junior Participating
Preferred Stock be increased from 150,000 shares to 185,000 shares.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be signed by its duly authorized officer this 24th day of March,
2005.

By:      /s/ Sudhir Agrawal
-----------------------------
Name:    Sudhir Agrawal, D. Phil
Title:   Chief Executive Officer, President
and Chief Scientific Officer 

AMENDMENT
TO THE
LICENSE AGREEMENT
BY AND BETWEEN
HYBRIDON, INC.
AND
YOON S. CHO-CHUNG, M.D., PH.D.

This Amendment, effective the 4th day of February, 2005, ("Effective Date") is
an Amendment to the License Agreement dated the 30th day of October, 1995, (the
"Agreement"), between Hybridon, Inc., a Delaware corporation, having its
principle place of business at 345 Vassar Street, Cambridge, MA 02139
(hereinafter "HYBRIDON") and Yoon S. Cho-Chung, M.D., Ph.D. (hereinafter
"CHO-CHUNG").

WHEREAS Hybridon and Cho-Chung desire to reaffirm the terms and
obligations of the Agreement and to amend the Agreement as defined under this
Amendment hereto;

NOW, THEREFORE, in consideration of the mutual agreement hereinafter set
forth, Hybridon and Cho-Chung hereby agree to amend the Agreement as follows:

In SECTION 8.1 (a) insert the following text immediately before `; and' at
the end of this Section:

"and thereafter by an additional two periods of one (1) year each by paying
CHO-CHUNG US$150,000 for each such extension Period, and thereafter by an
additional four periods of one (1) year each by paying CHO-CHUNG US$175,000 for
each such extension Period, and thereafter by an additional four periods of one
(1) year each by paying CHO-CHUNG US$200,000 for each such extension Period, all
such payments to be paid in two equal installments due on June 30th and December
31st of each year"

In ARTICLE XII. NOTICES - change the respective notice addresses to:

For CHO-CHUNG:                    FOR HYBRIDON:

Yoon S. Cho-Chung, M.D., Ph.D.    Hybridon, Inc.
345 Vassar Street
Cambridge, Massachusetts 02139
ATTN.: Robert G. Andersen, CFO
and VP Operations

IN ALL OTHER RESPECTS, THE AGREEMENT REMAINS IN FULL FORCE AND EFFECT.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.

HYBRIDON, INC.                             YOON S. CHO-CHUNG, M.D., PH.D.

By: /s/ Robert G. Andersen                 By: /s/ Yoon S. Cho-Chung
----------------------------------         ----------------------------------
Name: Robert G. Andersen                   Name: Yoon S. Cho-Chung, M.D., Ph.D.

Title: Chief Financial Officer and
VP Operations

Date:     4 Feb. 2005                      Date:     4 Feb. 2005
----            ----------------           ----            ----------------

Page 1 of 1                       Confidential

EXHIBIT 10.46

SUMMARY OF DIRECTOR COMPENSATION OF HYBRIDON, INC.

The director compensation program for the members of the Board of
Directors of Hybridon,. Inc. (the "Company") involves the payment of meeting
fees, annual retainers and equity compensation.

Meeting Fees

Members of the Board of Directors who are not employees of the Company are
paid $1,250 for personal attendance and $500 for telephonic attendance at Board
of Directors and committee meetings. These directors are reimbursed for their
expenses incurred in connection with their attendance at Board of Directors and
committee meetings.

The Board has a policy under which non-employee directors may elect to
receive meeting fees in cash or in a number of shares of Common Stock determined
by dividing the fees for meetings attended by 85% of the fair market value of
the Company's Common Stock on the first business day of the quarter following
the quarter in which fees are earned.

Annual Retainers

In addition to meeting fees, the Company pays the Chairman of the Board an
annual retainer of $60,000, which is paid in monthly installments, and pays the
Chairman of the Audit Committee an annual retainer of $15,000, which is paid in
quarterly installments. All other non-employee directors are paid an annual
retainer of $10,000, which is paid in quarterly installments.

Equity Compensation

The Company's amended 1995 Director Stock Option Plan provides for the
grant of options to purchase 25,000 shares of Common Stock to each non-employee
director upon his or her initial election to the Board of Directors. In
addition, each non-employee director receives an automatic quarterly grant of
options to purchase 10,000 shares of Common Stock on the first day of each
calendar quarter, with options to purchase 3,750 of such shares being granted
under the Company's 1995 Director Stock Option Plan and options to purchase
6,250 of such shares being granted under the Company's Amended and Restated 1997
Stock Incentive Plan. All options are granted with exercise prices equal to the
fair market value of the Common Stock on the date of grant. All options vest on
the first anniversary of the date of grant. The vesting of all options granted
will be automatically accelerated upon the occurrence of a change in control of
the Company.

Exhibit 10.47

HYBRIDON, INC.

Non-Employee Director Nonstatutory Stock Option Agreement
Granted Under 1997 Stock Incentive Plan

1.    Grant of Option.

This agreement evidences the grant by Hybridon, Inc., a Delaware
corporation (the "Company"), on [__________] (the "Grant Date") to [_________],
a non-employee director of the Company (the "Participant"), of an option to
purchase, in whole or in part, on the terms provided herein and in the Company's
1997 Stock Incentive Plan (the "Plan"), a total of [__________] shares (the
"Shares") of common stock, $0.001 par value per share, of the Company ("Common
Stock") at a price of $[_______] per Share.

