10-K

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

                                    FORM 10-K

                       FOR ANNUAL AND TRANSITIONAL REPORTS
                       PURSUANT TO SECTIONS 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

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

         For the Fiscal Year Ended December 31, 1996
                                                        OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-19635

                               GENTA INCORPORATED
   (Exact name of Registrant as specified in its certificate of incorporation)

                  Delaware                                33-0326866
       (State or other jurisdiction of                 (I.R.S. Employer
       incorporation or organization)               Identification Number)

         3550 General Atomics Court
            San Diego, California                            92121
  (Address of principal executive offices)                (Zip Code)

                                 (619) 455-2700
              (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
                                                Preferred Stock Purchase Rights,
                                                     Par Value $.001
                                                      (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 such  filing
requirements for the past 90 days.
                                          Yes    X             No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The   approximate   aggregate   market   value  of  the  voting  stock  held  by
non-affiliates  of the  registrant  was $16.7  million as of March 1, 1997.  For
purposes of determining this number,  1.8 million shares of common stock held by
affiliates are excluded.

As of March 1,  1997,  the  registrant  had  39,991,626  shares of Common  Stock
outstanding.

                       Documents Incorporated by Reference

Designated  portions of Registrant's  Definitive Proxy Statement to be furnished
for the  Annual  Meeting  of the  Stockholders  to be held on April 4,  1997 are
incorporated by reference in Part III of this Form 10-K.




                                     Part I

Item 1.   Business

Overview

         Genta Incorporated  ("Genta" or the "Company"),  incorporated under the
laws  of  the  State  of  Delaware   on   February  4,  1988,   is  an  emerging
biopharmaceutical   company   engaged  in  the  development  of  a  pipeline  of
pharmaceutical  products.  Genta's multi-faceted approach incorporates a product
development  portfolio  with  balanced  technical  risk,  a novel drug  delivery
technology  and a United  States/European  business  base.  The near to mid-term
segment of the product pipeline consists of oral controlled-release  drugs being
developed by the Company's 50%-owned drug delivery joint venture with Jagotec AG
("Jagotec"),  Genta Jago  Technologies  B.V.  ("Genta  Jago").  Using  Jagotec's
patented  GEOMATRIX(R)  drug delivery  technology  ("GEOMATRIX"),  Genta Jago is
employing a two-pronged  commercialization  strategy: the development of generic
versions of successful brand-name  controlled-release  drugs and the development
of controlled-release formulations of drugs currently marketed in only immediate
release form.  The  Company's  longer-term  research  efforts are focused on the
development   of   proprietary   Anticode(TM)    oligonucleotide    ("Anticode")
pharmaceuticals  intended to block or regulate the production of disease-related
proteins at the genetic  level.  The  Company's  Anticode  programs  are focused
primarily in the area of cancer.  In late 1995, a phase I/IIa clinical trial was
initiated  in the United  Kingdom  using  Genta's  Anticode  drug  ("G3139")  in
non-Hodgkin's  lymphoma  patients  for whom prior  therapies  have  failed.  The
clinical trial is being  conducted in  collaboration  with the Royal Marsden NHS
Trust and the Institute for Cancer  Research.  In late 1996, an  Investigational
New Drug  application  ("IND") for the G3139  clinical  program was filed in the
United  States  and  allowed  to  proceed  by the  United  States  Food and Drug
Administration  ("FDA").  The Company also  manufactures  and markets  specialty
biochemicals  and   intermediate   products  to  the  in  vitro  diagnostic  and
pharmaceutical industries through its manufacturing subsidiary,  JBL Scientific,
Inc.  ("JBL"),  a  California  corporation  acquired by the Company in February,
1991.

         The  statements  contained in this Annual  Report on Form 10-K that are
not historical are forward-looking  statements within the meaning of Section 27A
of the  Securities  Act of 1933, as amended,  and Section 21E of the  Securities
Exchange  Act  of  1934,  as  amended,   including   statements   regarding  the
expectations,  beliefs,  intentions  or  strategies  regarding  the future.  The
Company intends that all forward-looking statements be subject to the safeharbor
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995.  These
forward-looking  statements  reflect the Company's views as of the date they are
made with respect to future events and financial performance, but are subject to
many  risks and  uncertainties,  which  could  cause the  actual  results of the
Company to differ  materially  from any future  results  expressed or implied by
such  forward-looking  statements.  Examples  of such  risks  and  uncertainties
include,  but are not limited  to: the  obtaining  of  sufficient  financing  to
maintain the Company's planned operations;  the timely  development,  receipt of
necessary  regulatory  approvals and acceptance of new products;  the successful
application of the Company's  technology to produce new products;  the obtaining
of proprietary  protection for any such  technology and products;  the impact of
competitive  products and pricing and  reimbursement  policies;  the changing of
market  conditions and the other risks  detailed in the Risk Factors  section of
this Annual  Report on Form 10-K and  elsewhere  herein.  The  Company  does not
undertake to update any forward-looking statements.

         See "Risk Factors" for a discussion of certain risks and  uncertainties
applicable to the Company and its stockholders, including the Company's need for
additional  funds to sustain its operations in 1997 and  thereafter,  as well as
the threat of a delisting of the Company's common stock from the Nasdaq SmallCap
Market.


                                        2



Oral Controlled-Release Drugs

         Formulations  of drugs using the GEOMATRIX  technology  are designed to
swell and gel when exposed to gastrointestinal fluids. This swelling and gelling
is designed to allow the active drug  component  to diffuse from the tablet into
the  gastrointestinal  fluids,  gradually  over a period of up to 24 hours.  The
Company  believes that the GEOMATRIX  technology may have other benefits  which,
collectively, may distinguish it from competing controlled-release technologies.
The  Company  believes  GEOMATRIX  formulations  can  control  drug  release and
potentially  modulate  pharmacokinetic  profiles to produce a variety of desired
clinical effects. For example, the GEOMATRIX technology may be used to formulate
tablets  with a rapid or a delayed  therapeutic  effect by varying  the  release
characteristics of the drug from the tablet.  The GEOMATRIX  technology may also
be used to  formulate  tablets  that  release two drugs at the same or different
rates, or tablets that release a drug in several pulses after administration.

         Genta Jago is using the GEOMATRIX  drug delivery  technology to develop
oral  controlled-release  formulations  for a broad range of presently  marketed
drugs which have lost, or will in the near to mid-term lose,  patent  protection
and/or  marketing  exclusivity.  Certain of these  presently  marketed drugs are
already  available  in  a  controlled-release  format,  while  others  are  only
available in an immediate  release  format that  requires  dosing  several times
daily. In the case of drugs already  available in a  controlled-release  format,
Genta  Jago  is  seeking  to  develop  bioequivalent  products  which  would  be
therapeutic  substitutes  for the  branded  products.  In the case of  currently
marketed  products that are only  available in immediate  release form requiring
multiple  daily  dosing,  Genta Jago is seeking to develop  once or  twice-daily
controlled-release  formulations.  The  potential  benefits of Genta Jago's oral
controlled-release   formulations  may  include  improved  compliance,   greater
efficacy  and reduced side  effects as a result of a more  constant  drug plasma
concentration  than that  associated with immediate  release drugs  administered
several times daily.

         Genta   Jago's   strategy   is   to    commercialize    its   GEOMATRIX
controlled-release  products worldwide primarily by forming alliances with major
pharmaceutical companies.  Genta Jago has established three such collaborations.
See "Business -- Collaborative and Licensing Agreements" below.

         Genta  Jago   currently  has  eight   products  in  various  stages  of
development  that  are  intended  to  be   bioequivalent   generic  versions  of
brand-name, controlled-release drugs currently marketed by others. Four of these
products,     nifedipine    (Procardia    XL(R)),    ketoprofen    (Oruvail(R)),
carbidopa/levodopa  (Sinemet(R)CR),  and naproxen  (Naprelan(R))  are  currently
undergoing  manufacturing scale-up after completion of formulations  development
and pilot human pharmacokinetic studies. During the manufacturing scale-up phase
of development, Genta Jago and its collaborators are seeking to proceed from the
production of small-scale  research quantities to the production of larger-scale
quantities  necessary for commercial scale  manufacturing.  The scale-up has not
yet  been  successfully  completed  for  these  products.   Assuming  successful
completion  of  manufacturing  scale-up,   pivotal  bioequivalency  studies  are
scheduled to begin for these products in 1997.  Genta Jago believes that if such
bioequivalency  studies  are  successfully   completed,   Abbreviated  New  Drug
Applications  (each an "ANDA") may be filed with the FDA for two of its products
in  1997.  In  addition,   potentially   bioequivalent  versions  of  two  other
products--Voltaren-XR(R)   (diclofenac)   and   Covera-HS(R)   (verapamil)--have
completed formulations development and pilot pharmacokinetic studies. Genta Jago
intends to proceed  with  manufacturing  scale-up on these two  products  during
1997.

         Genta Jago has also  completed  initial  formulations  development  and
pilot   human   pharmacokinetic   studies   for   GEOMATRIX   controlled-release
formulations of cefaclor (Ceclor CD(R)) and metoprolol tartrate and formulations
development is ongoing for additional products including acyclovir (Zovirax(R)).
Genta Jago  continues to seek  collaborative  agreements  for these  products in
order to finance the  manufacturing  scale-up  and  required  bioequivalency  or
clinical studies. In addition to these products currently in development,  Genta
Jago maintains the rights to apply the GEOMATRIX  technology to the  development
of up to approximately 50 additional  drugs.  There can be no assurance that any
product  will be  successfully  developed  or receive the  necessary  regulatory
approvals.


                                        3





Anticode Programs

         Anticode   oligonucleotides   represent  a  modern   approach  to  drug
development  based upon genetic  control of disease.  Many human diseases have a
genetic  origins that involve either the expression of a harmful foreign gene or
the  aberrant   expression  of  a  normal  or  mutated   human  gene.   Anticode
oligonucleotides  are short strands of synthetic  nucleic acids designed to bind
to ("hybridize" with) specific sequences of disease-related  RNA or DNA, thereby
blocking or  controlling  production of  disease-related  proteins.  The Company
believes  that,  because  of  their  selective  binding   properties,   Anticode
oligonucleotides  will not  interfere  with the  function of normal  cells,  and
therefore,  will elicit significantly fewer side effects than traditional drugs.
Anticode  drugs may attack a disease at one of two  levels.  One  approach is to
prevent the synthesis of essential  disease-related  proteins. In this approach,
certain oligonucleotides are used to interrupt the processing of, or selectively
to  destroy,  individual  messenger  RNA (mRNA)  sequences,  which  leads to the
down-regulation   (lowering   of  levels)  of  specific   proteins  and  thereby
effectively  eliminates  the  disease.  This is referred  to as the  "antisense"
mechanism  of  action.   A  second   therapeutic   opportunity   is  to  prevent
transcription  of  disease-causing  DNA into the mRNA copy of the gene.  This is
referred to as the "triple-strand to DNA" mechanism of activity.

         Genta has  focused  its  Anticode  research  on  oligonucleotides  with
methylphosphonate  and phosphorothioate  backbones.  The Company has exclusively
licensed  patents  from Dr. Paul O. P. Ts'o,  Dr. Paul Miller and Johns  Hopkins
University ("Johns Hopkins") covering methylphosphonate  technology.  Genta also
has obtained certain rights to phosphorothioate  oligonucleotide  constructions.
Genta's   scientists   have   improved   these   technologies   by   introducing
chirally-enriched  or chirally-pure  oligonucleotides.  In preclinical  studies,
these improved oligonucleotides effectively turn off the action of targeted mRNA
sequences inside cells. Intravenous  administration of these oligonucleotides to
certain  animals   demonstrates  that  these  compounds  remain  stable  in  the
circulatory  system  and  are  eventually  excreted  intact  in the  urine.  New
proprietary delivery systems have also been developed to increase  intracellular
concentration  of  oligonucleotides  and to lower the drug dosage for  potential
therapeutics. Management believes that the Company has the ability to acquire or
produce quantities of  oligonucleotides  sufficient to support its present needs
for research and its projected needs for initial clinical development programs.

         The Company's  Anticode research and development  efforts are currently
focused  primarily  on  its  cancer,   program  as  described  below.  Extensive
additional  development will be required, and there can be no assurance that any
product will be successfully  developed or will receive the necessary regulatory
approvals.

BCL2 Gene Target

         The BCL2 gene is a  proto-oncogene  and a major  inhibitor of apoptosis
(programmed  cell death) of cancerous  cells.  The protein produced by this gene
has two known critical  functions in the progression of cancer:  it makes cancer
cells  immortal,  creating a survival  advantage of malignant over normal cells;
and confers resistance to radiation and chemotherapy, rendering those treatments
ineffective  in the late stages of many types of cancer.  Genta's lead anti-BCL2
molecule,  G3139,  is  designed to  inactivate  the RNA that  produces  the BCL2
protein product,  thereby preventing  cellular  production of the protein.  High
levels of BCL2 are associated with a poor clinical prognosis in many solid tumor
and hematological malignancies such as lymphoma,  leukemia,  melanoma,  multiple
myeloma and prostate and breast cancers.  The Company believes that its Anticode
strategy  against the BCL2 gene has the  potential  to  represent a  significant
therapeutic opportunity in many of these cancers.

         In  preclinical  studies  conducted  by  Dr.  Finbarr  Cotter,  at  the
Institute for Child Health in London, an anti- BCL2 oligonucleotide was shown to
cure  lymphoma-like  disease  induced by the injection of human B-cell  lymphoma
cells in  immunodeficient  mice.  In  addition,  in a  variety  of other  animal
studies, anti-BCL2 Anticode oligonucleotides were found to inhibit the growth of
human melanoma,  colon and human breast cancer tumors in  immunodeficient  mice.
G3139 has demonstrated efficacy when administered as a single agent.

         In July 1996, the National Cancer Institute  ("NCI") agreed to fund and
conduct  preclinical  studies of G3139.  Pending  the  outcome of these  ongoing
preclinical  studies,  NCI intends to sponsor  Phase I human  trials  evaluating
G3139 against a number of solid tumor malignancies. The Company will collaborate
with NCI on the  design of such  clinical  studies  and the  selection  of tumor
targets. The primary goal of the trials will be to determine

                                        4





the maximum tolerated dose of G3139, although any preliminary antitumor activity
will also be assessed.  Tumors under  consideration  for clinical  study include
malignant melanoma, breast, prostate and colorectal cancers. NCI would cover the
costs  of  running  both  preclinical  and  clinical  studies.  Genta  would  be
responsible  for supplying NCI with  necessary  quantities of G3139 to carry out
this work.

         In late 1995, a Phase I/IIa  clinical trial was initiated in the United
Kingdom  using  Genta's   anti-BCL2   Anticode   oligonucleotides,   G3139,   in
non-Hodgkin's  lymphoma  patients  for whom prior  therapies  have  failed.  The
clinical trial is being  conducted in  collaboration  with the Royal Marsden NHS
Trust and the  Institute  for Cancer  Research  under the direction of Dr. David
Cunningham. The principal aim of this Phase I/IIa study is to define the maximum
tolerated dose of G3139.  Secondary  objectives include  measurement of clinical
and biochemical disease  parameters.  To date, G3139 has been administered to 14
patients  with  relapsed  and poor  prognosis  disease.  Other than usually mild
topical  skin  irritation  in  most  of  the  patients,   no  serious,   clearly
drug-attributable  or dose-limiting  adverse effects have been seen, so far. The
doses have been  escalated  six times,  and  escalations  continue.  Some of the
patients have  demonstrated  encouraging  signs of potential drug activity.  The
responses  included  one  patient in whom  cancer  mass was  reduced and one who
developed a complete  radiological tumor response for over 38 weeks in duration.
These  results  have been  considered  very  encouraging  by  several  prominent
oncologists  and  accepted for journal  publications  and  presentation  at peer
meetings, including that of the American Society of Clinical Oncologists.

         Late in 1996,  Genta's  IND was filed in the United  States and the FDA
has  allowed the program to proceed.  Genta is working  with  several  prominent
United States and European  clinical experts to devise the appropriate  clinical
strategy for subsequent  trials.  Planning includes  continuation of Phase I/IIa
clinical trials in  non-Hodgkin's  lymphoma,  initiation of studies in different
BCL2 positive solid tumors, including those in the prostate, reported to express
BCL2 in the vast  majority of  patients.  These  studies  will also examine both
subcutaneous  and  intravenous  administration.  Extensive  additional  clinical
studies are required, and there can be no assurance that the Company will secure
the funding  necessary to conduct this  development  or that any product will be
successfully developed or receive the necessary regulatory approvals.

         In September  1996, the Company  received a notice of an allowance from
the United  States  Patent and  Trademark  Office  for  patent  claims  covering
antisense compounds targeted against BCL2. Those claims covering compositions of
matter give Genta  exclusive  rights to target  sequences of the BCL2 gene.  The
patent claims cover the Company's  proprietary  Anticode  molecules which target
BCL2,  including its lead clinical  candidate,  G3139. Other related patents and
claims in the United States and Europe are still pending.

Focal Adhesion Kinase (FAK) Gene Target

         FAK protein is involved in the regulation of adhesion-dependent  growth
and  motility  of  cells.  In a  variety  of  cancers  -  human  epithelial  and
mesenchymal tumors, such as those implicated in melanoma,  lymphoma and multiple
myeloma - the  manufacture of FAK protein ("FAK  expression")  is highly active.
Moreover,  increased FAK expression  correlates with increased  invasiveness and
increased  ability of cancer to metastasize  (spread of cancer through body). In
collaborative  preclinical  experiments  with  Dr.  William  G.  Cance,  at  the
University of North Carolina, Genta's Anticode oligonucleotides against FAK were
shown to  inhibit  the  growth  of a primary  (the  site at which the  cancer is
believed to have begun) tumor and to  virtually  eliminate  metastases  in human
melanoma/immunocompromised  mice xenograft models. Combined with the observation
that anti-FAK oligonucleotides appear to show few adverse effects against normal
tissues,  such results  indicate  that the FAK target may  represent a promising
therapeutic  opportunity  for both the  treatment  of  primary  disease  and the
prevention of metastatic disease.

         In an effort to focus its  research  and  development  efforts on areas
which  provide  the  most  significant  commercial  opportunities,  the  Company
continually  evaluates  its  ongoing  programs  in  light of the  latest  market
information and conditions,  availability of third party funding,  technological
advances,  and other  factors.  As a result of such  evaluation,  the  Company's
product  development  plans  have  changed  from time to time,  and the  Company
anticipates that they will continue to do so in the future. The Company recorded
research  and  development  expenses of $5.8  million,  $11.3  million and $13.5
million during 1996, 1995, and 1994, respectively, of which zero,

                                        5





approximately $1.1 million and $3.1 million, respectively,  were funded pursuant
to collaborative research and development agreements.

          In  1996,   the  Company   terminated   those   employees   conducting
pre-clinical research on the Company's antisense projects.

Topical Dermatology Products

         During  1996,  the Company  sold its rights  relating  to research  and
development  activities  regarding two licensed topical dermatology products for
approximately $373,000. The Company does not presently intend to conduct further
activities in this area.

Manufacturing

         In 1996,  Genta  continued to advance its  technology  for  large-scale
production of its Anticode oligonucleotides and has also developed a high degree
of self-sufficiency for large-scale  production of synthon raw materials for its
Anticode  oligonucleotides.  The  Company  also  filed a  series  of key  patent
applications in 1996 covering the improved  synthesis of dimers essential to the
manufacture of its Anticode molecules.

         Genta obtained its manufacturing capabilities in early 1991 through the
acquisition of JBL. JBL is a manufacturer of high-quality specialty biochemicals
and  intermediate  products  for  the  pharmaceutical  and in  vitro  diagnostic
industries.  A number of Fortune  500  companies  utilize  JBL  products  as raw
material in the production of a final product.  The manufacturing  facilities at
JBL have not been formally inspected by the FDA for compliance with requirements
for Good Manufacturing  Practices ("GMP").  The Company is continuing to develop
procedures,   documentation  and  facilities  for  the  production  of  Anticode
oligonucleotides which it believes will adequately comply with the necessary GMP
requirements.  Failure to establish  compliance with GMP to the  satisfaction of
the FDA can result in delays in, or prohibition from, initiating clinical trials
or commercial marketing of a product.

         The  manufacture of all of the Company's and Genta Jago's products will
be  subject  to GMP  requirements  prescribed  by the  FDA  or  other  standards
prescribed by the appropriate regulatory agency in the country of use. There can
be no  assurance  that the  Company  or Genta  Jago will be able to  manufacture
products or have products manufactured for either of them in a timely fashion at
acceptable quality and prices, that they or third party manufacturers can comply
with GMP, or that they or third party  manufacturers will be able to manufacture
an adequate supply of product.