It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.

2.    Vesting Schedule.

Except as otherwise provided in this Agreement, this option may be
exercised, in whole or in part, with respect to all of the Shares covered hereby
at any time on or after the first anniversary of the Grant Date and prior to the
tenth anniversary of the Grant Date (hereinafter the "Expiration Date").
Notwithstanding the foregoing, this option shall immediately become exercisable
in full in the event a Change of Control Event (as defined in the Plan) occurs.

3.    Exercise of Option.

(a) Form of Exercise. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement and payment in cash or a check to the
order of the Company in an amount equal to the purchase price of the Shares
purchased. The Participant may purchase less than the number of shares covered
hereby, provided that no partial exercise of this option may be for any
fractional share.

(b) Continuous Relationship with the Company Required. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, a director or consultant of the Company (an
"Eligible Participant").

(c) Termination of Relationship with the Company. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraph (d) below, the right to exercise this option shall terminate sixty
(60) days after such cessation (but in no event after the Expiration Date),
provided that this option shall be exercisable only to the extent that the

Participant was entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Participant, prior to the Expiration Date,
violates the non-competition or confidentiality provisions of any
confidentiality and nondisclosure agreement or other agreement between the
Participant and the Company, the right to exercise this option shall terminate
immediately upon such violation.

(d) Exercise Period Upon Death or Disability. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Expiration Date while he or she is an Eligible Participant, this option
shall be exercisable, within the period of one hundred eighty (180) days
following the date of death or disability of the Participant, by the Participant
(or in the case of death by an authorized transferee), provided that this option
shall be exercisable only to the extent that this option was exercisable by the
Participant on the date of his or her death or disability, and further provided
that this option shall not be exercisable after the Expiration Date.

4.    Withholding.

No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.

5.    Nontransferability of Option.

This option is personal and may not be transferred other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, and this option shall be exercised during the lifetime of
the Participant only by the Participant or his or her guardian or legal
representative. No rights granted hereunder may be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
nor shall any such rights be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of this option or of such rights contrary to the provisions hereof, or
upon the levy of any attachment or similar process upon this option or such
rights, this option and such rights shall, at the election of the Company,
become null and void.

6.    Provisions of the Plan.

This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.

-2-

IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.

HYBRIDON, INC.

Dated:                              By:
---------                        ------------------------------------
Name:
-----------------------------
Title:
----------------------------

-3-

PARTICIPANT'S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1997 Stock Incentive Plan.

PARTICIPANT:

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

Address:
-------------------

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

-4-

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-3898, 333-3900, 333-3902, 333-34008, 333-71938, 333-116010,
333-116011, and 333-116012, Form S-2 as amended by Form S3/A No. 333-109630 and
Form S-3 Nos. 333-111903 and 333-119943,) and the related Prospectuses of
Hybridon, Inc. of our report dated January 28, 2005, with respect to the
consolidated financial statements of Hybridon, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 2004.

/s/ Ernst & Young LLP

Boston, Massachusetts
March 18, 2005

 
Exhibit 31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
I, Sudhir Agrawal, certify that:
 	 	
 	      1. I have reviewed this Annual Report on Form 10-K of Hybridon, Inc.;	
 	 	
 	      2. Based on my knowledge, this 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 report;	
 	 	
 	      3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;	
 	 	
 	      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:	

 	      a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;	
 	 	
 	      b) [Not Applicable]	
 	 	
 	      c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
 	      d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	      a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
 	      b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	/s/ SUDHIR AGRAWAL	
 	 	
 	Sudhir Agrawal	
 	Chief Executive Officer	
Dated: March 15, 2005

Exhibit 31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14
and 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
I, Robert G. Andersen certify that:
 	 	
 	      1. I have reviewed this Annual Report on Form 10-K of Hybridon, Inc.;	
 	 	
 	      2. Based on my knowledge, this 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 report;	
 	 	
 	      3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;	
 	 	
 	      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:	

 	      a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;	
 	 	
 	      b) [Not Applicable]	
 	 	
 	      c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	
 	      d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	      a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	
 	      b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	/s/ROBERT G. ANDERSEN	
 	 	
 	Robert G. Andersen	
 	Chief Financial Officer	
Dated: March 15, 2005

Exhibit 32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      In connection with the Annual Report on Form 10-K of Hybridon, Inc. (the “Company”) for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Sudhir Agrawal, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
 	 	
 	      (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	
 	      (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
      A signed original of this written statement has been provided to Hybridon, Inc. and will be retained by Hybridon, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 	 	
 	/s/SUDHIR AGRAWAL	
 	 	
 	Sudhir Agrawal	
 	Chief Executive Officer	
Date: March 15, 2005

Exhibit 32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      In connection with the Annual Report on Form 10-K of Hybridon, Inc. (the “Company”) for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert G. Andersen, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
 	 	
 	      (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	
 	 	
 	      (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
      A signed original of this written statement has been provided to Hybridon, Inc. and will be retained by Hybridon, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 	 	
 	/s/ROBERT G. ANDERSEN	
 	 	
 	Robert G. Andersen	
 	Chief Financial Officer	
Date: March 15, 2005