Genta Europe

         Genta  Europe  has  received  $1.1  million  of  funding  from a French
governmental   agency,   L'Agence  National  de  Valorisation  de  la  Recherche
("ANVAR"),   towards  research  and  development  activities.  Genta  Europe  is
currently in default under the agreement with ANVAR,  and ANVAR has the right to
demand repayment of such funds.  However,  management  believes that this matter
will be resolved in a mutually satisfactory manner.

Sales and Marketing

         Genta Jago has secured collaborative agreements with three entities for
the   development   and   commercialization   of   selected   controlled-release
pharmaceuticals.  Genta Jago's  collaborative  agreements  generally provide the
collaborative  partner exclusive rights to market and distribute the products in
exchange for royalty payments to Genta Jago on product sales.  Genta Jago's goal
is to form  additional  collaborations  to  develop  and  market a number of its
GEOMATRIX  controlled-release  products,  while  potentially  selecting  certain
products  to develop and  commercialize  on its own.  Genta Jago would  consider
several  options  for  commercializing  these  potential  products in the United
States including building a small sales force or contracting for the services of
an existing  sales force.  To market  these  potential  products  outside of the
United States,  Genta Jago believes it would best utilize its resources  through
licensing  arrangements.  There  can be no  assurance  that any  such  potential
product will be successfully developed or that any prospective collaborations or
licensing arrangements will be entered into.

                                        6






         JBL  manufactures and markets  specialty  biochemicals and intermediate
products to over 100 purchasers in the pharmaceutical and diagnostic industries,
with the top 10 customers representing more than 80% of JBL's total sales.

Collaborative and Licensing Agreements

Genta Jago

         In  December  1992,  the  Company and  Jagotec  formed  Genta  Jago,  a
Netherlands corporation,  to develop and commercialize therapeutic products on a
worldwide  basis.  The Company and Jagotec each own 50% of Genta Jago. Under the
arrangement,  Jagotec  granted Genta Jago an exclusive  license to its GEOMATRIX
oral  controlledrelease  technology for the development and commercialization of
approximately 25 specified products (the "Initial  Products").  In May 1995, the
parties  entered  into an agreement to expand Genta Jago by adding the rights to
develop and commercialize an additional 35 products (the "Additional Products").
With these Additional  Products,  Genta Jago now maintains the rights to develop
controlled-release  formulations  of  approximately  60 products using Jagotec's
GEOMATRIX  technology.  Under the  agreement,  Genta Jago also acquired  certain
manufacturing  rights with  respect to such  products.  In  connection  with the
expansion of Genta Jago,  the parties  elected to focus Genta Jago's  activities
exclusively on GEOMATRIX  oral-controlled  release products.  As a result, Genta
Jago returned to Genta, in May 1995, the right to develop six Anticode  products
licensed from Genta in connection with the formation of Genta Jago in 1992.

         In  connection  with the  formation of Genta Jago,  the Company made an
initial capital contribution of $4 million to Genta Jago and issued an aggregate
of 1.2 million  unregistered  shares of Genta's  common  stock to Jagotec and an
affiliate. To obtain the rights to the Additional Products and the manufacturing
rights in May 1995,  Genta applied $5 million in option and related fees paid to
Jagotec  and its  affiliates,  of  which  $3.85  million  was paid  during  1994
(including $1.85 million of non-refundable  fees charged to expense during 1994)
and $1.15 million was paid in the first quarter of 1995. The Company also issued
an additional  1.24 million  unregistered  shares of Genta's  common stock to an
affiliate  of  Jagotec  in May  1995.  Genta  Jago is  required  to pay  certain
additional  fees to Jagotec  upon Genta  Jago's  receipt of revenues  from third
parties, and to pay manufacturing royalties to Jagotec.

         The Company is also required to provide loans to Genta Jago pursuant to
a working  capital  agreement  which  expires  in  October  1998.  The loans are
advanced  up to a  mutually  agreed  upon  maximum  commitment  amount  which is
established  by  the  parties  on a  periodic  basis.  The  Company  anticipates
contributing working capital loans of up to approximately $300,000 to Genta Jago
during 1997.  In  connection  with Genta Jago's  return of the Anticode  license
rights to Genta in May 1995,  the working  capital loan payable by Genta Jago to
Genta was credited with a principal  reduction of approximately $4.4 million. As
of December  31,  1996,  the  Company  had  advanced  working  capital  loans of
approximately  $15.3 million to Genta Jago, net of principal  repayments and the
aforementioned   credit,  which  amount  fully  satisfied  the  loan  commitment
established by the parties  through  December 31, 1996. Such loans bear interest
and are  payable  in full in  October  1998,  or  earlier  in the event  certain
revenues  are  received  by Genta  Jago  from  third  parties.  There  can be no
assurance,  however,  that Genta Jago will obtain sufficient financial resources
to repay such loans to Genta.  Genta Jago repaid Genta $1 million of its working
capital loans, in November 1996, from license fee revenues.

         Genta has the  option to  purchase  Jagotec's  interest  in Genta  Jago
during the period beginning in December 1998 through the year 2000. The exercise
price with  respect to the  Initial  Products  is the lesser of the fair  market
value at the time of exercise of the 50% interest in the Initial  Products owned
by Jagotec,  or $100  million,  in each case  reduced by the market value at the
time of  exercise  of the  purchase  option of the 1.2  million  shares of Genta
common stock issued to Jagotec and an affiliate in 1992. The exercise price with
respect  to the  Additional  Products  is the fair  market  value at the time of
exercise of the 50% interest in the Additional  Products  owned by Jagotec.  The
Company  also has an  exclusive  worldwide  license to use  Jagotec's  GEOMATRIX
technology in Genta's Anticode development  programs.  Genta Jago has contracted
with Genta and Jagotec to conduct  research and  development and provide certain
other services.



                                        7





Genta Jago/Gensia/Brightstone

         In January 1993, Genta Jago entered into a collaboration agreement with
Gensia,  Inc.  ("Gensia")  for  the  development  and   commercialization  of  a
potentially   bioequivalent   nifedipine  product,  an  oral  controlled-release
pharmaceutical  product  for  treatment  of  cardiovascular  disease.  Under the
agreement,  Gensia  was to  provide  funding  for  formulation  and  preclinical
development  to be  conducted by Genta Jago and to be  responsible  for clinical
development,  regulatory  submissions  and  marketing.  Terms  of the  agreement
provided Gensia  exclusive rights to market and distribute the products in North
America,  Europe and certain other countries.  Genta Jago received $2.2 million,
$1.9 million and $4.9 million of research and development  funding in 1996, 1995
and 1994,  respectively,  pursuant to the agreement.  Collaborative  revenues of
$2.8 million,  $3 million and $4.2 million were  recognized  under the agreement
during the years ended December 31, 1996, 1995 and 1994, respectively.

         Effective  October  1996,  Gensia  and  SkyePharma  PLC  ("SkyePharma")
reached an agreement whereby a SkyePharma  subsidiary,  Brightstone Pharma, Inc.
("Brightstone"),  was  assigned  Gensia's  rights to develop and  copromote  the
potentially  bioequivalent  nifedipine product under the collaboration agreement
with Genta Jago.  The assignment was accepted by Genta Jago and has no impact on
the terms of the  original  agreement.  Genta Jago is still  entitled to receive
additional  milestone  payments  from  Brightstone   triggered  upon  regulatory
submissions  and approvals,  as well as royalties or profit sharing ranging from
10% to 21% of product sales, if any.

        Genta's  Chairman  and Chief  Executive  Officer is a member of Gensia's
Scientific Advisory Board.

Genta Jago/Apothecon

         In March 1996,  Genta Jago entered into a  collaborative  licensing and
development  agreement  with  Apothecon,  Inc.  ("Apothecon"),  the  multisource
subsidiary  of  Bristol-Myers  Squibb  Co.  Under  the  terms of the  agreement,
Apothecon  provides  funding to Genta Jago up to a specified  maximum amount for
the formulation,  development and clinical testing of a GEOMATRIX formulation of
OD-CR  ketoprofen,  subject to certain early termination  rights.  The agreement
also  provides  for Genta  Jago to  receive  potential  milestone  payments  and
royalties on product  sales,  if any. Terms of the agreement  provide  Apothecon
exclusive  rights to market and  distribute  the products on a worldwide  basis.
During 1996,  Genta Jago received $1.1 million in funding under the  arrangement
and recognized $1.3 million of collaborative revenue from the arrangement.

Genta Jago/Krypton

         In October 1996, Genta Jago entered into five  collaborative  licensing
and  development  agreements  with Krypton,  Ltd.  ("Krypton"),  a subsidiary of
SkyePharma.  Under the terms of the  agreements,  Genta Jago is to sublicense to
Krypton rights to develop and commercialize  potentially bioequivalent GEOMATRIX
versions of five currently marketed products. Genta Jago also granted Krypton an
option to sublicense  rights to develop and commercialize an improved version of
a sixth product.  During 1996,  Genta Jago received  funding of $1 million under
the collaborative  agreements and recognized $1 million of collaborative revenue
from the agreements.


                                        8





Chugai/Gen-Probe

         In February 1989, the Company  entered into a development,  license and
supply  agreement  with  Gen-Probe  Incorporated  ("Gen-Probe").  Gen-Probe  was
subsequently  acquired by Chugai  Pharmaceutical  Company,  Ltd.  ("Chugai"),  a
Japanese  corporation.  Chugai has the option to acquire an exclusive  worldwide
license  to any  product  consisting  of,  including,  derived  from or based on
oligonucleotides   for  the  treatment  or  prevention  of  Epstein-Barr  virus,
cytomegalovirus,  HIV,  human  T-cell  leukemia  virus-1 and all  leukemias  and
lymphomas.  Genta is  obligated  to  pursue  the  development  of a  therapeutic
compound for the treatment of one of these  indications as its first therapeutic
development  program.  If Chugai  exercises  its option to  acquire  rights to a
product in any such indication,  the Company will grant Chugai certain rights to
sell such product and Chugai must fund Genta's  development of any such product,
subject to certain  limitations and early  termination  rights.  If Chugai fully
funds the development of such product,  profits on sales of such product will be
shared between the parties. Through the agreement, the Company also has obtained
certain  rights  to  phosphorothioate  oligonucleotide  constructions  and other
technology.  In return,  the Company has agreed to pay Chugai a royalty on sales
of products  derived from such  technology.  Gen-Probe is a  stockholder  in the
Company.

Ts'o/Miller/Hopkins

         In February  1989,  the Company  entered into a license  agreement with
Drs. Paul Ts'o and Paul Miller (the "Ts'o/Miller  Agreement")  pursuant to which
Drs.  Ts'o and Miller  granted an  exclusive  license to the  Company to certain
issued patents,  patent applications and related technology regarding the use of
nucleic   acids   and   oligonucleotides,   including   methylphosphonates,   as
pharmaceutical  agents.  Dr. Ts'o is a Professor of  Biophysics,  Department  of
Biochemistry, and Dr. Miller a Professor of Biochemistry,  both at the School of
Public Health and Hygiene,  Johns Hopkins  University.  In May 1990, the Company
entered  into a  license  agreement  with  Johns  Hopkins  (the  "Johns  Hopkins
Agreement," and collectively with the Ts'o/Miller Agreement,  referred to herein
as the "Ts'o/Miller/Hopkins Agreements") pursuant to which Johns Hopkins granted
Genta an  exclusive  license  to its rights in certain  issued  patents,  patent
applications and related technology  developed as a result of research conducted
at Johns Hopkins by Drs. Ts'o and Miller and related to the use of nucleic acids
and  oligonucleotides as pharmaceutical  agents. In addition,  Johns Hopkins has
granted Genta certain  rights of first  negotiation  to inventions  made by Drs.
Ts'o and Miller in their  laboratories  in the area of  oligonucleotides  and to
inventions  made by  investigators  at Johns  Hopkins in the course of  research
funded  by  Genta,   which   inventions  are  not  otherwise   included  in  the
Ts'o/Miller/Hopkins Agreements. Genta has agreed to pay Dr. Ts'o, Dr. Miller and
Johns Hopkins  royalties on net sales of products  covered by the issued patents
and patent applications, but not the related technology, licensed to the Company
under the  Ts'o/Miller/Hopkins  Agreements.  The  Company has also agreed to pay
certain minimum  royalties  prior to  commencement  of commercial  sales of such
products,  which  royalties  may be credited  under certain  conditions  against
royalties  payable on  subsequent  sales.  Subject  to  certain  rights of early
termination, the Ts'o/Miller/Hopkins Agreements remain in effect for the life of
the  last-to-expire  patent  licensed under the  respective  agreements or until
abandonment of the last-pending patent application licensed under the respective
agreements.

         As of December 31, 1996,  the Company owed Johns Hopkins  $627,271,  of
which  $200,000  consists of royalty  payments for 1995 and 1996 and the balance
consisted  of  the  Company's   obligations   to  provide  funds  to  support  a
post-doctoral  research program of Johns Hopkins.  In February 1997, the Company
paid Johns  Hopkins  $100,000  toward the  post-doctoral  support  program.  The
Company is in  negotiations  with Johns  Hopkins as to payment of the  remaining
balance in cash and  securities.  On February  14,  1997,  the Company  received
notice from Johns  Hopkins that the Company was in material  breach of the Johns
Hopkins  Agreement.  The Johns Hopkins  Agreement  provides  that, if a material
payment default is not cured within 90 days of receipt of notice of such breach,
Johns Hopkins may terminate the Johns Hopkins  Agreement.  A termination  of the
Johns Hopkins agreement could have a material adverse effect on the Company.


                                        9





Other Anticode Agreements

         The Company entered into agreements with Baxter Healthcare  Corporation
and  Johnson & Johnson  Consumer  Products,  Inc.  in late 1995,  which  provide
limited  funding for  preliminary  feasibility  studies using  Genta's  Anticode
compounds.  Under the terms of these agreements,  if the  collaborative  partner
elects to  pursue  the  commercial  development  of an  Anticode  compound  upon
completion  of the  feasibility  studies,  the parties would enter into mutually
acceptable development, license and supply agreements.

Patents and Proprietary Technology

         The  Company's  policy is to protect  its  technology  by,  among other
things,  filing  patent  applications  with  respect  to  technology  considered
important to the development of its business. The Company also relies upon trade
secrets,  unpatented  know-how,  continuing  technological  innovation  and  the
pursuit of  licensing  opportunities  to develop and  maintain  its  competitive
position.

         Genta has a portfolio  of  intellectual  property  rights to aspects of
Anticode  technology  which  includes  rights in novel  compositions  of matter,
methods of  large-scale  synthesis and methods of controlling  gene  expression.
This  portfolio  includes  issued United States and Canadian  patents and patent
applications,  which  were  licensed  by  Genta  under  the  Ts'o/Miller/Hopkins
Agreements as described above, and patent  applications filed by the Company. In
addition,  foreign  counterparts of certain applications have been filed or will
be filed at the  appropriate  time.  These issued  patents  will expire,  absent
regulatory extension, in the years 2001 through 2005. Additional allowed patents
under this agreement generally would not expire until 17 years after the date of
allowance or, in other cases, 20 years from the date of application.  Generally,
it is the  Company's  strategy  to apply for  patent  protection  in the  United
States,  Canada,  Western  Europe,  Israel,  Taiwan,  Japan,  Australia  and New
Zealand. The Company seeks to coordinate its patent protection policy with those
of its licensors; however, of the six issued patents licensed by Genta under the
Ts'o/Miller/Hopkins  Agreements,  five were filed only in the United  States and
one was filed in both the  United  States and  Canada.  Genta also has rights of
first refusal for future  antisense work performed by Drs. Ts'o and Miller.  See
"Collaborative and Licensing Agreements -- Ts'o/Miller/Hopkins."

         Since its  incorporation,  Genta has  separately  filed an aggregate of
over 100 United States and foreign patent applications covering new compositions
and improved methods to use, synthesize and purify Anticode oligonucleotides and
linker-arm technology.

         Under the agreement with Gen-Probe,  Genta gained  non-exclusive access
to all  technology  developed by Gen-Probe  related to the use of DNA probes for
therapeutic  applications  as of February  1989.  This  technology is related to
nucleic acid probes for quantitation of organisms and viruses, methods for their
production,    including   nonnucleotide   linking   reagents,   labeling,   and
purification,  and methods for their use  including  hybridization  and enhanced
hybridization.  This includes  rights to 14 issued  patents and several  pending
United  States  patent   applications  and  corresponding   issued  and  pending
applications in foreign countries.  See "Collaborative and Licensing  Agreements
- -- Chugai/Gen-Probe".

         Genta also gained access to certain rights from the National Institutes
of Health  ("NIH")  covering  phosphorothioate  oligonucleotides.  This includes
rights to three United States issued  patents,  one granted  European patent and
other corresponding  foreign  applications which are still pending. In addition,
under an  agreement  with the  University  of  Pennsylvania,  Genta has acquired
exclusive  rights  for the  use of  BCL2 as a  target  for  antisense  and  gene
therapy-based treatments for cancer.

         In September  1996, the Company  received a notice of an allowance from
the United  States  Patent and  Trademark  Office  for  patent  claims  covering
antisense  compounds targeted against BCL2 based on the technology acquired from
the University of  Pennsylvania.  Those claims  covering  compositions of matter
give Genta  exclusive  rights to target  sequences of the BCL2 gene.  The patent
claims cover the Company's  proprietary  Anticode  molecules  which target BCL2,
including its lead clinical  candidate,  G3139. Other related patents and claims
in the United States and Europe are still pending.


                                       10





         Jagotec's  GEOMATRIX  technology  is the subject of issued  patents and
pending applications. Jagotec currently holds four issued United States patents,
five  granted  foreign   patents,   and  other   corresponding   foreign  patent
applications still pending that cover the GEOMATRIX  technology.  Certain rights
to GEOMATRIX technology have been licensed to Genta Jago. See "Collaborative and
Licensing Agreements -- Genta Jago".

         The patent  positions of  biopharmaceutical  and  biotechnology  firms,
including  Genta,  can be  uncertain  and  involve  complex  legal  and  factual
questions.  Consequently,  even though Genta is currently prosecuting its patent
applications with the United States and foreign patent offices, the Company does
not know  whether any of its  applications  will  result in the  issuance of any
patents  or,  if  any  issued  patents  will  provide  significant   proprietary
protection or will be circumvented or invalidated.  Since patent applications in
the United  States are  maintained in secrecy  until  patents  issue,  and since
publication of discoveries  in the scientific or patent  literature  tend to lag
behind actual discoveries by several months, Genta cannot be certain that others
have not filed patent applications directed to inventions covered by its pending
patent  applications  or that it was the first to file patent  applications  for
such inventions.

         Competitors or potential  competitors may have filed  applications for,
or have  received  patents and may obtain  additional  patents  and  proprietary
rights  relating  to,  compounds  or  processes  competitive  with  those of the
Company.  See  "Competition."  Accordingly,  there can be no assurance  that the
Company's patent  applications will result in issued patents or that, if issued,
the patents will afford protection against  competitors with similar technology;
nor can there be any  assurance  that any  patents  issued to Genta  will not be
infringed or circumvented by others;  nor can there be any assurance that others
will not obtain patents that the Company would need to license or design around.
There can be no assurance that the Company will be able successfully to obtain a
license to technology that it may require or that, if obtainable, such a license
would be available on reasonable terms.

         There can be no assurance that the Company's patents, if issued,  would
be held valid by a court of competent  jurisdiction.  Moreover,  the Company may
become involved in interference proceedings declared by the United States Patent
and  Trademark  Office in  connection  with one or more of its patents or patent
applications  to  determine  priority  of  invention,   which  could  result  in
substantial  cost to the Company,  as well as a possible  adverse decision as to
priority of invention of the patent or patent application involved.

         The Company also relies upon unpatented  trade secrets and no assurance
can be given that third  parties will not  independently  develop  substantially
equivalent  proprietary  information  and  techniques  or  gain  access  to  the
Company's trade secrets or disclose such  technology to the public,  or that the
Company can meaningfully maintain and protect unpatented trade secrets.

         Genta  requires  its   employees,   consultants,   outside   scientific
collaborators  and  sponsored  researchers  and  other  advisors  to  execute  a
confidentiality  agreement  upon the  commencement  of  employment or consulting
relationship  with  the  Company.  The  agreement  generally  provides  that all
confidential  information  developed or made known to the individual  during the
course of the individual's  relationship  with Genta shall be kept  confidential
and shall not be disclosed to third parties except in specific circumstances. In
the case of employees,  the  agreement  generally  provides that all  inventions
conceived  by the  individual  shall be  assigned  to,  and  made the  exclusive
property  of,  the  Company.  There can be no  assurance,  however,  that  these
agreements will provide meaningful protection for the Company's trade secrets or
adequate  remedies  in the  event  of  unauthorized  use or  disclosure  of such
information,  or in the event of an employee's  refusal to assign any patents to
the Company in spite of such contractual obligation.


                                       11





Government Regulation

         Regulation by governmental authorities in the United States and foreign
countries  is a  significant  factor in the  manufacture  and  marketing  of the
Company's proposed products and in its ongoing research and product  development
activities.  All of the Company's  therapeutic  products will require regulatory
approval by  governmental  agencies prior to  commercialization.  In particular,
human  therapeutic  products  are subject to rigorous  preclinical  and clinical
testing and premarket approval  procedures by the FDA and similar authorities in
foreign  countries.  Various  federal,  and in some cases  state,  statutes  and
regulations  also  govern or  influence  the  manufacturing,  safety,  labeling,
storage,  record keeping and marketing of such products.  The lengthy process of
seeking these approvals,  and the subsequent  compliance with applicable federal
and in some cases state,  statutes and  regulations,  require the expenditure of
substantial  resources.  Any failure by the Company,  its  collaborators  or its
licensees  to obtain,  or any delay in  obtaining,  regulatory  approvals  could
adversely affect the marketing of any products  developed by the Company and its
ability to receive product or royalty revenue.

         The  activities  required  before  a new  pharmaceutical  agent  may be
marketed in the United States begin with preclinical testing.  Preclinical tests
include laboratory  evaluation of product chemistry and animal studies to assess
the  potential  safety and  efficacy of the product  and its  formulations.  The
results of these  studies must be submitted to the FDA as part of an IND,  which
must be reviewed and approved by the FDA before  proposed  clinical  testing can
begin. An IND becomes effective within 30 days of filing with the FDA unless the
FDA imposes a clinical  hold on the IND. In addition,  the FDA may, at any time,
impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical
hold, clinical trials cannot commence or recommence, as the case may be, without
prior  FDA  authorization  and then  only  under  terms  authorized  by the FDA.
Typically, clinical testing involves a three-phase process. In Phase I, clinical
trials are  conducted  with a small  number of subjects to  determine  the early
safety profile and the pattern of drug distribution and metabolism. In Phase II,
clinical trials are conducted with groups of patients  afflicted with a specific
disease in order to determine preliminary efficacy, optimal dosages and expanded
evidence  of  safety.  In  Phase  III,  large-scale,  multi-center,  comparative
clinical  trials are conducted with patients  afflicted with a target disease in
order to provide  enough data for the  statistical  proof of efficacy and safety
required by the FDA and others.  In the case of  products  for  life-threatening
diseases, the initial human testing is generally done in patients rather than in
healthy  volunteers.  Since these patients are already afflicted with the target
disease,  it is possible  that such  studies may provide  results  traditionally
obtained in Phase II trials.  These trials are frequently  referred to as "Phase
I/II" trials.

         The results of the  preclinical  and clinical  testing,  together  with
chemistry,  manufacturing and control information, are then submitted to the FDA
for a pharmaceutical  product in the form of a New Drug Application ("NDA"), for
a biological product in the form of a Product License Application ("PLA") or for
medical  devices in the form of a  Premarket  Approval  Application  ("PMA") for
approval to commence  commercial sales. In responding to an NDA, PLA or PMA, the
FDA may grant marketing  approval,  request  additional  information or deny the
application  if  it  determines  that  the  application  does  not  satisfy  its
regulatory  approval criteria.  There can be no assurance that approvals will be
granted on a timely basis,  if at all, or if granted will cover all the clinical
indications  for which the  Company  is  seeking  approval  or will not  contain
significant   limitations   in   the   form   of   warnings,    precautions   or
contraindications with respect to conditions of use.

         In  circumstances  where a company  intends to develop and  introduce a
novel  formulation  of an active drug  ingredient  already  approved by the FDA,
clinical and preclinical testing  requirements may not be as extensive.  Limited
additional data about the safety and/or  effectiveness  of the proposed new drug
formulation,  along with  chemistry  and  manufacturing  information  and public
information  about  the  active  ingredient,  may be  satisfactory  for  product
approval.  Consequently,  the new  product  formulation  may  receive  marketing
approval more rapidly than a traditional full NDA,  although no assurance can be
given that a product will be granted such treatment by the FDA.

         For clinical investigation and marketing outside the United States, the
Company is or may be subject to foreign regulatory  requirements governing human
clinical trials and marketing approval for drugs. The requirements governing the
conduct of clinical trials,  product  licensing,  pricing and reimbursement vary
widely from country to country. The Company's approach is to design its European
clinical trials studies to meet FDA,  European  Economic  Community  ("EEC") and
other European countries' standards. At present, the marketing authorizations

                                       12





are  applied  for at a national  level,  although  certain  EEC  procedures  are
available to  companies  wishing to market a product in more than one EEC member
state. If the competent authority is satisfied that adequate evidence of safety,
quality and efficacy has been presented, a market authorization will be granted.
The  registration  system proposed for medicines in the EEC after 1992 is a dual
one in which products,  such as biotechnology  and high technology  products and
those containing new active substances, will have access to a central regulatory
system that provides registration throughout the entire EEC. Other products will
be  registered by national  authorities  under the local laws of each EEC member
state. Provided regulatory  harmonization is finalized in the EEC, the Company's
clinical trials will be designed to develop a regulatory  package sufficient for
multi-country approval in the Company's European target markets without the need
to duplicate studies for individual country approvals.  This approach also takes
advantage of regulatory  requirements in some  countries,  such as in the United
Kingdom,  which allow Phase I studies to commence after  appropriate  toxicology
and preclinical pharmacology studies, prior to formal regulatory approval.

         Prior to the  enactment of the Drug Price  Competition  and Patent Term
Restoration  Act of 1984  (the  "Waxman/Hatch  Act"),  the FDA,  by  regulation,
permitted  certain pre-1962 drugs to be approved under an abbreviated  procedure
which waived  submission of the extensive animal and human studies of safety and
effectiveness  normally required to be in a NDA. Instead,  the manufacturer only
needed to provide an ANDA  containing  labeling,  information  on chemistry  and
manufacturing  procedures  and data  establishing  that the  original  "pioneer"
product and the proposed  "generic" product are bioequivalent  when administered
to humans.

         Originally,  the FDA's regulations permitted this abbreviated procedure
only for copies of a drug that was  approved  by the FDA as safe before 1962 and
which was  subsequently  determined  by the FDA to be effective for its intended
use. In 1984, the  Waxman/Hatch  Act extended  permission to use the abbreviated
procedure  established  by the FDA to copies of post-1962  drugs  subject to the
submission of the required data and  information,  including  data  establishing
bioequivalence.  However,  effective  approval of such ANDAs were dependent upon
there being no outstanding patent or non-patent exclusivities.

         Additionally,  the FDA allows, under section 505(b)(2) of the Food Drug
and Cosmetic Act, for the  submission and approval of a hybrid  application  for
certain  changes in drugs which,  but for the changes,  would be eligible for an
effective  ANDA  approval.  Under these  procedures the applicant is required to
submit the clinical efficacy and/or safety data necessary to support the changes
from the ANDA eligible drug (without  submitting the basic underlying safety and
efficacy data for the chemical entity involved) plus manufacturing and chemistry
data and information. Effective approval of a 505(b)(2) application is dependent
upon the ANDA eligible drug upon which the applicant relies for the basic safety
and  efficacy  data  being  subject  to  no  outstanding  patent  or  non-patent
exclusivities.  As  compared  to a  NDA,  an  ANDA  or a  505(b)(2)  application
typically involves reduced research and development costs. However, there can be
no  assurance  that any such  applications  will be approved.  Furthermore,  the
supply of raw materials must also be approved by the FDA.

         The  Company is also  subject to various  foreign,  federal,  state and
local laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing  practices, the experimental use of animals and the
use,  manufacture,  storage,  handling and disposal of hazardous or  potentially
hazardous  substances,  including  radioactive  compounds and infectious disease
agents,  used in connection with the Company's research and development work and
manufacturing processes.  Although the Company believes it is in compliance with
these laws and regulations in all material  respects  (except as disclosed under
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operations -- Liquidity and Capital Resources"),  there can be no assurance that
the Company will not be required to incur  significant costs to comply with such
regulations in the future.


                                       13





Competition

         For  many of their  applications,  the  Company's,  and  Genta  Jago's,
products under development will be competing with existing  therapies for market
share.  In addition,  a number of companies  are  pursuing  the  development  of
antisense  and  triple-strand  technology  and  controlled-release   formulation
technology  and the  development  of  pharmaceuticals  utilizing  antisense  and
triple-strand  technology and  controlled-release  formulation  technology.  The
Company competes with fully integrated  pharmaceutical  companies, many of which
have more  substantial  experience,  financial and other  resources and superior
expertise  in  research  and  development,   manufacturing,  testing,  obtaining
regulatory  approvals,  marketing and  distribution.  Smaller companies may also
prove to be significant  competitors,  particularly  through their collaborative
arrangements  with large  pharmaceutical  companies  or  academic  institutions.
Furthermore,  academic institutions,  governmental agencies and other public and
private  research  organizations  have  conducted  and will  continue to conduct
research,  seek patent protection and establish arrangements for commercializing
products.  Such  products may compete  directly  with any products  which may be
offered by the Company.

         The Company's  products  under  development  are expected to address an
array of markets.  The Company's  competition  will be determined in part by the
potential  indications  for which  the  Company's  products  are  developed  and
ultimately  approved by  regulatory  authorities.  For certain of the  Company's
potential  products,  an important  factor in  competition  may be the timing of
market introduction of the Company's or competitor's products.  Accordingly, the
relative  speed with which Genta and Genta Jago can develop  products,  complete
the clinical trials and approval  processes and supply commercial  quantities of
the products to the market are expected to be important competitive factors. The
Company expects that competition among products approved for sale will be based,
among other things,  on product  efficacy,  safety,  reliability,  availability,
price, patent position and sales, marketing and distribution  capabilities.  The
development  by others of new  treatment  methods could render the Company's and
Genta  Jago's  products  under  development  non-competitive  or  obsolete.  The
Company's  competitive  position  also  depends  upon its ability to attract and
retain  qualified  personnel,  obtain  patent  protection  or otherwise  develop
proprietary  products or processes and secure  sufficient  capital resources for
the often  substantial  period between  technological  conception and commercial
sales.

         JBL's products address several markets,  including clinical  chemistry,
diagnostics,  molecular  biology  and  pharmaceutical  development.  While  many
customers  have  specified  JBL  products  in  their  manufacturing   protocols,
competition  from  several  international   competitors  could  undermine  JBL's
competitive position, many of whom have more substantial  experience,  financial
and  other  resources  and  superior  expertise  in  research  and  development,
manufacturing,   testing,   obtaining   regulatory   approvals,   marketing  and
distribution.  Competition has come primarily on price for some key JBL products
for pharmaceutical  development,  and from competing technologies in diagnostics
and molecular biology.

Human Resources

         As of December 31, 1996,  Genta,  JBL and Genta Europe had 22, 41 and 2
employees, respectively, 13 of whom held doctoral degrees. Twenty employees were
engaged in research and development activities, 21 were engaged in manufacturing
and 24 were in  administration,  sales and  marketing  positions.  A significant
number of the Company's  management  and  professional  employees have had prior
experience and positions with pharmaceutical and biotechnology companies.  Genta
believes it maintains satisfactory relations with its employees.

         In October 1996, the Company  terminated its nine employees  conducting
pre-clinical  research on the  Company's  "antisense"  projects and Genta Europe
terminated  seven  employees.  The  Company's  overall  staff was  reduced by an
additional net reduction of ten employees in 1996, due to attrition.

Risk Factors

         In addition to the other information contained in this Annual Report on
Form 10-K, the following factors should be considered carefully.


                                       14





         Need for Additional  Funds; Risk of Insolvency.  Genta's  operations to
date have consumed substantial amounts of cash. The Company anticipates that its
existing cash funds,  including $3 million in additional  financing  obtained in
February  1997,  will  enable the  Company to  maintain  its  presently  planned
operations  until July,  1997. The Company's  auditors have included an emphasis
paragraph in their opinion with respect to the Company's  ability to continue as
a going  concern.  Management  believes  that a minimum  of  approximately  $6.4
million of additional  financing will be necessary to sustain operations through
the end of 1997 and to  satisfy  the  Company's  obligations  under  its  Senior
Secured  Convertible  Bridge Notes (the "Convertible  Notes") and 4% Convertible
Debentures (the "Convertible  Debentures").  Substantial  additional  sources of
financing  will be required  in order for the  Company to  continue  its planned
operations  thereafter,  as well.  Furthermore,  The Nasdaq Stock  Market,  Inc.
("Nasdaq")  has informed the Company that its common stock will be delisted from
the Nasdaq  SmallCap  Market  unless the Company  makes a public filing with the
Securities  and  Exchange  Commission  and  Nasdaq by April 7,  1997  evidencing
minimum capital and surplus of at least $6 million.  See "Risk Factors -- Threat
of Nasdaq  Delisting"  below.  The Company is  negotiating  with  pharmaceutical
companies regarding  collaborative  agreements and other financing  arrangements
and is actively seeking  additional equity or debt financing.  See "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Liquidity and Capital  Resources."  However,  there can be no assurance that any
such  collaborative  agreements or other sources of funding will be available on
favorable terms, if at all. If such funding is unavailable,  the Company will be
required to license or sell certain of its assets and technology,  further scale
back or eliminate some or all of its  development  programs,  further reduce its
work  force and  spending,  and take other  measures  in order to  continue  its
operations.  If such measures are not successfully completed, the Company may be
required  to  discontinue  its  operations.  The  Company  will  need  to  raise
substantial additional funds to conduct the costly and time-consuming  research,
pre-clinical  development and clinical  trials  necessary to bring its and Genta
Jago's   products  to  market  and  to  establish   production   and   marketing
capabilities. The Company will also need substantial additional funds to provide
working  capital  loans to Genta Jago.  The Company  intends to seek  additional
funding through public or private financings,  including equity financings,  and
through collaborative  arrangements.  Adequate funds for these purposes, whether
obtained through financial  markets or collaborative or other  arrangements with
corporate partners or from other sources, may not be available when needed or on
terms acceptable to the Company.  Insufficient  funds may require the Company to
delay,  scale  back  or  eliminate  some  or  all of its  research  and  product
development  programs or to license third parties to  commercialize  products or
technologies  that the  Company  would  otherwise  seek to develop  itself.  The
Company's future cash  requirements  will be affected by results of research and
development,  results of  preclinical  studies and  bioequivalence  and clinical
trials,  relationships  with corporate  collaborators,  changes in the focus and
direction of the Company's  research and development  programs,  competitive and
technological  advances,  resources  devoted to Genta Jago,  the FDA and foreign
regulatory  process,  potential  litigation  by companies  seeking to prevent or
delay marketing approval of Genta Jago's products and other factors.

         Threat of Nasdaq Delisting. Since October 22, 1996 the Company's common
stock has been trading at less than $1.00 per share.  Effective February 7, 1997
the Company's common stock was removed from the Nasdaq National Market and began
trading on the Nasdaq SmallCap Market under a conditional exception from the bid
price and capital surplus requirements of the Nasdaq SmallCap Market. Nasdaq has
indicated that,  unless the Company's  common stock achieves a minimum bid price
of at least $1.50 per share by April 7, 1997,  and maintains a minimum bid price
of at least $1.50 per share for a period of ten consecutive days thereafter, the
Company's  common stock will be delisted from the Nasdaq  SmallCap  Market.  The
Board of Directors  of the Company has  approved an  amendment to the  Company's
Restated  Certificate  of  Incorporation  effecting a one-for-ten  reverse stock
split of the Company's  common stock (the  "Reverse  Split  Amendment")  and has
recommended that stockholders  approve the Reverse Split Amendment at the Annual
Meeting of Stockholders to be held on April 4, 1997. The Company  believes that,
if the Reverse Split Amendment is approved, it can meet Nasdaq's terms; however,
there can be no assurance that,  even with the reverse stock split,  the Company
will be able to maintain its listing on the Nasdaq SmallCap Market.  To maintain
such listing, the Company will also be required to make a public filing with the
SEC and Nasdaq evidencing minimum capital and surplus of $6 million on or before
April 7, 1997.  While the  Company  believes  that it can meet this  capital and
surplus  level by such date,  there can be no  assurance  that the Company  will
succeed in timely  achieving this  requirement or that, even if successful,  the
Company's  common stock would not be delisted from the Nasdaq  SmallCap  Market.
There can be no assurances  that approval of the Reverse  Split  Amendment  will
succeed in raising the bid price of the  Company's  common stock above $1.50 per
share, that such minimum price if achieved would be maintained for the requisite
period,  or that even if Nasdaq's minimum bid price  requirement were satisfied,
the Company's common stock would not be delisted from the Nasdaq

                                       15





SmallCap  Market for other  reasons.  A delisting of the Company's  common stock
could adversely affect the ability of the Company to attract new investors.

         Subordination of Common Stock to Series A and Series C Preferred Stocks
and Redemption of Series A Preferred Stock;  Risk of Dilution.  The common stock
is expressly  subordinate  to the  approximately  $30 million  preference of the
528,100  outstanding  shares of Series A Preferred  Stock and the  approximately
$1.5 million  preference of the 1,424 shares of Series C Preferred  Stock in the
event of the liquidation,  dissolution or winding up of the Company. Further, no
dividends  may be paid on the common stock unless full  cumulative  dividends on
the Series A and Series C Preferred Stocks have been paid or funds set aside for
such preferred  dividends by the Company.  In addition,  the conversion ratio of
the  Series A  Preferred  Stock and the  exercise  price of  warrants  issued in
connection  with the Series A  Preferred  Stock  (the  "Series A  Warrants")  is
subject to  adjustment,  among other  things,  upon certain  issuances of common
stock or  securities  convertible  into common stock at $6.75 per share or less.
Each  share of Series A  preferred  stock is  presently  convertible  into 21.31
shares of common stock and the exercise  price of the Series A Warrants is $2.60
per share.

          The Series A Preferred  Stock was  subject to a  mandatory  redemption
(the  "Mandatory  Redemption")  by  the  Company  on  September  23,  1996  (the
"Redemption Date"). Under the terms of the Mandatory Redemption, as set forth in
the Company's Restated Certificate of Incorporation, the Redemption Price of $50
per share plus accrued dividends was to be paid, subject to certain  conditions,
in common stock valued at an average  trading  price for ten trading days before
August 20, 1996. The Company elected to effect the Mandatory  Redemption through
the use of  common  stock,  and then was  required  to use its best  efforts  to
arrange with an investment  bank acceptable to the holders of Series A preferred
stock for a firm commitment  underwriting  relating to such shares.  The Company
was unable to arrange for such a firm commitment offering and is now required to
use its  reasonable  efforts to arrange for a firm  commitment  underwriting  as
promptly as practicable and to redeem any remaining outstanding shares of Series
A preferred stock upon arranging for such firm commitment underwriting.  Even if
the Company is  successful in satisfying  its Mandatory  Redemption  obligations
with its  shares of  common  stock,  holders  of common  stock  will  experience
substantial  dilution  at the time of such  redemption.  Terms of the  Company's
Series A  preferred  stock  provide  for the  payment of  dividends  annually in
amounts  ranging  from $3.00 per share per annum for the first year to $5.00 per
share per annum in the third and fourth years.  Dividends may be paid in cash or
common stock or a combination thereof, at the Company's option. Dividends on the
preferred  stock  accrue on a daily basis  (whether or not  declared)  and shall
accumulate to the extent not paid on the annual dividend  payment date following
the  dividend  period for which they  accrue.  Each share of Series C  Preferred
Stock is  convertible,  subject  to  certain  conditions,  at the  option of the
holder,  into that number of shares of common stock  determined  by dividing the
sum of $1,000,  plus all accrued  dividends  on each share of Series C Preferred
Stock  (approximately  $40 per share),  by the conversion  price of the Series C
Preferred  Stock.  The conversion price of the Series C Preferred Stock is equal
to 75% of the average of the closing bid prices of the Company's common stock on
the Nasdaq Stock Market for a specified period.  Terms of the Company's Series C
convertible  preferred stock also provide for dividends payable in shares of the
Company's  common  stock.  The Company has paid and, to the extent  permitted by
law,  intends to continue paying the dividends in shares of the Company's common
stock.

         Subordination  of Common  Stock to Senior  Secured  Convertible  Bridge
Notes  and 4%  Convertible  Debentures;  Risk of  Dilution.  In the  event  of a
liquidation,  dissolution or winding up of the Company, the common stock is also
expressly subordinate to $3 million principal amount of Convertible Notes and to
$350,000 principal amount of Convertible Debentures;  both issues are payable in
August,  1997.  Further,  no  dividends  may be paid on the common  stock unless
cumulative  dividends on such convertible notes and debentures have been paid or
funds have been set aside for such payment.  The Convertible Notes are initially
convertible into 600,000 shares of Series D preferred  stock,  which are in turn
convertible  into 20 million  shares of common  stock,  subject to  antidilution
adjustments.  The  Convertible  Debentures  are  convertible  into a maximum  of
122,101 shares of common stock.

        Early Stage of Development;  Technological  Uncertainty.  Genta is at an
early stage of development.  All of the Company's potential therapeutic products
are in  research  or  development,  and no  revenues  have been  generated  from
therapeutic  product sales.  The Company is pursuing  research and  development,
through  Genta  Jago,  of a range  of oral  controlled-release  formulations  of
currently  available  pharmaceuticals.  Many  of the  products  to be  developed
through Genta Jago have not yet been  successfully  formulated  using  GEOMATRIX
technology. In

                                       16





addition,  none of the products being  developed  through Genta Jago has had its
manufacturing  process successfully  scaled-up for commercial  production or has
started pivotal bioequivalence trials. To date, a major portion of the Company's
resources  have been  dedicated  to applying  molecular  biology  and  medicinal
chemistry to the research and development of potential  pharmaceutical  products
based upon Anticode technology.  While the Company has demonstrated the activity
of Anticode  technology  in model systems in vitro and the activity of antisense
technology in animals and has identified a number of compounds which the Company
believes are worthy of additional testing,  only one of these potential Anticode
products  has begun to be  tested in  humans,  with  such  testing  in its early
stages. There can be no assurance that the novel approach of Anticode technology
to develop therapeutic  products will result in products which receive necessary
regulatory approvals or that will be successful  commercially.  Further, results
obtained  in  preclinical  studies  or  pilot  bioequivalence   trials  are  not
necessarily  indicative  of  results  that will be  obtained  in human  clinical
testing or pivotal  bioequivalence  trials,  respectively.  The  Company is also
developing products for certain diseases where no animal models exist. There can
be no assurance that any of the Company's or Genta Jago's potential products can
be successfully  developed.  Furthermore,  the Company's products in research or
development  may prove to have  undesirable and unintended side effects or other
characteristics  that may prevent or limit their commercial use. There can be no
assurance that the Company will be permitted to undertake human clinical testing
of its  potential  Anticode  products  or any  other of the  Company's  products
currently in preclinical development,  or, if permitted, that such products will
be  demonstrated  to be safe  and  efficacious.  In  addition,  there  can be no
assurance that any of the Company's or Genta Jago's  products will obtain FDA or
foreign  regulatory  approval for any  indication  or that an approved  compound
would be capable of being produced in commercial  quantities at reasonable costs
and successfully  marketed.  Products,  if any,  resulting from Genta's or Genta
Jago's  research and  development  programs are not expected to be  commercially
available for a number of years.

         Loss  History;  Uncertainty  of  Future  Profitability.  Genta has been
unprofitable to date,  incurring  substantial  operating losses  associated with
ongoing  research and  development  activities,  preclinical  testing,  clinical
trials,  manufacturing activities and development activities undertaken by Genta
Jago.  From the period since its inception to December 31, 1996, the Company has
incurred a cumulative net loss of $108.4  million.  The Company has  experienced
significant  quarterly  fluctuations in operating results and expects that these
fluctuations  in revenues,  expenses and losses will  continue.  The Company has
historically  experienced  significant  quarterly  fluctuations  in its level of
product sales, generally reflecting the timing and degree of customer demand for
various products.

         Dividends.  The  Company  has never paid cash  dividends  on its common
stock and does not  anticipate  paying  any such  dividends  in the  foreseeable
future. In addition, the Company is restricted from paying cash dividends on its
common  stock  until  such time as all  cumulative  dividends  have been paid on
outstanding shares of its Series A and Series C convertible preferred stock. The
Company  currently  intends to retain its  earnings,  if any,  after  payment of
dividends on outstanding  shares of Series A and Series C convertible  preferred
stock,  for the development of its business.  See  "Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations  --  Liquidity  and
Capital Resources."

         Operations   After   Restructuring.   As  a  result  of  the  Company's
restructuring to reduce operating expenses, the Company has focused its research
and development programs on its near-term drug delivery  (GEOMATRIX)  technology
and its Anticode cancer program.  The Company's  Anticode  programs  directed at
other areas have  largely  been  curtailed  and any future  progress  with these
programs is dependent upon the Company obtaining a collaborative partner to fund
further research.  There can be no assurance that the Company will be successful
in  obtaining  additional  funding  for these  programs.  The  Company no longer
anticipates  devoting any of its resources to further development of its topical
dermatology product  candidates.  The Company's agreement with its collaborative
partner,  the Procter & Gamble  Company  ("Procter & Gamble"),  for its Anticode
program in infectious  diseases,  ended in September 1995. The Company will have
to obtain  additional  corporate  partners  in order to  continue  its  Anticode
programs.  There can be no assurance  that the Company will be able to negotiate
such collaborative arrangements on favorable terms, if at all.

         Genta Jago's  strategy is to form alliances  with major  pharmaceutical
companies  to  commercialize  its  GEOMATRIX  oral  controlled-release  products
worldwide.  Genta Jago has established  collaborations with Gensia (and, through
Gensia,  with  Boehringer  Mannheim),  Apothecon  and Krypton.  Gensia has since
entered into an Assignment and Release  Agreement with SkyePharma for its United
States subsidiary, Brightstone, to assume

                                       17





Gensia's position in the  collaboration  with Genta Jago with no modification to
the terms of the original  agreement between Genta Jago and Gensia.  Brightstone
also replaces Gensia in its relationship with Boehringer Mannheim.

         No Assurance of Regulatory Approval; Government Regulation. The FDA and
comparable  agencies in foreign countries impose substantial  premarket approval
requirements  upon the introduction of  pharmaceutical  products through lengthy
and detailed  preclinical and clinical  testing  procedures and other costly and
time-consuming  procedures.  Satisfaction of these requirements,  which includes
demonstrating  to the  satisfaction of the FDA and foreign  regulatory  agencies
that the product is both safe and  effective,  typically  takes several years or
more depending upon the type,  complexity and novelty of the product.  There can
be no  assurance  that  such  testing  will  show  any  product  to be  safe  or
efficacious  or,  in the  case  of  certain  of  Genta  Jago's  products,  to be
bioequivalent to a currently marketed pharmaceutical. Government regulation also
affects the manufacture and marketing of pharmaceutical  products. The effect of
government  regulation  may be to  delay  marketing  of any new  products  for a
considerable or indefinite  period of time, to impose costly procedures upon the
Company's or Genta Jago's  activities and to diminish any competitive  advantage
that the Company or Genta Jago may attain.  It may take years  before  marketing
approvals  are obtained for the Company's or Genta Jago's  products,  if at all.
There can be no assurance that FDA or other regulatory approval for any products
developed by the Company or Genta Jago will be granted on a timely basis,  if at
all, or, if granted,  that such approval will cover all the clinical indications
for which the  Company  or Genta Jago is seeking  approval  or will not  sustain
significant   limitations   in   the   form   of   warnings,    precautions   or
contraindications  with respect to conditions of use.  Further,  with respect to
the reformulated versions of currently available pharmaceuticals being developed
through  Genta  Jago,  there is a  substantial  risk that the  manufacturers  or
marketers  of such  currently  available  pharmaceuticals  will seek to delay or
block regulatory approval of any reformulated  versions of such  pharmaceuticals
through  litigation  or other means.  Any  significant  delay in  obtaining,  or
failure to obtain, such approvals would materially  adversely affect the Company
and Genta Jago's revenue. Moreover, additional government regulation from future
legislation or  administrative  action may be established which could prevent or
delay  regulatory  approval of the Company's or Genta Jago's products or further
regulate the prices at which the Company's or Genta Jago's proposed products may
be sold.

         The  Company is also  subject to various  foreign,  federal,  state and
local laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing  practices, the experimental use of animals and the
use,  manufacture,  storage,  handling and disposal of hazardous or  potentially
hazardous  substances,  including  radioactive  compounds and infectious disease
agents,  used in connection with the Company's research and development work and
manufacturing processes.  Although the Company believes it is in compliance with
these laws and regulations in all material  respects  (except as disclosed under
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operations -- Liquidity and Capital Resources"),  there can be no assurance that
the Company will not be required to incur  significant costs to comply with such
regulations in the future.

         Uncertainty Regarding Patents and Proprietary Technology. The Company's
and Genta Jago's success will depend, in part, on their respective  abilities to
obtain  patents,  maintain  trade  secrets and operate  without  infringing  the
proprietary  rights of others.  No assurance can be given that patents issued to
or licensed by the Company or Genta Jago will not be challenged,  invalidated or
circumvented,  or that the rights granted  thereunder  will provide  competitive
advantages  to the Company or Genta  Jago.  There can be no  assurance  that the
Company's or Genta Jago's patent applications will be approved, that the Company
or Genta Jago will develop  additional  products that are  patentable,  that any
issued  patent  will  provide  the  Company or Genta  Jago with any  competitive
advantage or adequate protection for its inventions or will not be challenged by
others,  or that the  patents of others  will not have an adverse  effect on the
ability of the Company or Genta Jago to do business.  Competitors may have filed
applications,  may have been issued patents or may obtain additional patents and
proprietary  rights relating to products or processes  competitive with those of
the Company or Genta Jago.  Furthermore,  there can be no assurance  that others
will not independently develop similar products,  duplicate any of the Company's
or Genta Jago's products or design around any patented products developed by the
Company or Genta  Jago.  The  Company  and Genta Jago rely on secrecy to protect
technology in addition to patent protection,  especially where patent protection
is not believed to be appropriate or obtainable.  No assurance can be given that
others  will not  independently  develop  substantially  equivalent  proprietary
information and techniques or otherwise gain access to

                                       18





the Company's or Genta Jago's trade  secrets,  or that the Company or Genta Jago
can effectively protect is rights to its unpatented trade secrets.

         Genta and Genta Jago have obtained  licenses or other rights to patents
and other  proprietary  rights of third  parties,  and may be required to obtain
licenses to additional patents or other proprietary rights of third parties.  No
assurance  can be given that any existing  licenses and other rights will remain
in effect or that any licenses  required  under any such  additional  patents or
proprietary rights would be made available on terms acceptable to the Company or
Genta Jago, if at all. If Genta's or Genta Jago's  licenses and other rights are
terminated  or if Genta or Genta Jago cannot  obtain such  additional  licenses,
Genta or Genta Jago could encounter delays in product market introductions while
it attempts to design  around such  patents or could find that the  development,
manufacture or sale of products requiring such licenses could be foreclosed.  In
addition,  the Company or Genta Jago could incur  substantial  costs,  including
costs caused by delays in obtaining regulatory approval and bringing products to
market,  in defending  itself in any suits brought  against the Company or Genta
Jago claiming infringement of the patent rights of third parties or in asserting
the Company's or Genta Jago's patent  rights,  including  those granted by third
parties,  in a suit against  another  party.  The Company or Genta Jago may also
become involved in interference proceedings declared by the United States Patent
Office in  connection  with one or more of its  patents or patent  applications,
which could result in substantial  cost to the Company or Genta Jago, as well as
an  adverse  decision  as to  priority  of  invention  of the  patent  or patent
application  involved.  There can be no assurance that the Company or Genta Jago
will have  sufficient  funds to obtain,  maintain  or  enforce  patents on their
respective  products or technology,  to obtain or maintain  licenses that may be
required in order to develop and  commercialize  their respective  products,  to
contest patents obtained by third parties, or to defend against suits brought by
third parties.

         Dependence  on  Others.   The  Company's  strategy  for  the  research,
development  and  commercialization  of certain of its or Genta Jago's  products
requires  negotiating,  entering into and maintaining various  arrangements with
corporate collaborators,  licensors, licensees and others, and is dependent upon
the   subsequent   success  of  these  outside   parties  in  performing   their
responsibilities.  The Company's agreement with Procter & Gamble represented the
Company's  primary  source  of  collaborative  revenues  during  1995  and  such
agreement   ended  in  September   1995.   Genta  Jago  is  seeking   additional
collaborative  arrangements  to  develop  and  commercialize  certain  of  their
respective products.  However, there can be no assurance that Genta Jago will be
able to negotiate collaborative arrangements on acceptable terms, if at all.

         Technology  Licensed From Third  Parties.  The Company has entered into
certain  agreements  with, and licensed  certain  technology and compounds from,
third  parties.  The  Company  has relied on  scientific,  technical,  clinical,
commercial  and other data  supplied and  disclosed  by others in entering  into
these  agreements,  including the Genta Jago  agreements,  and will rely on such
data in support of development of certain products.  Although the Company has no
reason to believe  that this  information  contains  errors of omission or fact,
there can be no  assurance  that  there are no errors of  omission  or fact that
would  materially  affect the future  approvability  or commercial  viability of
these products.

         Competition.  The Company and Genta Jago have numerous  competitors  in
the United States and other  countries  for their  respective  technologies  and
products under  development,  including among others,  major  pharmaceutical and
chemical  companies,  specialized  biotechnology  firms,  universities and other
research  institutions.  There can be no assurance  that the  Company's or Genta
Jago's  competitors  will not  succeed in  developing  products  or other  novel
technologies  that are more  effective  than any  which  have  been or are being
developed  by the Company or Genta Jago or which would  render the  Company's or
Genta Jago's technology and products non-competitive.  Many of the Company's and
Genta  Jago's  competitors  have  substantially  greater  financial,  technical,
marketing and human resources than the Company or Genta Jago. In addition,  many
of those competitors have  significantly  greater experience than the Company or
Genta Jago in undertaking  preclinical  testing and human clinical trials of new
pharmaceutical  products and  obtaining  FDA and other  regulatory  approvals of
products  for use in  healthcare.  Accordingly,  the  Company's  or Genta Jago's
competitors  may succeed in obtaining  regulatory  approval  for  products  more
rapidly  than the  Company or Genta  Jago and such  competitors  may  succeed in
delaying or blocking  regulatory  approvals  of the  Company's  or Genta  Jago's
products.  Furthermore,  if the Company or Genta Jago is  permitted  to commence
commercial  sales  of  products,  it will  also be  competing  with  respect  to
marketing  capabilities,  an area in which it has limited or no experience,  and
manufacturing  efficiency.  There are many public and private companies that are
conducting research and development activities based on drug delivery

                                       19





and antisense technologies. The Company believes that the industry-wide interest
in such  technologies  will  accelerate  and  competition  will intensify as the
techniques which permit drug design and development  based on such  technologies
are more widely understood.

         Difficult  Manufacturing  Requirements.  The  manufacture  of  Anticode
oligonucleotides  is a time-consuming and complex process.  Management  believes
that  the  Company  has  the  ability  to  acquire  or  produce   quantities  of
oligonucleotides  sufficient  to support its present  needs for research and its
projected needs for its initial clinical development  programs.  However,  Genta
believes that improvements in its  manufacturing  technology will be required to
enable the Company to meet the volume and cost  requirements  needed for certain
commercial  applications  of Anticode  products.  Products  based on  chemically
modified  oligonucleotides  have never been  manufactured on a commercial scale.
The  manufacture  of all of the  Company's  and Genta  Jago's  products  will be
subject to current GMP  requirements  prescribed  by the FDA or other  standards
prescribed by the appropriate regulatory agency in the country of use. There can
be no  assurance  that the  Company  or Genta  Jago will be able to  manufacture
products,  or  have  products  manufactured  for  it,  in a  timely  fashion  at
acceptable quality and prices, that they or third party manufacturers can comply
with GMP or that they or third party  manufacturers  will be able to manufacture
an adequate supply of product.

         Limited Sales, Marketing and Distribution  Experience.  The Company and
Genta Jago have very limited experience in pharmaceutical  sales,  marketing and
distribution. In order to market and sell certain products directly, The Company
or Genta Jago would have to develop or subcontract a sales force and a marketing
group with technical expertise.  There can be no assurance that any direct sales
or marketing efforts would be successful.

         Uncertainty of Product Pricing,  Reimbursement and Related Matters. The
Company's and Genta Jago's business may be materially  adversely affected by the
continuing  efforts of governmental  and third party payers to contain or reduce
the costs of healthcare  through various means. For example,  in certain foreign
markets  the  pricing or  profitability  of  healthcare  products  is subject to
government  control.  In the United  States,  there have been,  and the  Company
expects that there will continue to be, a number of federal and state  proposals
to implement  similar  governmental  control.  While the Company  cannot predict
whether any such legislative or regulatory proposals or reforms will be adopted,
the  adoption  of any  such  proposal  or  reform  could  adversely  affect  the
commercial  viability of the Company's and Genta Jago's potential  products.  In
addition, in both the United States and elsewhere,  sales of healthcare products
are dependent in part on the  availability of reimbursement to the consumer from
third party payers,  such as government and private insurance plans. Third party
payers are increasingly  challenging the prices charged for medical products and
services and therefore,  significant  uncertainty exists as to the reimbursement
of existing and newly approved healthcare products. If the Company or Genta Jago
succeeds  in  bringing  one or more  products  to the  market,  there  can be no
assurance  that  these  products  will be  considered  cost  effective  and that
reimbursement  to the consumer  will be available or will be sufficient to allow
the Company or Genta Jago to sell its products on a competitive basis.

         Dependence  on Qualified  Personnel.  The  Company's  success is highly
dependent on the retention of principal members of its management and scientific
staff and the  recruitment  of  additional  key  personnel.  As the  Company has
already  fallen below critical mass, the loss of additional key personnel or the
failure to recruit necessary  additional  personnel does and will further impede
the  achievement of development  objectives.  There is intense  competition  for
qualified personnel in the areas of the Company's  activities,  and there can be
no  assurance  that Genta  will be able to  continue  to attract  and retain the
qualified personnel necessary for the development of its business.

         Product Liability Exposure;  Limited Insurance Coverage. The Company's,
JBL's and Genta Jago's  businesses  expose them to potential  product  liability
risks which are inherent in the testing,  manufacturing,  marketing  and sale of
human therapeutic  products.  If available,  product liability insurance for the
pharmaceutical industry generally is expensive. The Company has obtained a level
of liability insurance coverage which it deems appropriate for its current stage
of development.  However,  there can be no assurance that the Company's  present
insurance  coverage is adequate.  Such existing  coverage may not be adequate as
the Company further develops products, and no assurance can be given that in the
future adequate insurance coverage will be available in sufficient

                                       20





amounts or at a reasonable  cost,  or that a product  liability  claim would not
have a material  adverse  effect on the business or  financial  condition of the
Company.

         Hazardous Materials;  Environmental Matters. The Company's research and
development and manufacturing  processes involve the controlled storage, use and
disposal of hazardous materials,  biological hazardous materials and radioactive
compounds.  The  Company  is  subject  to  federal,  state  and  local  laws and
regulations  governing the use, manufacture,  storage,  handling and disposal of
such materials and certain waste  products.  Although the Company  believes that
its safety  procedures for handling and disposing of such materials  comply with
the standards  prescribed by such laws and  regulations,  the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an  accident,  the  Company may be held liable for any damages
that result,  and any such liability  could exceed the resources of the Company.
There  can be no  assurance  that  the  Company  will not be  required  to incur
significant  costs to comply  with  environmental  laws and  regulations  in the
future,  nor that the operations,  business or assets of the Company will not be
materially  adversely  affected  by  current  or  future  environmental  laws of
regulations.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operation -- Liquidity and Capital Resources."

         Volatility  of Stock Price.  The market price of the  Company's  common
stock, like that of the common stock of many other biopharmaceutical  companies,
has been highly volatile. Factors such as the results of preclinical studies and
clinical trials by Genta, Genta Jago or their competitors, other evidence of the
safety or  efficacy  of  products  of Genta,  Genta  Jago or their  competitors,
announcements  of technological  innovations or new therapeutic  products by the
Company, Genta Jago or their competitors,  governmental regulation, developments
in  patent  or other  proprietary  rights  of the  Company  or its  competitors,
including  litigation,  fluctuations  in the Company's  operating  results,  and
market  conditions  for  biopharmaceutical   stocks  in  general  could  have  a
significant  impact on the future price of the common  stock.  On March 2, 1997,
the Company had 39,991,626 shares of common stock  outstanding.  Future sales of
shares of common stock by existing  stockholders  and option  holders also could
adversely affect the market price of the common stock.

         Concentration of Ownership. The Company's directors, executive officers
and principal  stockholders  and certain of their affiliates have the ability to
influence  the election of the Company's  directors  and most other  stockholder
actions.

         Possible  Nonpayment  of  Dividends  on Series A and Series C Preferred
Stock;  Deficiency  in Fixed  Charges and  Preferred  Stock  Dividend  Coverage.
Dividends  will be payable on the  Series A and  Series C  Preferred  Stock only
when,  as and if  declared by the  Company's  Board of  Directors,  out of funds
legally available therefor. The Company has incurred losses and, thus, has had a
deficiency  in  fixed  charges  and  preferred  stock  dividend  coverage  since
inception.  For the fiscal years ended December 31, 1991, 1992, 1993, 1994, 1995
and 1996 the coverage  deficiency  was  approximately  $9,486,000,  $16,703,000,
$16,189,000,  $25,998,000,  $27,917,000 and $13,950,000 respectively.  While the
Company  intends to pay dividends on the Series A and Series C Preferred  Stock,
it is  anticipated  that the Company will continue to incur losses and thus will
continue to have a deficiency  in fixed  charges and  preferred  stock  dividend
coverage.  Dividends  on the Series A and Series C  Preferred  Stock may be paid
only  out of  capital  surplus  (within  the  meaning  of the  Delaware  General
Corporation  Law) or net profits of the Company for the fiscal year in which the
dividend is declared and the preceding fiscal year.

         Effect of Certain  Anti-Takeover  Provisions.  The  Company's  Restated
Certificate of Incorporation and Bylaws include provisions that could discourage
potential  takeover  attempts  and  make  attempts  by  stockholders  to  change
management more difficult. The approval of 66-2/3% of the Company's voting stock
is required to approve  certain  transactions  and to take  certain  stockholder
actions,  including  the calling of a special  meeting of  stockholders  and the
amendment of any of the  anti-takeover  provisions  contained  in the  Company's
Restated  Certificate of  Incorporation.  Further,  pursuant to the terms of its
stockholder  rights plan adopted in December 1993, the Company has distributed a
dividend of one right for each outstanding  share of common stock.  These rights
will cause a substantial  dilution to a person or group that attempts to acquire
the  Company on terms not  approved by the Board of  Directors  and may have the
effect of deterring hostile takeover  attempts.  The stockholder rights plan was
amended to permit the  consummation  of the  transactions  with the Aries  Funds
described under Item 5(d) of this Annual Report on Form 10-K.


                                       21





Item 2.  Properties

         Genta's principal  administrative offices and research laboratories are
located in San Diego, California where the Company occupies approximately 15,000
square feet. The Company's lease for these premises  expired in November,  1996,
and the Company is currently renting on a month-to-month  basis at the same rate
of $30,076 per month.  The Company  believes this space will be adequate for its
activities through 1997.

         JBL,  the  Company's  manufacturing  subsidiary,  leases  and  occupies
approximately  30,000 square feet of office,  laboratory and manufacturing space
in San Luis Obispo, California.  This lease expires in 2000. The lease calls for
rent of  approximately  $306,000  in 1997,  with  amounts  generally  increasing
annually  thereafter to reflect cost of living  related  increases.  The Company
currently uses substantially all of the manufacturing capacity of this facility.
The Company believes that such space will be adequate for its planned operations
through 1997.  The Company also has an option to purchase  property  adjacent to
this facility,  for expansion,  if necessary. A director and officer and another
officer of the Company, Drs. Klem and Brown,  respectively,  are affiliated with
the owners of the leased and adjacent properties.

         Genta Pharmaceuticals  Europe, S.A., the Company's European subsidiary,
leases approximately 10,000 square feet of office,  laboratory and manufacturing
space in  Marseilles,  France.  The lease is  cancelable  in 2003 and expires in
2005. The lease calls for rent of  approximately  $99,000 in 1997,  with amounts
generally  increasing  annually  thereafter  to reflect  cost of living  related
increases.

Item 3.  Legal Proceedings

         (a)  On   February  5,  1997,   Equity-Linked   Investors,   L.P.   and
         Equity-Linked Investors-II  (collectively,  the "Plaintiffs") who, as a
         group,  may be deemd to beneficially  own more than five percent of the
         outstanding  shares  of the  Common  Stock of the  Company  as Series A
         preferred  stockholders,  filed suit (the "Suit") in the Delaware Court
         of Chancery  (the "Court")  against the Company,  each of the Company's
         directors  and the Aries  Funds  (as  hereinafter  defined  in Item 5).
         Through the Suit, the Plaintiffs are seeking to enjoin the transactions
         contemplated   by  The  Note  and  Warrant   Purchase   Agreement  (the
         "Transactions"),  rescission  of the  Transactions,  damages,  attorney
         fees,  and such other and further relief as the Court may deem just and
         proper.  The Suit  alleges  that the Board of  Directors of the Company
         breached fiduciary duties by failing to consider financing alternatives
         to the Transactions and further alleges that the Transactions  were not
         in the  best  interests  of the  stockholders.  Additionally,  the Suit
         alleges that the Aries Funds aided and abetted such breach of fiduciary
         duty through their participation in the Transactions. On March 4 and 5,
         1997, a trial was held before the Court.  The Court has  established  a
         briefing  schedule and set a hearing for post-trial  arguments on April
         1, 1997. The Company believes that the lawsuit is without merit.

         (b) No material legal proceedings were terminated in the quarter ending
         December 31, 1996.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were submitted to a vote of security  holders in the quarter
ended December 31, 1996.


                                       22





Executive Officers of the Registrant

The executive officers of the Company are as follows:



                Name                                 Age                    Position

                                                           
Thomas H. Adams, Ph.D...........................     54      Chairman of the Board, Chief Executive Officer
                                                             and Director

Lauren R. Brown, Ph.D...........................     54      Vice President, President of JBL

Zofia E. Dziewanowska, Ph.D., M.D...............     57      Senior Vice President, Global Clinical Affairs

Robert E. Klem, Ph.D............................     52      Vice President, Director, and Chairman of the
                                                             Board of JBL

Guy Van de Winckel..............................     55      Vice President, European Operations

Robert Wang, Ph.D...............................     49      Vice President, Pharmaceutical Operations



         Dr.  Adams was the founder of Genta and has been  Chairman of the Board
and Chief Executive  Officer of Genta since February 1989. He previously  served
as  Chairman  of the Board and Chief  Executive  Officer of  GenProbe,  which he
co-founded in 1984. Prior to joining Gen-Probe,  he held the positions of Senior
Vice  President  of  Research  &  Development  and Chief  Technical  Officer  at
Hybritech  Incorporated  ("Hybritech"),  a leading monoclonal  antibody products
company which was acquired by Eli Lilly and Company in 1986.  He had  previously
held senior scientific  management  positions with Technicon  Instruments Corp.,
the Hyland Laboratories Division of Baxter Travenol,  and DuPont. Dr. Adams is a
director of Life Technologies,  Inc., and three private  biotechnology firms. He
received  his  Ph.D.  in  Biochemistry  from the  University  of  California  at
Riverside.

         Dr. Brown has been Vice President of the Company since October 1991. He
co-founded JBL in 1973 and, since then, has been President of JBL the subsidiary
that Genta acquired in February 1991. He has had  significant  experience in the
scale-up of a wide variety of  processes,  including  many custom  syntheses for
outside  companies  under  GMP  standards.  In  the  past,  he has  also  shared
responsibilities for the research program at JBL, and he developed the syntheses
for many of JBL's  products.  Dr. Brown received his Ph.D. in Organic  Chemistry
from the University of California at Riverside.

         Dr.  Dziewanowska  joined the Company as Senior Vice President,  Global
Clinical Affairs in May 1994. Prior to joining Genta, Dr.  Dziewanowska spent 17
years at Hoffmann-La  Roche Inc. in various  research and development  positions
including,   most  recently,   Vice  President  and  Director  of  International
Therapeutic  Research and Medical Affairs Advisor. Dr. Dziewanowska is currently
holding a faculty appointment at the Cornell University Medical School. She also
has held various  positions  in the  Pharmaceutical  Research and  Manufacturers
Association  of America,  the most recent being a  Vice-Chairman  of the Medical
Section Steering Committee,  American  Association of Pharmaceutical  Physicians
and the  International  Federation of  Pharmaceutical  Medicine.  Before joining
Hoffmann-La Roche, Dr.  Dziewanowska  worked four years as associate director of
international  clinical pharmacology at Merck, Sharp & Dohme Laboratories and as
a visiting associate  physician in the Department of Pharmacology at Rockefeller
University  in New York.  She  received an M.D.  degree from the  University  of
Warsaw Medical School and a Ph.D. in physiology from the Institute of Immunology
and Experimental Therapeutics, Polish Academy of Science. Her medical degree was
recertified  in England and the United States She has been invited to speak on a
variety of United States and  International  Conferences  pertaining to clinical
drug research and development, and she is listed in "Who's Who."

         Dr. Klem has been a director of the Company  since  February 1991 and a
Vice  President of the Company since October 1991.  Dr. Klem  co-founded  JBL in
1973 and, since then, has been Chairman of the Board and Chief


                                       23



Technical  Officer of JBL with  responsibility  for  research,  development  and
marketing activities. Previously, Dr. Klem was the Plant Manager for E.I. DuPont
in Victoria,  Texas from 1970 to 1974.  Dr. Klem  received his Ph.D.  in Organic
Chemistry from the University of California at Riverside.

         Mr. Van de Winckel has been President of Genta Pharmaceuticals  Europe,
S.A.  since its  incorporation  in  November  1993 and has been Vice  President,
European Operations of the Company since December 1992. From 1987 until December
1992, Mr. Van de Winckel was an independent  consultant for healthcare companies
in Europe  and the  United  States,  specializing  in  marketing  and  financial
strategies.  From  1981  until  1986,  Mr.  Van de  Winckel  was Vice  President
International  and Co-President of Hybritech  Europe. He previously held various
management positions with Baxter Travenol, including Vice President of Marketing
with the Hyland Laboratories  Division and Director of Marketing  International.
Mr.  Van de  Winckel  received  a  degree  in  international  business  from the
University of Louvain, Belgium.

         Dr.  Wang has been Vice  President,  Pharmaceutical  Operations  of the
Company since July 1995.  From  September  1993 through June 1995,  Dr. Wang was
Vice  President,  Corporate  Operations  of the Company.  From the time Dr. Wang
joined Genta in February 1989 to September  1993,  Dr. Wang was Vice  President,
Process  Development  of the  Company.  From  1986 to  1988,  Dr.  Wang was Vice
President of Development at Gen-Probe where he had technical  responsibility for
developing and implementing a novel nonisotopic DNA probe assay system. Prior to
joining  Gen-Probe,  Dr.  Wang was Senior  Director of Process  Development  and
Manufacturing   at   Hybritech,   where  he  had  overall   responsibility   for
manufacturing,  process  development and clinical support for all manufacturing.
Dr. Wang also held senior scientific positions at Calbiochem-Behring Diagnostics
and International  Diagnostic Technology.  He received his Ph.D. in Biochemistry
from the University of California at Riverside and was a post-doctoral fellow at
Scripps Clinic and Research Foundation.



                                       24





                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters


(a)      Market Information

         Throughout 1995 and 1996, the Company's  common stock was traded on the
         Nasdaq National Market under the symbol "GNTA". However, as of February
         7, 1997 the  Company's  common  stock  trades  in the  over-the-counter
         market on the Nasdaq  SmallCap  Market  under the symbol  "GNTAC"  (see
         "Risk Factors - Threat of Nasdaq Delisting").  The following table sets
         forth, for the periods indicated, the high and low sales prices for the
         common stock as reported by Nasdaq.


                                                             High        Low


         1995
           First Quarter................................      $ 6 1/2    3 3/4
           Second Quarter...............................      3 1/2      1 3/4
           Third Quarter................................      3 1/2      1 3/8
           Fourth Quarter...............................      2 7/8      1 1/2

         1996
           First Quarter................................      2 15/16    1 7/8
           Second Quarter...............................      2 7/8      1 7/16
           Third Quarter................................      2          7/16
           Fourth Quarter...............................      1 1/2      9/32



(b)      Holders

         There were 424 holders of record of the  Company's  common  stock as of
         March 1, 1997.

(c)      Dividends

         The Company has never paid cash  dividends on its common stock and does
         not anticipate paying any such dividends in the foreseeable  future. In
         addition,  the Company is restricted  from paying cash dividends on its
         common stock until such time as all cumulative dividends have been paid
         on  outstanding  shares  of  its  Series  A and  Series  C  convertible
         preferred stocks. The Company currently intends to retain its earnings,
         if any,  after payment of dividends on  outstanding  shares of Series A
         and Series C convertible  preferred  stock,  for the development of its
         business.  See  "Management's  Discussion  and  Analysis  of  Financial
         Condition   and  Results  of   Operations   --  Liquidity  and  Capital
         Resources".

(d)      Recent Sale of Unregistered Securities

         In February, 1997, the Company raised gross proceeds of $3 million in a
         private placement,  to the Aries Fund and the Aries Domestic Fund, L.P.
         (collectively the "Aries Funds"),  of Convertible Notes and warrants to
         purchase 20 million  shares of common stock  ("Bridge  Warrants").  The
         Convertible  Notes are  initially  convertible  into 600,000  shares of
         Series D preferred stock, which in turn are convertible into 20 million
         shares of common stock. Bridge Warrants on 7.8 million shares of common
         stock have an  exercise  price of $.001 per share.  Bridge  Warrants on
         12.2 million  shares of common stock have an exercise price of $.55 per
         share.  Further,  upon the occurrence of certain events of default,  if
         elected  by  the  holders,  up to  $300,000  principal  amount  of  the
         Convertible  Notes is  convertible  into common  stock at a  conversion
         price of $.001 per share.  Each Bridge Warrant is  convertible,  at the
         option of the holder, into a new

                                       25





         Warrant  entitling such holder to purchase one share of common stock at
         an exercise  price of $0.15 per share or, under certain  circumstances,
         if lower than $0.15 per  share,  50% of the market  price of the common
         stock.  Pursuant to the Note and Warrant Purchase Agreement dated as of
         January 28, 1997 between the Company and the Aries Funds (the "Note and
         Warrant Purchase Agreement"), the Aries Funds have the right to appoint
         a majority of the  members of the Board of  Directors  of the  Company;
         provided, however, that in the event the Company does not obtain Future
         Financings (as defined in the Note and Warrant  Purchase  Agreement) in
         excess of $3.5  million on or before the date which is six months after
         the Bridge Closing Date referred to in such  agreement,  then the Aries
         Funds shall have the contractual right to appoint only two directors or
         observers  and,  if at such  time,  more than two  directors  have been
         appointed  by the  Aries  Funds,  the  additional  directors  shall  be
         required  to  resign.  As of March 14,  1997,  the Aries  Funds had not
         exercised their right to appoint any directors or observers.


                                       26





Item 6.    Selected Consolidated Financial Data

     The following  table sets forth certain  consolidated  financial  data with
respect to the Company. The selected consolidated  financial data should be read
in conjunction with the consolidated financial statements and related
notes thereto.



                                                                         YEARS ENDED DECEMBER 31,
                                                      -----------------------------------------------------------------------------
                                                          1996             1995          1994             1993           1992
                                                          ----             ----          ----             ----           ----
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:                       (In thousands, except per share amounts)
   Revenues:
                                                                                                                 
      Product sales                                         $4,925           $3,782         $3,574           $3,263         $2,272 
      Gain on sale of technology                               373               -              -                -             -
      Collaborative research and development                     -            1,125          3,141            4,733          3,546 
                                                      -------------    -------------   ------------    -------------  -------------
                                                             5,298            4,907          6,715            7,996          5,818 
                                                      -------------    -------------   ------------    -------------  -------------
   Costs and expenses:
      Cost of products sold                                  2,479            1,899          1,710            1,593          1,502 
      Research and development                               5,834           11,277         13,533           12,117         10,743 
      Charge for acquired in-process research and
         development                                             -            4,762          1,850                -          7,200 
      Selling, general and administrative                    5,639            5,439          6,376            5,140          4,221 
                                                      -------------    -------------   ------------    -------------  -------------
                                                            13,952           23,377         23,469           18,850         23,666 
                                                      -------------    -------------   ------------    -------------  -------------
   Loss from operations                                    (8,654)         (18,470)       (16,754)         (10,854)       (17,848) 
   Equity in net loss of joint venture                     (2,712)          (6,913)        (7,425)          (5,310)              - 
   Other income, net                                          (59)               17            731              646          1,145 
                                                      -------------    -------------   ------------    -------------  -------------
   Net loss                                              $(11,425)        $(25,366)      $(23,448)        $(15,518)      $(16,703) 
   Dividends on preferred stock                            (2,525)          (2,551)        (2,550)            (671)              - 
                                                      -------------    -------------   ------------    -------------  -------------
   Net loss applicable to common shares                  $(13,950)        $(27,917)      $(25,998)        $(16,189)      $(16,703) 
                                                      =============    =============   ============    =============  =============
   Net loss per common share(1)                            $(0.47)          $(1.43)        $(1.90)          $(1.19)        $(1.34) 
                                                      =============    =============   ============    =============  =============
   Shares used in the calculation of net loss per
      common share                                          29,834           19,519         13,710           13,621         12,450 
                                                      =============    =============   ============    =============  =============
   Deficiency of earnings to meet combined fixed
      charges and preferred stock dividends(2)           $(13,950)        $(27,917)      $(25,998)        $(16,189)      $(16,703) 
                                                      =============    =============   ============    =============  =============






                                                                                 DECEMBER 31,
                                                      -----------------------------------------------------------------------------
                                                          1996             1995           1994             1993          1992      
                                                          ----             ----           ----             ----          ----      
CONSOLIDATED BALANCE SHEETS DATA:                                                      (In thousands)
                                                                                                                 
   Cash, cash equivalents and short-term
      investments                                             $532             $272         $11,103          $34,594        $26,356 
   Working capital (deficit)                               (1,954)          (1,580)           5,597           30,524         21,530 
   Total assets                                             11,169           15,631          23,908           45,486         34,618 
   Notes payable and capital lease obligations,
      less current portion                                   1,160            2,334           1,871            1,651          1,409 
   Total stockholders' equity                                4,074            6,972          14,076           38,064         26,664 




(1)  Computed on the basis of net loss per common  share  described in Note 1 of
Notes to Consolidated Financial Statements.

(2) The Company  has incurred losses  and, thus,  has  had a deficiency in fixed
charges and preferred stock dividend coverage since inception.


                                       27





Item 7.  Management's Discussion and Analysis of Financial Condition and Results
 of Operations

Overview

         Since its inception in February  1988,  Genta has devoted its principal
efforts  toward  drug  discovery,  research  and  development.  Genta  has  been
unprofitable  to  date  and,  even  if it  obtains  financing  to  continue  its
operations,  expects to incur substantial  operating losses for the next several
years  due to  continued  requirements  for  ongoing  research  and  development
activities,  preclinical testing and clinical trials,  manufacturing activities,
regulatory activities,  establishment of a sales and marketing organization, and
development  activities  undertaken by Genta Jago,  the Company's  joint venture
with  Jagotec.  From the period since its  inception  to December 31, 1996,  the
Company has incurred a cumulative  net loss of $108.4  million.  The Company has
experienced  significant  quarterly  fluctuations  in  operating  results and it
expects that these fluctuations in revenues, expenses and losses will continue.
See "Risk Factors."

         The  statements  contained in this Annual  Report on Form 10-K that are
not historical are forward-looking  statements within the meaning of Section 27A
of the  Securities  Act of 1933, as amended,  and Section 21E of the  Securities
Exchange  Act  of  1934,  as  amended,   including   statements   regarding  the
expectations,  beliefs,  intentions  or  strategies  regarding  the future.  The
Company intends that all forward-looking statements be subject to the safeharbor
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995.  These
forward-looking  statements  reflect the Company's views as of the date they are
made with respect to future events and financial performance, but are subject to
many  risks and  uncertainties,  which  could  cause the  actual  results of the
Company to differ  materially  from any future  results  expressed or implied by
such  forward-looking  statements.  Examples  of such  risks  and  uncertainties
include,  but are not limited to, obtaining sufficient financing to maintain the
Company's  planned  operations,  the timely  development,  receipt of  necessary
regulatory approvals and acceptance of new products,  the successful application
of  the  Company's  technology  to  produce  new  products,   the  obtaining  of
proprietary  protection  for any such  technology  and  products,  the impact of
competitive  products and pricing and  reimbursement  policies,  changing market
conditions  and the other  risks  detailed in the Risk  Factors  section of this
Annual Report on Form 10-K and elsewhere herein.  The Company does not undertake
to update any forward-looking statements.

Results of Operations

         Operating  revenues  totaled  $5.3  million  in 1996  compared  to $4.9
million  in 1995 and $6.7  million  in 1994.  Sales of  specialty  chemical  and
pharmaceutical intermediate products increased to $4.9 million in 1996 from $3.8
million in 1995 and $3.6 million in 1994. Collaborative research and development
revenues  were zero,  $1.1  million  and $3.1  million  in 1996,  1995 and 1994,
respectively.  Collaborative  research and development revenues recorded in 1995
represented  revenues  earned pursuant to the Company's  collaboration  with The
Procter & Gamble Company which ended in late 1995.

         Sales of specialty  chemical and pharmaceutical  intermediate  products
increased  each year primarily due to increased  market  penetration of existing
products  and,  to a  lesser  degree,  the  introduction  of new  products.  One
customer, a European  distributor,  accounted for approximately 27%, 21% and 19%
of product  sales  during the years  ended  December  31,  1996,  1995 and 1994,
respectively.  One other  customer  accounted for  approximately  16% and 12% of
product sales during the years ended  December 31, 1995 and 1994,  respectively,
while another  customer  comprised 18% of 1994 product sales.  No other customer
accounted for more than 8% of product sales in 1996. Management does not believe
the  loss of any one  customer  would  have a  material  adverse  affect  on the
Company's  business  as  a  whole.  The  Company  has  historically  experienced
significant  quarterly  fluctuations  in its level of product  sales,  generally
reflecting the timing and degree of customer  demand for certain  products,  and
the Company  anticipates that these sales  fluctuations  will continue in future
periods.

         Costs and  expenses  totaled  $14  million  in 1996  compared  to $23.4
million in 1995 and $23.5 million in 1994. Included in costs and expenses during
1995 and 1994 were charges for  acquired  in-process  research  and  development
totaling  $4.8  million  and $1.9  million,  respectively,  associated  with the
expansion of Genta Jago to obtain rights to develop  additional  GEOMATRIX-based
products. Exclusive of these charges, the Company's costs and expenses decreased
by  approximately  $4.7 million in 1996 relative to 1995  primarily due to lower
research  and  development   expenses  largely  attributable  to  the  Company's
restructuring and related workforce reductions

                                       28





implemented in 1995 and 1996. These savings in operating expenses were partially
offset by an  aggregate  of  approximately  $850,000  in  non-recurring  charges
recorded during 1996 primarily  related to the Company's  restructuring and work
force reductions. As a result of the aforementioned restructuring and other cost
savings  measures  implemented  during 1995 and 1996,  the  Company  anticipates
further  reductions in the level of its operating  expenses during 1997 relative
to 1996.  However,  the Company  anticipates  that, if sufficient  collaborative
revenues and other funding is available,  research and development  expenses may
increase in future years due to requirements for preclinical  studies,  clinical
trials and increased  regulatory  costs. The Company also anticipates that costs
associated with Anticode marketing activities, if such products are successfully
developed and approved for marketing,  would be the  responsibility of corporate
partners.

         The Company's  equity in net loss of joint venture totaled $2.7 million
in 1996 compared to $6.9 million in 1995 and $7.4 million in 1994.  The decrease
in the Company's  share of Genta Jago's net loss during 1996 relative to 1995 is
largely  attributable  to the fact  that  development  efforts  are now  focused
exclusively  on  GEOMATRIX-based  products and a greater  portion of development
activities  were funded pursuant to Genta Jago's  collaborative  agreements with
third parties.

         Interest  income  has  fluctuated   significantly   each  year  and  is
anticipated  to continue to fluctuate  primarily due to changes in the levels of
cash, investments and interest rates each period.

Liquidity and Capital Resources

         Since inception, the Company has financed its operations primarily from
private and public offerings of its equity securities.  Cash provided from these
offerings  totaled  approximately  $95.4  million  through  December  31,  1996,
including net proceeds of $8.4 million raised during 1996. At December 31, 1996,
the Company had cash,  cash  equivalents  and  short-term  investments  totaling
$532,000  compared to $272,000 at December  31,  1995.  The increase in cash and
cash  equivalents  during  1996 is largely  attributable  to  proceeds  from the
Company's  private  placements,  as  described  in  footnote 8 to the  Company's
consolidated financial statements.

         The Company anticipates that its existing capital resources,  including
$3 million in financing  obtained from the issuance of the Convertible  Notes in
February  1997,  will  enable the  Company to  maintain  its  presently  planned
operations until July, 1997. Management believes that a minimum of approximately
$6.4 million of additional  financing  will be required to sustain the Company's
presently-planned  operations  through  the  end  of  1997  and to  satisfy  the
Company's   obligations   under  the  Convertible   Notes  and  the  Convertible
Debentures.  The Company has been informed,  however, that its common stock will
be delisted  from the Nasdaq  SmallCap  Market unless the Company makes a public
filing with the Securities  and Exchange  Commission and Nasdaq by April 7, 1997
evidencing minimum capital and surplus of at least $6 million. While the Company
believes that it can meet this capital and surplus level by such date, there can
be no  assurance  that  the  Company  will  succeed  in  timely  achieving  this
requirement.  Such  delisting  may have an adverse  effect on the ability of the
Company to attract new  investors.  The Company is actively  seeking  additional
sources of financing and is negotiating with pharmaceutical  companies regarding
collaborative  agreements  and  other  financial  arrangements.  There can be no
assurance,  however, that any such collaborative  agreements or other sources of
funding will be available on favorable terms, if at all. The Company has entered
into a letter of intent with an  investment  banking firm pursuant to which such
firm  confirmed its interest in acting as placement  agent,  on a "best efforts"
basis, of a private placement of preferred stock, convertible notes and warrants
for proceeds of up to $7.5 million (plus an over-allotment  option),  subject to
certain  conditions.  In the Letter of Intent,  this firm  agreed  that,  to the
extent  alternative  financings  were  available at better  timing,  pricing and
terms, the firm would waive its right to conduct the offering. If the Company is
unsuccessful  in raising the  required  funds,  the Company  will be required to
license  or  sell  additional  assets  and  technology,  further  scale  back or
eliminate some or all of its development programs, further reduce its work force
and spending,  and take other measures in order to continue its  operations.  If
such  measures are not  successfully  completed,  the Company may be required to
discontinue its operations. See "Risk Factors -- Need for Additional Funds; Risk
of Insolvency" and "Risk Factors -- Threat of Nasdaq Delisting."

         As described  under Item 5(d) of this Annual  Report on Form 10-K,  the
Aries  Funds,  who  provided $3 million in financing to the Company in February,
1997, have the right to appoint a majority of the members of the

                                       29





Board of Directors of the Company. As of March 14, 1997, the Aries Funds had not
exercised this right.  However,  should they determine to do so, their designees
may decide to alter the business  strategy,  operations and/or management of the
Company in a manner not contemplated in this Annual Report on Form 10-K.

         In connection with the Genta Jago joint venture formed in late 1992 and
expanded in May 1995, the Company entered into a working capital  agreement with
Genta  Jago which  expires in October  1998.  Pursuant  to this  agreement,  the
Company is  required  to make loans to Genta Jago up to a mutually  agreed  upon
maximum  commitment  amount,  which  amount is  established  by the parties on a
periodic basis.  The Company  anticipates  its working  capital  contribution to
Genta Jago for 1997 will be  $300,000,  as compared to $846,784 in 1996 and $7.7
million  in  1995,  as a  result  of  Genta  Jago's  success  in  entering  into
collaborative  agreements  with third  parties.  As of December  31,  1996,  the
Company had advanced  working  capital loans of  approximately  $15.3 million to
Genta  Jago,  net of  principal  repayments.  Such loans bear  interest  and are
payable in full in October 1998,  or earlier in the event  certain  revenues are
received by Genta Jago from third parties.  There can be no assurance,  however,
that Genta Jago will obtain sufficient  financial  resources to repay such loans
to Genta.  Genta Jago repaid  Genta $1 million of its working  capital  loans in
November 1996 from license fee revenues.  The amount of future loans by Genta to
Genta Jago will  depend upon  several  factors  including  the amount of funding
obtained by Genta Jago through  collaborative  arrangements,  Genta's ability to
provide  loans,  and the timing and cost of Genta  Jago's  preclinical  studies,
clinical trials and regulatory activities.

         Through  December  31,  1996,  the Company  acquired  $10.1  million in
property and equipment of which $5.5 million was financed through capital leases
and other equipment financing arrangements,  $3.3 million was funded in cash and
the remainder was acquired through the Company's acquisition of JBL. In November
1996,  the Company  bought out certain of its capital  leases for  approximately
$1.2 million,  primarily  covering  equipment  used in research and  development
activities at Genta and JBL,  using Company funds which the leasing  company had
on deposit.  This  equipment had an original cost of $4.5 million and a net book
value at buyout of approximately  $850,000. The Company capitalized $1.2 million
as fixed  assets  at the time of the  buyout.  In 1996,  the  Company  also sold
certain of its fixed  assets.  This resulted in a decrease of gross fixed assets
from $9.6  million in 1995 to $6 million in 1996.  The Company  has  commitments
associated  with its notes  payable,  capital  leases  and  operating  leases as
discussed further in Note 7 of the Notes to Consolidated  Financial  Statements.
In particular,  the Company's  equipment  financing  agreement  contains certain
financial  covenants,  the most  significant  of which  required  the Company to
provide  certain  deposits in the event that the Company's  cash and  investment
balances fell below  specified  levels.  As of December 31, 1996 the Company had
$251,000 in security  deposits with an equipment  financing  company pursuant to
the terms of the agreement.

         In October 1996, JBL retained a chemical  consulting  firm to advise it
with  respect to  environmental  compliance  regarding  an  incident of soil and
groundwater   contamination   (the  "Spill")  by  small  quantities  of  certain
chemicals.  The Company believes, based upon information known to date, that the
Spill is  relatively  minor and will not have a material  adverse  effect on the
business of the Company, although there can be no assurance thereof.

         Terms of the Company's  Series A Preferred Stock require the payment of
dividends  annually in amounts ranging from $3 per share per annum for the first
year to $5 per share per annum in the third and fourth  years.  Dividends may be
paid in cash or common stock or a combination  thereof, at the Company's option.
Dividends on the Series A Preferred  Stock  accrue on a daily basis  (whether or
not declared) and shall accumulate to the extent not paid on the annual dividend
payment date  following the dividend  period for which they accrue.  The Company
may redeem the Series A Preferred  Stock under  certain  circumstances,  and was
required to redeem the Series A Preferred Stock,  subject to certain conditions,
in  September  1996 at a  redemption  price of $50 per share,  plus  accrued and
unpaid  dividends  (the  "Redemption  Price").  The  Company  elected to pay the
Redemption Price in common stock. In September 1996, holders of 55,900 shares of
Series A Preferred  Stock  converted such shares and related  accrued  dividends
into 2,423,500 shares of the Company's common stock. The Company is obligated to
use its  reasonable  efforts to arrange for a firm  commitment  underwriting  in
order to redeem the Series A Preferred  Stock.  The Company is  restricted  from
paying  cash  dividends  on  common  stock  until  such  time as all  cumulative
dividends on  outstanding  shares of Series A and Series C Preferred  Stock have
been paid. The Company currently  intends to retain its earnings,  if any, after
payment of  dividends on  outstanding  shares of Series A and Series C Preferred
Stock, for the development of its business. The Company has been unsuccessful to
date in its  efforts to  renegotiate  certain  terms of its  agreement  with the
holders of the Series A Preferred Stock.

                                       30






         If the Company  successfully secures sufficient levels of collaborative
revenues  and other  sources  of  financing,  it  expects  to incur  substantial
additional  costs,  including costs related to ongoing  research and development
activities,  preclinical testing and clinical trials,  manufacturing activities,
costs associated with the market introduction of potential  products,  expansion
of its administrative activities, and development activities undertaken by Genta
Jago. The Company will need substantial additional funds before it can expect to
realize  significant  product revenue.  The Company anticipates that significant
additional sources of financing,  including equity financings,  will be required
in order for the  Company to  continue  its planned  principal  operations.  The
Company's working capital and additional  funding  requirements will depend upon
numerous factors,  including: (i) the availability of funding; (ii) the progress
of the Company's research and development programs; (iii) the timing and results
of  preclinical  testing  and  clinical  trials;  (iv) the  timing  and costs of
obtaining  regulatory  approvals;  (v) the level of  resources  devoted to Genta
Jago;  (vi) the  level  of  resources  that the  Company  devotes  to sales  and
marketing capabilities;  (vii) technological advances;  (viii) the activities of
competitors;  and (ix) the  ability of the  Company to  establish  and  maintain
collaborative arrangements with others to fund certain research and development,
to  conduct  clinical  trials,  to  obtain  regulatory  approvals  and,  if such
approvals are obtained, to manufacture and market products.

         In the  Company's  Quarterly  Report on Form 10-Q for the period ending
September 30, 1996,  the Company  announced that it intended to sell, and was in
negotiations  with a potential  buyer for,  its JBL  subsidiary.  However,  such
negotiations did not produce an agreement, and the Company is no longer pursuing
its discussions  with the potential  buyer or any other potential  purchasers at
this time.



                                       31





Item 8.               Financial Statements and Supplemental Data


                      INDEX TO FINANCIAL STATEMENTS COVERED
                       BY REPORTS OF INDEPENDENT AUDITORS



                                                                                                             Page

Genta Incorporated

                                                                                                         
Report of Ernst & Young LLP, Independent Auditors............................................................33

Consolidated Balance Sheets at December 31, 1996 and 1995....................................................34

Consolidated Statements of Operations for each of the three years
   in the period ended December 31, 1996.....................................................................35

Consolidated Statements of Stockholders' Equity for each of the
   three years in the period ended December 31, 1996.........................................................36

Consolidated Statements of Cash Flows for each of the three
   years in the period ended December 31, 1996...............................................................37

Notes to Consolidated Financial Statements...................................................................38



Genta Jago Technologies B.V. (A Development Stage Company)

Report of Ernst & Young LLP, Independent Auditors............................................................50

Balance Sheets at December 31, 1996 and 1995.................................................................51

Statements of Operations for the years ended December 31, 1996, 1995 and 1994, and
   the period from inception (December 15, 1992) through December 31, 1996...................................52

Statement of Stockholders' Equity (Net Capital Deficiency) for the period
   from inception (December 15, 1992) through December 31, 1996..............................................53

Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994,
   and the period from inception (December 15, 1992) through December 31, 1996...............................54

Notes to Financial Statements................................................................................55



                                       32





                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Genta Incorporated

         We have audited the accompanying  consolidated  balance sheets of Genta
Incorporated  as of  December  31, 1996 and 1995,  and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended December 31, 1996.  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 generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the consolidated  financial position of Genta
Incorporated at December 31, 1996 and 1995, and the consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996, in conformity with generally accepted accounting principles.

         As discussed  in Note 1 to the  financial  statements,  the Company has
incurred substantial and continued operating losses since inception and requires
substantial additional sources of financing to fund its operations through 1997.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  Management's  plans as to this matter are also described in
Note 1. The 1996 financial  statements do not include any adjustments that might
result from the outcome of this uncertainty.



                                                      ERNST & YOUNG LLP

San Diego, California
February 28, 1997

                                       33





                               GENTA INCORPORATED
                          CONSOLIDATED BALANCE SHEETS




                                                                                           DECEMBER 31,
                                                                            -----------------------------------------
                                  ASSETS                                          1996                   1995
                                                                            ------------------    -------------------

Current assets:
                                                                                                          
   Cash and cash equivalents                                                         $532,013               $271,755
   Receivable from sale of preferred stock                                                  -              2,785,800
   Trade accounts receivable                                                          602,696                471,296
   Notes receivable from officers and employees                                        62,000                362,000
   Inventories                                                                        992,243                702,644
   Other current assets                                                               185,164                151,923
                                                                            ------------------    -------------------
Total current assets                                                                2,374,116              4,745,418
                                                                            ------------------    -------------------
Property and equipment, net                                                         3,634,281              4,656,955
Investment in and advances to joint venture                                                 -                258,896
Intangibles, net                                                                    4,022,242              3,577,654
Other assets, net                                                                   1,138,745              2,392,220
                                                                            ------------------    -------------------
                                                                                  $11,169,384            $15,631,143
                                                                            ==================    ===================

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                $1,481,521             $2,260,495
   Accrued payroll and related expenses                                               782,280                628,750
   Other accrued expenses                                                           1,229,845              1,407,748
   Deferred revenue                                                                   193,121                148,532
   Short-term notes payable                                                           350,000                760,000
   Current portion of notes payable and
      capital lease obligations                                                       291,842              1,120,013
                                                                            ------------------    -------------------
Total current liabilities                                                           4,328,609              6,325,538
                                                                            ------------------    -------------------
Capital lease obligations, less current portion                                        30,652                896,465
Notes payable, less current portion                                                 1,129,388              1,437,481
Deficit in Joint Venture                                                            1,606,503                      -
Commitments and contingencies                                                               -                      -
Stockholders' equity:
   Preferred stock;  5,000,000 shares authorized,  convertible  preferred shares
   outstanding:
      Series A preferred  stock,  $.001 par value;  528,100  and 600,000  shares
         issued and outstanding at December 31, 1996 and 1995,
         respectively, liquidation value is $29,786,307 at December 31, 1996              528                    600
      Series B  preferred  stock,  $.001 par value;  no shares and 3,000  shares
         issued and outstanding at December 31, 1996 and 1995,
         respectively.                                                                      -                      3
      Series C convertible preferred stock, $.001 par value; 1,424 and no
        shares issued and outstanding at December 31, 1996 and
        1995, respectively, liquidation value is $1,468,822 at
        December 31, 1996.                                                                  1                      -
   Common stock,  $.001 par value;  150,000,000  shares  authorized,  39,991,626
       shares and 23,963,534 shares issued and
      outstanding at December 31, 1996 and 1995, respectively                          39,992                 23,964
   Additional paid-in capital                                                     108,787,562            102,374,105
   Accumulated deficit                                                           (108,375,407)           (96,949,625)
   Accrued dividends payable                                                        3,671,532              1,572,588
   Notes receivable from stockholders                                                 (49,976)               (49,976)
                                                                            ------------------    -------------------
Total stockholders' equity                                                          4,074,232              6,971,659
                                                                            ------------------    -------------------
                                                                                  $11,169,384            $15,631,143
                                                                            ==================    ===================



                             See Acompanying Notes

                                       34




                               GENTA INCORPORATED
                     CONSOLIDATED STATEMENTS OF OPERATIONS




                                                         YEARS ENDED DECEMBER 31,
                                           -------------------------------------------------------------
                                                 1996                  1995                 1994
                                           -----------------     -----------------    ------------------

Revenues:
                                                                                           
   Product sales                                 $4,924,694            $3,781,983            $3,573,701
   Gain on sale of technology                       373,261                     -                     -
   Collaborative research
     and development                                      -             1,125,000             3,141,688
                                           -----------------     -----------------    ------------------
                                                  5,297,955             4,906,983             6,715,389
                                           -----------------     -----------------    ------------------

Cost and expenses:
   Cost of products sold                          2,479,337             1,899,216             1,709,762
   Research and development                       5,833,697            11,277,238            13,533,600
   Charge for acquired in-process
      research and development                            -             4,762,000             1,850,000
   Selling, general and administrative            5,638,750             5,438,307             6,376,390
                                           -----------------     -----------------    ------------------
                                                 13,951,784            23,376,761            23,469,752
                                           -----------------     -----------------    ------------------
Loss from operations                             (8,653,829)          (18,469,778)          (16,754,363)
Equity in net loss of joint venture              (2,712,183)           (6,913,180)           (7,424,828)
Other income (expense):
   Interest income                                  159,165               348,470             1,014,213
   Interest expense                                (218,935)             (331,226)             (283,530)
                                           -----------------     -----------------    ------------------
Net loss                                       $(11,425,782)         $(25,365,714)         $(23,448,508)
Dividends on preferred stock                     (2,524,701)           (2,551,726)           (2,550,000)
                                           -----------------     -----------------    ------------------
Net loss applicable to common shares           $(13,950,483)         $(27,917,440)         $(25,998,508)
                                           =================     =================    ==================
Net loss per common share                             $(.47)               $(1.43)               $(1.90)
                                           =================     =================    ==================
Shares used in computing net
  loss per common share                          29,834,491            19,518,616            13,709,611
                                           =================     =================    ==================



                             See Acompanying Notes

                                       35




                               GENTA INCORPORATED
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996





                                                    CONVERTIBLE PREFERRED                                            
                                                           STOCK                       COMMON STOCK             ADDITIONAL
                                                    ------------------------   -----------------------------      PAID-IN   
                                                      SHARES       AMOUNT       SHARES           AMOUNT           CAPITAL        
                                                    ------------   --------   --------------   ------------   ---------------  

                                                                                                            
BALANCE AT DECEMBER 31, 1993                            600,000         600      13,648,972         13,649        86,525,495   
   Issuance of common stock on exercise
      of options                                              -           -           3,306              3             9,847   
   Issuance of common stock as dividend                                                                                        
      on preferred stock                                      -           -         222,986            223         1,799,274   
   Dividends accrued on preferred stock                       -           -               -              -       (2,550,000)   
   Amortization of deferred compensation                      -           -               -              -                 -   
   Net loss                                                   -           -               -              -                 -   
                                                    ------------   --------   --------------   ------------   ---------------  
BALANCE AT DECEMBER 31, 1994                            600,000         600      13,875,264         13,875        85,784,616   
   Issuance of common stock                                   -           -       5,734,409          5,735         9,159,542   
   Issuance of common stock upon
      conversion of promissory notes                          -           -       1,777,903          1,778         3,020,660   
   Issuance of common stock for acquired in-process
      research and development                                -           -       1,240,000          1,240         1,610,760   
   Issuance of Series B convertible preferred
      stock                                               3,000           3               -              -         2,774,897   
   Issuance of warrants to purchase common stock              -           -               -              -           173,118   
   Issuance of common stock on exercise
      of options                                              -           -           7,324              7             3,655   
   Issuance of common stock as dividend
      on preferred stock                                      -           -       1,328,634          1,329         2,398,583   
   Dividends accrued on preferred stock                       -           -               -              -       (2,551,726)   
   Repayment of notes receivable from
      stockholders                                            -           -               -              -                 -   
   Amortization of deferred compensation                      -           -               -              -                 -   
   Net loss                                                   -           -               -              -                 -   
                                                    ------------   --------   --------------   ------------   ---------------  
BALANCE AT DECEMBER 31, 1995                            603,000         603      23,963,534         23,964       102,374,105   
   Issuance of Series C convertible preferred
      stock                                               6,000           6               -              -         5,492,633   
   Issuance of Series C convertible preferred
      stock on conversion of promissory notes             1,044           1               -              -         1,044,000   
   Issuance of common stock upon conversion
      of Series A convertible preferred stock          (71,900)        (72)       2,554,458          2,555           324,538   
   Issuance of common stock upon conversion
      of Series B convertible preferred stock           (3,000)         (3)       2,269,425          2,269            31,741   
   Issuance of common stock upon conversion
      of Series C convertible preferred stock           (5,620)         (6)       5,247,489          5,247            59,488   
   Issuance of common stock upon
      conversion of convertible debentures                    -           -       5,877,899          5,878         1,592,721   
   Issuance of warrants to purchase common stock              -           -               -              -           221,543   
      for patent legal services
   Issuance of common stock on exercise
      of options                                              -           -          78,821             79           171,494   
   Dividends accrued on preferred stock                       -           -               -              -       (2,524,701)   
   Net loss                                                   -           -               -              -                 -   
                                                    ============   ========   ==============   ============   ===============  
BALANCE AT DECEMBER 31, 1996                            529,524        $529      39,991,626        $39,992      $108,787,562   
                                                    ============   ========   ==============   ============   ===============  


                               GENTA INCORPORATED
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996




                                                                          ACCRUED              NOTES                          
                                                    ACCUMULATED        DIVIDENDS ON      RECEIVABLE FROM       DEFERRED       
                                                      DEFICIT        PREFERRED STOCK      STOCKHOLDERS       COMPENSATION     
                                                   ---------------   ----------------   ----------------   ----------------

                                                                                                              
BALANCE AT DECEMBER 31, 1993                         (48,135,403)            670,862            (74,726)         (265,730)    
   Issuance of common stock on exercise
      of options                                                -                  -                  -                 -     
   Issuance of common stock as dividend                         -                  -
      on preferred stock                                        -         (1,800,000)                 -                 -     
   Dividends accrued on preferred stock                         -          2,550,000                  -                 -     
   Amortization of deferred compensation                        -                  -                  -           200,894     
   Net loss                                          (23,448,508)                  -                  -                 -     
                                                   ---------------   ----------------   ---------------       -------------
BALANCE AT DECEMBER 31, 1994                         (71,583,911)          1,420,862            (74,726)          (64,836)     
   Issuance of common stock                                     -                  -                  -                 -     
   Issuance of common stock upon
      conversion of promissory notes                            -                  -                  -                 -     
   Issuance of common stock for acquired in-process
      research and development                                  -                  -                  -                 -     
   Issuance of Series B convertible preferred
      stock                                                     -                  -                  -                 -     
   Issuance of warrants to purchase common stock                -                  -                  -                 -     
   Issuance of common stock on exercise
      of options                                                -                  -                  -                 -     
   Issuance of common stock as dividend
      on preferred stock                                        -         (2,400,000)                 -                 -     
   Dividends accrued on preferred stock                         -          2,551,726                  -                 -     
   Repayment of notes receivable from
      stockholders                                              -                  -             24,750                 -     
   Amortization of deferred compensation                        -                  -                  -            64,836     
   Net loss                                          (25,365,714)                  -                  -                 -     
                                                   ---------------   ----------------   ----------------   ----------------
BALANCE AT DECEMBER 31, 1995                         (96,949,625)          1,572,588            (49,976)                -     
   Issuance of Series C convertible preferred
      stock                                                     -                  -                  -                 -     
   Issuance of Series C convertible preferred
      stock on conversion of promissory notes                   -                  -                  -                 -     
   Issuance of common stock upon conversion
      of Series A convertible preferred stock                   -           (327,021)                 -                 -     
   Issuance of common stock upon conversion
      of Series B convertible preferred stock                   -            (34,007)                 -                 -     
   Issuance of common stock upon conversion
      of Series C convertible preferred stock                   -            (64,729)                 -                 -     
   Issuance of common stock upon
      conversion of convertible debentures                      -                  -                  -                 -     
   Issuance of warrants to purchase common stock                -                  -                  -                 -     
      for patent legal services
   Issuance of common stock on exercise
      of options                                                -                  -                  -                 -     
   Dividends accrued on preferred stock                         -          2,524,701                  -                 -     
   Net loss                                           (11,425,782)                 -                  -                 -     
                                                   ===============   ================   ================   ================
BALANCE AT DECEMBER 31, 1996                        $(108,375,407)        $3,671,532           $(49,976)       $        -     
                                                   ===============   ================   ================   ================




                               GENTA INCORPORATED
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996



                                                           TOTAL
                                                      STOCKHOLDERS'
                                                          EQUITY
                                                     ---------------
                                                     
BALANCE AT DECEMBER 31, 1993                             38,734,747
   Issuance of common stock on exercise
      of options                                              9,850
   Issuance of common stock as dividend            
      on preferred stock                                       (503)
   Dividends accrued on preferred stock                           -
   Amortization of deferred compensation                    200,894
   Net loss                                             (23,448,508)
                                                     ---------------
BALANCE AT DECEMBER 31, 1994                             15,496,480
   Issuance of common stock                               9,165,277
   Issuance of common stock upon
      conversion of promissory notes                      3,022,438
   Issuance of common stock for acquired in-process
      research and development                            1,612,000
   Issuance of Series B convertible preferred
      stock                                               2,774,900
   Issuance of warrants to purchase common stock            173,118
   Issuance of common stock on exercise
      of options                                              3,662
   Issuance of common stock as dividend
      on preferred stock                                        (88)
   Dividends accrued on preferred stock                           -
   Repayment of notes receivable from
      stockholders                                           24,750
   Amortization of deferred compensation                     64,836
   Net loss                                             (25,365,714)
                                                     ---------------
BALANCE AT DECEMBER 31, 1995                              6,971,659
   Issuance of Series C convertible preferred
      stock                                               5,492,639
   Issuance of Series C convertible preferred
      stock on conversion of promissory notes             1,044,001
   Issuance of common stock upon conversion
      of Series A convertible preferred stock                     -
   Issuance of common stock upon conversion
      of Series B convertible preferred stock                     -
   Issuance of common stock upon conversion
      of Series C convertible preferred stock                     -
   Issuance of common stock upon
      conversion of convertible debentures                1,598,599
   Issuance of warrants to purchase common stock            221,543
      for patent legal services
   Issuance of common stock on exercise
      of options                                            171,573
   Dividends accrued on preferred stock                           -
   Net loss                                             (11,425,782)
                                                     ===============
BALANCE AT DECEMBER 31, 1996                             $4,074,232
                                                     ===============



                             See Accompanying Notes

                                       36





                               Genta Incorporated
                      CONSOLIDATED STATEMENTS OF CASH FLOWS





                                                                             YEARS ENDED
                                                                             DECEMBER 31,
                                                      -----------------------------------------------------------
                                                            1996                 1995                 1994
                                                      ------------------   ------------------   -----------------
OPERATING ACTIVITIES
                                                                                                    
Net loss                                                   $(11,425,782)        $(25,365,714)       $(23,448,508)
Items reflected in net loss not requiring cash:
   Depreciation and amortization                              1,518,142            1,761,530           1,704,281
   Equity in net loss of joint venture                        2,712,183            6,913,180           7,424,828
   Charge for acquired in-process
      research and development and other                              -            3,807,556                   -
   Changes in operating assets and liabilities:
      Accounts and notes receivable                             168,600              294,012            (307,444)
      Inventories                                              (289,599)             106,909              36,564
      Other current assets                                      (33,241)             366,790             (83,360)
      Accounts payable, accrued expenses and other             (803,347)             467,738             931,835
      Deferred revenue                                           44,589             (976,468)           (141,688)
                                                      ------------------   ------------------   -----------------
Net cash used in operating activities                        (8,108,455)         (12,624,467)        (13,883,492)
INVESTING ACTIVITIES
Purchase of short-term investments                           (1,497,775)                    -        (10,935,406)
Maturities of short-term investments                          1,497,775            3,843,685          24,739,731
Purchase of property and equipment                             (115,922)            (778,964)         (1,264,168)
Investment in and advances to joint venture                    (846,784)          (7,722,255)         (6,749,298)
Deposits and other                                              642,654           (2,021,908)         (1,291,977)
                                                      ------------------   ------------------   -----------------
Net cash provided by (used in) investing activities            (320,052)          (6,679,442)          4,498,882
FINANCING ACTIVITIES
Proceeds from notes payable                                   2,176,500            4,877,471             757,456
Repayments of notes payable and capital leases               (1,948,438)          (1,743,728)         (1,069,289)
Proceeds from issuance of preferred stock, net                8,267,539                    -                   -
Proceeds from issuance of common stock, net                     171,573            9,168,939               9,850
Other                                                            21,591               13,762                (503)
                                                      ------------------   ------------------   -----------------
Net cash provided by (used in) financing activities           8,688,765           12,316,444            (302,486)
                                                      ------------------   ------------------   -----------------
Increase (decrease) in cash and cash equivalents                260,258           (6,987,465)         (9,687,096)
Cash and cash equivalents at beginning of year                  271,755            7,259,220          16,946,316
                                                      ------------------   ------------------   -----------------
Cash and cash equivalents at end of year                       $532,013             $271,755          $7,259,220
                                                      ==================   ==================   =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid                                                  $225,186             $298,432            $283,530
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:
Capital lease obligations
   entered into for equipment                                         -              622,746           1,182,015
Preferred stock dividends accrued                             2,524,701            2,551,726           2,550,000
Common stock issued in payment of dividends
   on preferred stock                                           425,757            2,399,912           1,799,497
Common stock issued upon conversion of notes
  payable and accrued interest                                1,044,001            3,022,438                   -
Preferred stock issued for receivable                                 -            2,774,900                   -
Common Stock issued upon conversion of
   convertible debentures                                     1,598,599                    -                   -
Exercise of buyout option for equipment under
    capital lease obligation in exchange for deposits         1,200,000                    -                   -



                             See Accompanying Notes

                                       37





                               Genta Incorporated
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Significant Accounting Policies

       Organization and Business

         Genta   Incorporated   ("Genta"  or  the   "Company")  is  an  emerging
biopharmaceutical   company   engaged  in  the  development  of  a  pipeline  of
pharmaceutical  products.  The near to mid-term segment of this product pipeline
consists of oral controlled-release  drugs being developed by the Company's drug
delivery joint venture with Jagotec AG ("Jagotec"), Genta Jago Technologies B.V.
("Genta Jago").  The Company's  longer-term  research efforts are focused on the
development   of   proprietary   Anticode(TM)    oligonucleotide    ("Anticode")
pharmaceuticals  intended to block or regulate the production of disease-related
proteins  by acting at the genetic  level.  The Company  also  manufactures  and
markets specialty  biochemical and pharmaceutical  intermediate products through
its manufacturing subsidiary, JBL Scientific, Inc. ("JBL").

       Basis of Presentation

         The accompanying  financial statements have been prepared assuming that
the Company will continue as a going  concern.  The Company is actively  seeking
collaborative  agreements,  additional  equity  financing  and  other  financing
arrangements with potential corporate partners and other sources. However, there
can be no assurance that any such  collaborative  agreements or other sources of
funding will be available  on  favorable  terms,  if at all. The Company is also
considering  the  licensing  or sale of certain  of its  assets and  technology,
delaying  or  curtailing  of  certain  of  its  development  programs,   further
reductions in workforce and spending or other  measures in order to continue its
operations.  The 1996 financial  statements do not include any adjustments  that
might result from the outcome of this uncertainty.

       Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly owned subsidiaries, JBL and Genta Pharmaceuticals Europe,
S.A.,  the  Company's  European  subsidiary  based in  Marseilles,  France.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

       Investment in Joint Venture

         The Company has a 50%  ownership  interest  in a joint  venture,  Genta
Jago, a Netherlands  corporation.  The  investment in joint venture is accounted
for under the equity method (Note 5).

       Use of Estimates

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

       Revenue Recognition and Major Customers

         Revenue from product sales is recognized upon shipment. One customer, a
European  distributor,  accounted for approximately  27%, 21% and 19% of product
sales during the years ended December 31, 1996, 1995 and 1994, respectively. One
other customer  accounted for  approximately 16% and 12% of product sales during
the years ended December 31, 1995 and 1994, respectively, while another customer
comprised 18% of 1994 product sales.  No other customer  accounted for more than
8% of product sales in 1996. Collaborative research and development revenues are
recorded as earned,  generally ratably,  as research and development  activities
are performed under the terms of

                                       38





the contracts.  Payments received in excess of amounts earned are deferred.  See
Note 9 for major collaborative research and development arrangements.

       Cash and Cash Equivalents

         Cash and cash  equivalents  consist of cash,  money market  funds,  and
other highly  liquid  investments  with  maturities of three months or less when
purchased. The carrying value of these instruments approximates fair value.

       Concentration of Credit Risk

         The Company  generally  invests its excess cash in high credit  quality
debt  instruments  of  corporations  and financial  institutions,  and in United
States government  securities.  Such investments are made in accordance with the
Company's   investment  policy,   which  establishes   guidelines   relative  to
diversification and maturities designed to maintain safety and liquidity.  These
guidelines are periodically reviewed and modified to take advantage of trends in
yields and interest  rates.  The Company has not  experienced  any losses on its
cash equivalents or short-term investments.

         The Company markets its specialty biochemical and intermediate products
to the pharmaceutical and diagnostic  industries.  Generally,  collateral is not
required on the  Company's  sales.  Credit  losses have been  insignificant  and
within management's expectations.

       Inventories

         Inventories  are stated at the lower of cost  (first-in,  first-out) or
market.

       Property and Equipment

         Property  and  equipment  is  stated at cost and  depreciated  over the
estimated useful lives of the assets using the straight-line  method.  Leasehold
improvements  are stated at cost and amortized over the shorter of the estimated
useful lives of the assets or the lease term.  Amortization  of equipment  under
capital leases is reported with depreciation of property and equipment.

       Intangible Assets

         Intangible assets, consisting primarily of capitalized patent costs and
purchased  proprietary  technology,  are amortized using the straight line basis
over a term of 5-17 years for issued patents, 14 years for purchased proprietary
technology and 5-7 years for organizational and other amortizable costs.

       Asset Impairment

         In March 1995,  the FASB issued  Statement No. 121,  Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of,
which  requires  impairment  losses to be recorded on long-lived  assets used in
operations when indicators of impairment are present and the  undiscounted  cash
flows  estimated  to be  generated  by those  assets  are less than the  assets'
carrying amounts. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. There was no affect on the financial
statements from the adoption of Statement No. 121.

       Employee Stock Options

         The Company has elected to follow  Accounting  Principles Board Opinion
No.  25,  "Accounting  for  Stock  Issued  to  Employees"  (APB 25) and  related
Interpretations  in  accounting  for its employee  stock  options  because,  the
alternative  fair value  accounting  provided  for under  Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
123), requires use of option valuation models that were not developed for use in
valuing  employee stock options.  Under SFAS No. 123,  deferred  compensation is
recorded for

                                       39





the excess of the fair value of the stock on the date of the option grant,  over
the exercise price of the option.  The deferred  compensation  is amortized over
the vesting period of the option.

         Net Loss Per Common Share

         Net loss per common share is computed using the weighted average number
of common  shares  outstanding  during each  period.  Shares  issuable  upon the
exercise of  outstanding  stock options and warrants and upon the  conversion of
convertible preferred stock are not reflected as their effect is anti-dilutive.

2.  Inventories



     Inventories are comprised of the following:
                                                                              December 31,
                                                                        -----------------------
                                                                         1996              1995
                                                                        ------             ----

                                                                                        
     Raw materials and supplies.................................     $   342,875      $   280,621
     Work-in-process............................................         272,259          162,097
     Finished goods.............................................         377,109          259,926
                                                                     -----------      -----------
                                                                     $   992,243      $   702,644
                                                                     ===========      ===========

3.  Property and Equipment

     Property and equipment is comprised of the following:
                                                                              December 31,
                                                                        -----------------------
                                                                         1996              1995
                                                                        ------             ----

     Equipment..................................................   $   4,093,563     $  7,719,863
     Leasehold improvements.....................................       1,128,520        1,385,041
     Furniture and fixtures.....................................         105,318          116,161
     Construction in progress...................................         624,167          359,273
                                                                   -------------     ------------
                                                                       5,951,568        9,580,338
     Less accumulated depreciation and amortization.............      (2,317,287)      (4,923,383)
                                                                   -------------     ------------
                                                                   $   3,634,281     $  4,656,955
                                                                   =============     ============


         Included in property and  equipment  at December 31, 1996 and 1995,  is
equipment   under  capital  leases   aggregating   $200,000  and  $4.7  million,
respectively,  all of which is pledged as  security  pursuant  to the  Company's
capital lease agreements. Accumulated amortization with respect to the equipment
under  capital  leases  totaled  $80,000 and $3 million at December 31, 1996 and
1995, respectively.

4.  Notes Receivable from Officers and Employees

         Notes  receivable  consist of loans made to officers  and  employees to
facilitate  their   relocation.   Such  loans  are  generally  secured  by  each
individual's residence.

5.  Genta Jago Joint Venture

         In December 1992, the Company and Jagotec, a subsidiary of Jago Holding
AG which was  acquired by  SkyePharma  in May 1996,  formed  Genta Jago, a 50/50
joint  venture to develop and  commercialize  products in six major  therapeutic
areas. Under the arrangement, Jagotec granted Genta Jago an exclusive license to
its  GEOMATRIX  oral  controlled-release  technology  for  the  development  and
commercialization  of  approximately  25 specified  products.  In May 1995,  the
parties  entered  into an agreement to expand Genta Jago by adding the rights to
develop and  commercialize  an  additional  35 products.  With these  additional
products,  Genta Jago now  maintains  the  rights to develop  controlled-release
formulations of approximately 60 products using Jagotec's GEOMATRIX  technology.
Under the agreement,  Genta Jago also acquired certain manufacturing rights with
respect to such  products.  In connection  with the expansion of Genta Jago, the
parties elected to focus Genta Jago's activities

                                       40





exclusively on GEOMATRIX-based products and, as a result, Genta Jago returned to
Genta in May 1995 the right to develop six Anticode products licensed from Genta
in 1992.

         In  connection  with the  formation of Genta Jago,  the Company made an
initial capital  contribution  of $4 million to Genta Jago and issued  1,200,000
unregistered  shares of Genta's  common  stock to Jagotec and an  affiliate.  To
obtain the  additional  product and  manufacturing  rights  during  1995,  Genta
applied  $5  million  in  option  and  related  fees  paid  to  Jagotec  and its
affiliates, of which $3.85 million was paid during 1994 (including $1.85 million
of  non-refundable  fees charged to expense  during 1994) and $1.15  million was
paid during the first  quarter of 1995.  The Company  also issued an  additional
1.24  million  unregistered  shares of Genta's  common  stock to an affiliate of
Jagotec in May 1995.  The  Company  recorded a charge  for  acquired  in-process
research and  development  of $4.8 million  during 1995  consisting  of the fair
value of the 1.24  million  shares of common stock  issued  ($1.6  million),  $2
million of  refundable  option fees paid during 1994,  and the $1.15  million in
fees paid  during the first  quarter  of 1995.  Genta  Jago is  required  to pay
certain  additional  fees to Jagotec upon Genta Jago's  receipt of revenues from
third parties, and pay manufacturing royalties to Jagotec.

         The Company is also required to provide loans to Genta Jago pursuant to
a working  capital  agreement  which  expires  in  October  1998.  The loans are
advanced up to a mutually agreed upon maximum commitment amount, which amount is
established by the parties on a periodic  basis. In connection with Genta Jago's
return of the Anticode  license rights to Genta in May 1995, the working capital
loan payable by Genta Jago to Genta was credited  with a principal  reduction of
approximately  $4.4 million.  As of December 31, 1996,  the Company had advanced
working  capital  loans of  approximately  $15.3  million to Genta Jago,  net of
principal repayments and the aforementioned credit, which amount fully satisfied
the loan commitment  established by the parties through  December 31, 1996. Such
loans bear  interest and are payable in full in October  1998, or earlier in the
event certain revenues are received by Genta Jago from third parties.  There can
be no assurance,  however,  that Genta Jago will obtain the necessary  financial
resources to repay such loans to Genta.  The Company has recorded  substantially
all of the net losses  incurred by Genta Jago  (excluding  certain  intercompany
transactions) as a reduction of the Company's investment in joint venture.

         Under terms of the joint venture,  Genta Jago has  contracted  with the
Company to conduct  research and development and provide certain other services.
Revenues associated with providing such services, totaling $1.6 million in 1996,
$2.7 million in 1995, and $2.9 million in 1994, are recorded by the Company as a
reduction of the related research and development and general and administrative
expenses.  Terms of the arrangement also grant the Company an option to purchase
Jagotec's interest in Genta Jago exercisable from December 1998 through 2000.

         Genta Jago  entered  into  collaborative  development  agreements  with
Gensia, Inc.,  Apothecon,  Inc., a subsidiary of Bristol-Meyers  Squibb Co., and
Krypton,  Ltd., a subsidiary of SkyePharma,  during January 1993, March 1996 and
October  1996,  respectively.  In October  1996,  SkyePharma  signed a letter of
intent with Gensia,  Inc. and  Boehringer  Mannheim Corp.  whereby  Brightstone,
SkyePharma's  United States subsidiary,  will assume rights to develop Procardia
XL(R) in collaboration with Boehringer Mannheim. Such agreements provide funding
to  Genta  Jago  for  the   development   and   clinical   testing  of  selected
controlled-release  pharmaceuticals in addition to potential  milestone payments
and royalties on future product sales.


                                       41





Condensed  financial  information for Genta Jago  Technologies B.V. is set forth
below.



                                                                                    December 31,
                                                                                -------------------
                                                                                1996           1995
                                                                                ----           ----
                                                                                     
Balance Sheets Data:
   Advance contract payments to related parties......................    $           -    $    1,539,000
   Receivables under collaboration agreements........................          904,000                 -
   Other current assets..............................................          142,000           245,000
                                                                         -------------    --------------
   Total current assets..............................................        1,046,000         1,784,000
   Other assets......................................................           11,000            12,000
                                                                         -------------    --------------
                                                                         $   1,057,000    $    1,796,000
                                                                         =============    ==============

   Current liabilities...............................................    $   3,053,000    $    1,360,000
   Notes payable to Genta Incorporated...............................       15,287,000        13,787,000
   Net capital deficiency............................................      (17,283,000)      (13,351,000)
                                                                         -------------    --------------
                                                                         $   1,057,000    $    1,796,000
                                                                         =============    ==============





                                                                                    Years ended December 31,
                                                                             -----------------------------------
                                                                             1996            1995           1994
                                                                             ----            ----           ----
                                                                                                           
Statements of Operations Data:
   Collaborative research and development revenues...................   $   5,477,000    $  2,968,000     $   5,285,000
   Costs and expenses................................................       8,453,000      10,336,000        13,338,000
                                                                          ------------    ------------     -------------
   Loss from operations..............................................      (2,976,000)     (7,368,000)       (8,053,000)
   Gain on waiver of debt in exchange for return of
      license rights to related party................................               -       4,703,000                 -
   Interest expense..................................................        (956,000)       (746,000)         (298,000)
                                                                        --------------  --------------    --------------
   Net loss..........................................................   $  (3,932,000)  $  (3,411,000)    $  (8,351,000)
                                                                        ==============  ==============    ==============



6.  Intangibles

     Intangibles consist of the following:



                                                                                           December 31,
                                                                                      ----------------------
                                                                                       1996             1995
                                                                                      -----             ----

                                                                                                          
     Purchased proprietary technology..................................           $   1,747,082      $    1,747,082
     Patent and patent applications....................................               2,964,193           2,356,556
     Organizational and other amortizable costs........................                 414,521             428,773
                                                                                  -------------      --------------
                                                                                      5,125,796           4,532,411
     Less accumulated amortization.....................................              (1,103,554)           (954,757)
                                                                                  -------------      --------------
     Net intangible assets.............................................           $   4,022,242      $    3,577,654
                                                                                  =============      ==============




                                                       42





7.  Notes Payable and Leases

     Notes payable consist of the following:



                                                                                           December 31,
                                                                                        ---------------------
                                                                                         1996            1995
                                                                                        -----            ----

                                                                                                 
        Note payable with  interest at 12.63%,  due in monthly  installments  of
          $22,407, secured by equipment with a net book value of approximately
          $703,000 and security deposit of $251,000..............................   $     328,367      $     540,955

        Research financing obligation payable to a French governmental
          agency, non-interest bearing, maturing through 2003....................       1,040,462          1,101,103

        Other....................................................................           7,435             16,584
                                                                                    -------------      -------------
                                                                                        1,376,264          1,658,642
        Less current portion.....................................................        (246,876)          (221,161)
                                                                                    -------------      -------------
                                                                                    $   1,129,388      $   1,437,481
                                                                                    =============      =============


         During 1995,  the Company  obtained  $1,100,000 in financing aid from a
French  governmental  agency  to be  used  to fund  certain  of its  development
programs. The aggregate principal maturities of notes payable for the years 1997
through  2001  are  $247,000,   $185,000,   $154,000,  $193,000,  and  $385,000,
respectively and $212,000 thereafter.

         The Company leases its facilities under operating leases that generally
provide for annual cost of living  related  increases.  The JBL  facilities  are
leased from its prior owners,  who include a director,  an executive officer and
other  stockholders of the Company.  Certain equipment is leased under operating
and capital leases. The Company's equipment financing agreements contain certain
financial  covenants,  the most  significant  of which  required  the Company to
provide  certain  deposits in the event that the Company's  cash and  investment
balances fell below specified  levels.  Included in other assets at December 31,
1996  and  1995  was  $251,000  and  $1.6  million  in cash  deposits  primarily
associated with the Company's  equipment  financing  agreements.  Minimum future
obligations  under both operating and capital leases at December 31, 1996 are as
follows:



                                                                  Operating leases
                                                             -------------------------
                                                               Related                         Capital
                                                               parties         Others          leases
                                                             ----------       --------        ---------
                                                                                            
     1997.............................................     $    389,000    $     447,000     $    48,000
     1998.............................................          408,000           99,000          31,000
     1999.............................................          429,000           99,000           1,000
     2000.............................................          188,000           99,000             ---
     2001.............................................              ---           99,000             ---
     Thereafter.......................................              ---          198,000             ---
                                                           ------------    -------------     -----------
     Total future minimum lease payments..............     $  1,414,000    $   1,041,000          80,000
                                                           ============    =============
     Less amount representing interest................                                            (4,000)
                                                                                             ------------
     Present value of future minimum lease payments...                                            76,000
     Less current portion.............................                                           (45,000)
                                                                                             ------------
     Long-term portion................................                                       $    31,000
                                                                                             ============


         Total rent expense under operating  leases for the years ended December
31,  1996,   1995  and  1994  was   $1,043,000,   $1,117,000,   and  $1,090,000,
respectively.



                                       43





8.  Stockholders' Equity

       Subsequent Event

         In February  1997, the company raised gross proceeds of $3 million in a
private placement of Senior Secured  Convertible  Bridge Notes (the "Convertible
Notes")  that bear  interest  at 12% per annum and mature on the earlier of June
30, 1997 or five business days following the  completion of any equity  offering
or series of equity  offerings  with gross  proceeds in excess of $2.5  million.
Warrants to purchase  7.8 million  and 12.2  million  shares of common  stock at
exercise prices of $.001 and $.55, respectively, are attached to the Convertible
Notes. The Convertible Notes are convertible,  at the option of the holder, into
600,000 shares of Series D Preferred Stock, subject to antidilution adjustments.
In the event of default,  the holders of the Convertible Notes have the right to
convert  the  lesser  of  (i)  the  then  outstanding  principal  amount  of the
Convertible  Notes  or  (ii)  10%  of  the  original  principal  amounts  of the
Convertible  Notes into common  shares at a conversion  rate of $.001 per share,
subject to antidilution  adjustments.  The holders of the Convertible Notes also
have the right to appoint a majority of members of the Board of Directors of the
Company;  provided however, that in the event the Company does not obtain future
financings  in excess of $3.5  million on or before June 30,  1997,  the holders
shall have the contractual right to appoint only two directors or observers and,
if additional directors have been appointed,  such additional directors shall be
required to resign.

         Preferred Stock

         In September  1996,  the Company  raised  gross  proceeds of $2 million
(approximately  $1.9 million net of offering fees and costs) through the sale of
Convertible  Debentures to investors in a private  placement  outside the United
States.  The  Convertible  Debentures  bear interest at the rate of 4% per annum
with  principal  and interest due and payable  August 1, 1997.  The  Convertible
Debentures were convertible,  at the option of the holders, beginning in October
1996,  into shares of common stock at a conversion  price equal to 75 percent of
the  average  Nasdaq  closing bid prices of Genta  common  stock for a specified
period prior to the date of conversion. Terms of the Convertible Debentures also
provide  for  interest  payable  in shares of the  Company's  common  stock.  In
November  1996,  $1.65  million of the  Convertible  Debentures  and the related
accrued interest was converted into  approximately  5.9 million shares of common
stock.

         In  March  1996,  the  Company  raised  gross  proceeds  of $6  million
(approximately  $5.5  million  net of  offering  fees and  costs)  in a  private
placement  of Series C  Convertible  preferred  stock (the  "Series C  Preferred
Stock") sold to institutional  investors.  In 1996, 5,620 shares of the Series C
Preferred Stock and accrued dividends was converted at the option of the holders
into  approximately  5.2 million shares of Genta's common stock.  The conversion
price is based  upon 75% of the  average  Nasdaq  closing  bid prices of Genta's
common stock for a specified period.  Terms of the Series C Preferred Stock also
provide for  dividends  payable in shares of the  Company's  common  stock.  The
Company has agreed to file a  registration  statement  with the  Securities  and
Exchange  Commission  covering the resale of the common stock  issuable upon the
payment of the remaining  dividends and the conversion of the Series C Preferred
Stock.

         On December 29, 1995, the Company completed the sale of 3,000 shares of
Series B Convertible preferred stock (the "Series B preferred stock") at a price
of $1,000 per share to  institutional  investors  outside of the United  States.
Proceeds from the offering totaling approximately $2.8 million were reflected as
a receivable from sale of preferred stock at December 31, 1995 and were received
by the Company on January 2, 1996.  The Series B preferred  stock was  converted
into  approximately  2.3 million  shares of the  Company's  common stock in late
February 1996 pursuant to terms of the Series B stock purchase agreements.

         In October 1993,  the Company  completed the sale of 600,000  shares of
Series A  convertible  preferred  stock ("the  Series A  Preferred  Stock") in a
private  placement of units  consisting of one share of Series A Preferred Stock
and a warrant to acquire one share of common stock,  sold at an aggregate  price
of $50 per unit. Each share of Series A Preferred  Stock is convertible,  at any
time prior to  redemption,  into 21.31  shares of the  Company's  common  stock,
subject to antidilution  adjustments.  Dividends on the Series A Preferred Stock
are cumulative  from the date of issuance,  and are payable  annually in amounts
ranging from $3 per share per annum for the first year to $5 per share per annum
in the third and fourth years.  Dividends may be paid in cash or common stock or
a combination  thereof at the Company's option.  Dividends are accrued using the
straight-line method over the four year period. The

                                       44





Company may redeem the Series A Preferred Stock under certain circumstances, and
was  required  to redeem  the  Series A  Preferred  Stock,  at the option of the
holder,  in September 1996 at a redemption price of $50 per share,  plus accrued
and unpaid  dividends (the "Redemption  Price").  The Company elected to pay the
Redemption  Price in common stock. In September 1996,  55,900 shares of Series A
Preferred  Stock  converted  such  shares and  related  accrued  dividends  into
approximately  2.4 million shares of the Company's  common stock. The Company is
obligated  to use  its  reasonable  efforts  to  arrange  for a firm  commitment
underwriting  in order to redeem the Series A  Preferred  Stock.  The company is
restricted  from paying cash  dividends  on common  stock until such time as all
cumulative  dividends on  outstanding  shares of Series A and Series C Preferred
Stock have been paid.

         In December  1993,  the Board of  Directors  of the  Company  adopted a
Stockholder Rights Plan which provides for the distribution of a preferred stock
purchase  right  ("Right") as a dividend for each share of the Company's  common
stock held of record at the close of business on January 21, 1994. Under certain
circumstances  involving an acquisition  of 15% or more of the Company's  common
stock or a specified  business  combination,  the Rights would permit the holder
(other than the 15% holder) to purchase shares of the Company's common stock or,
if applicable,  common stock of an acquirer at a 50% discount upon payment of an
exercise  price of $50 per Right.  The Rights expire in December 2003 and may be
redeemed by the Company prior to a 15% acquisition at a price of $.01 per Right.

       Warrants

         The Company  issued  five-year  warrants to purchase  600,000 shares of
common stock at an exercise  price of $2.60 per share,  subject to  antidilution
adjustments,  in  connection  with the Company's  private  placement of units in
October 1993. The Company issued a five-year  warrant to purchase 235,250 shares
of common  stock at an exercise  price of $1.70 per share in  connection  with a
private placement of common stock in May 1995. In addition,  five-year  warrants
to purchase an  aggregate of 247,312  shares of common stock at exercise  prices
ranging  from $1.94 to $2.13 per share were  issued to two  equipment  financing
companies  during 1995. In October 1996,  the Company issued a five year warrant
to purchase  375,123  shares of common  stock at an exercise  price of $1.32 per
share to a patent law firm, in exchange for legal services. In October 1996, the
Company  also issued a five year  warrant to purchase  100,000  shares of common
stock at an exercise price of $1.50 per share in connection with the Convertible
Debentures  issued in September 1996.  Warrants to purchase 7.8 million and 12.2
million  shares of common stock at exercise  prices of $.001 and $.55 per share,
respectively, were also issued in connection with the Convertible Notes.



                                       45





       Stock Benefit Plans

         The  Company's  1991 Stock Plan (the  "Plan")  provides for the sale of
stock and the grant of stock options to employees,  directors,  consultants  and
advisors of the Company. Options may be designated as incentive stock options or
non-statutory  stock options;  however,  incentive  stock options may be granted
only to employees of the  Company.  Options  under the Plan have a term of up to
ten years and must be  granted  at not less than the fair  market  value (85% of
fair market value for non-statutory  options) on the date of grant. Common stock
sold and options  granted  pursuant to the Plan  generally vest over a period of
four to five years. Information with respect to the Company's 1991 Stock Plan is
as follows:




                                                                              Shares under
                                                                                 option           Price
                                                                              ------------       -------
                                                                                            
Balance at December 31, 1993...............................................     1,367,116      $ .50-15.75
     Granted...............................................................       417,950        4.88-8.75
     Exercised.............................................................        (3,306)        .50-7.25
     Cancelled.............................................................       (34,537)       .50-12.00
                                                                              ------------     -----------
Balance at December 31, 1994...............................................     1,747,223        .50-15.75
     Granted...............................................................     1,988,035        1.75-6.25
     Exercised.............................................................        (7,324)             .50
     Cancelled.............................................................    (1,839,092)        .50-9.88
                                                                              ------------      ----------
Balance at December 31, 1995...............................................     1,888,842        .50-15.75
     Granted...............................................................       136,773         .41-2.63
     Exercised.............................................................       (78,821)        .50-2.25
     Cancelled.............................................................      (297,492)       .50-15.75
                                                                              ------------     -----------
Balance at December 31, 1996...............................................    1,649,302       $  .41-7.44
                                                                              ============     ===========


         In April  1995,  the Stock  Plan  Committee  of the Board of  Directors
approved a program  whereby  employees  (including  executive  officers)  of the
Company and certain  other  option  holders  could  exchange  their  unexercised
options ("Old  Options") on a one-for-one  basis for new options ("New Options")
priced at the market  value on April 20,  1995.  The New  Options  have the same
vesting  schedule and  contractual  terms as the Old Options.  However,  the New
Options held by  employees  (excluding  executive  officers)  and certain  other
holders  were not  exercisable  until April 20, 1996 and the New Options held by
executive  officers  of the  Company  are not  exercisable  until April 20, 1997
unless the holder is involuntarily  terminated without cause prior to such date.
An  aggregate  of  1,581,330   options  with  an  average   exercise   price  of
approximately  $7.84 per share were  exchanged  for New Options with an exercise
price of $2.25 per share on April 20, 1995. All of the  replacement  options are
included in options  granted and  canceled in the above  summary of stock option
activity.

         At  December  31,  1996,  options to purchase  approximately  1,248,000
shares  of  common  stock  were  exercisable  at a  weighted  average  price  of
approximately  $2.81 per share and approximately  669,000 shares of common stock
were  available for grant or sale under the Plan. An aggregate of  approximately
18,259,930  shares of common stock were reserved for the conversion of preferred
stock and the exercise of outstanding options and warrants at December 31, 1996.

         Adjusted pro forma  information  regarding net loss is required by SFAS
123, and has been  determined  as if the Company had  accounted for its employee
stock options under the fair value method of that Statement.  The fair value for
these  options  was  estimated  at the date of grant  using the "Black  Scholes"
method for option pricing with the following  weighted-average  assumptions  for
both 1995 and 1996:  volatility  factors  of the  expected  market  value of the
Company's common stock of .7 and .8,  respectively;  risk-free interest rates of
6%; dividend yields of 0%; and a weighted-average expected life of the option of
five years.


                                       46





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

                                                     Year ended      Year ended
                                                    December 31,    December 31,
                                                       1996              1995
                                                      ------            -----

     Adjusted pro forma net loss.................. $ (14,280,253) $ (28,027,475)
     Adjusted pro forma loss per share  .......... $        (.48) $       (1.44)


         The results above are not likely to be representative of the effects of
applying FAS123 on reported net income or loss for future years as these amounts
reflect the expense for only one or two years vesting.

         The weighted-average  exercise price of options granted,  exercised and
cancelled  during  the year were  $1.77,  $2.14,  and $2.23,  respectively.  The
weighted-average  grant-date  fair value of the options  granted during the year
was $0.85.  Following is a further  breakdown of the options  outstanding  as of
December 31, 1996.




                                                                                                                   Weighted
                                                                                                                    Average
                                                 Weighted              Weighted                                    exercise
                                                  Average               Average                                    price of
        Range               Options              remaining             Exercise               Options               options
      of Prices           Outstanding          life in years             Price              exercisable           exercisable
      ---------           -----------          -------------           --------             -----------           -----------
                                                                                                      
$0.41 - $1.69                 54,878                6.37               $  0.61                26,978             $  0.50

$1.75 - $2.63              1,525,674                7.39                  2.21             1,158,883                2.22

$3.00 - $7.44                 68,750                6.58                  7.34                62,472                7.41
                    ---------------------------------------------------------------------------------------------------------------
                           1,649,302                7.30               $  2.33             1,248,133             $  2.45
                    ===============================================================================================================



9.  Research, Development and Licensing Arrangements

         The  Company  entered  into  collaborative   research  and  development
agreements  with The  Procter  & Gamble  Company  ("P&G")  and the  Wyeth-Ayerst
Laboratories  Division of American  Home  Products  Corporation  ("WyethAyerst")
during 1991 and 1992,  respectively.  The agreements  generally provided for the
Company to  receive  research  funding  for the  discovery  and  development  of
specified Anticode products. The Wyeth-Ayerst collaboration ended in August 1994
and the P&G  collaboration,  as extended and modified,  ended in September 1995.
The Company received  research  payments of $3 million during 1994,  pursuant to
the P&G and Wyeth-Ayerst agreements.  Collaborative revenues of $1.1 million and
$3.1  million  were  recognized  under  these  contracts  during  1995 and 1994,
respectively, which amounts approximate costs incurred on the programs.

         In addition to the aforementioned arrangements, the Company has entered
into various license,  royalty and sponsored  research  agreements which provide
the  Company  with  rights to develop  and  market  products  covered  under the
agreements.  In connection with certain license  agreements  entered into with a
director of the Company and two other stockholders, the Company incurred royalty
expense  of  $100,000,   $100,000,   and  $75,000  in  1996,   1995,  and  1994,
respectively,  and is  committed to pay minimum  royalties of $100,000  annually
until expiration of the related patents.


                                       47





10.  Income Taxes

         Significant  components  of the  Company's  deferred  tax  assets as of
December 31, 1996 and 1995 are shown below. A valuation allowance of $32,508,000
has been recognized to offset the net deferred tax assets as realization of such
assets is uncertain.



                                                                            December 31,
                                                                     -------------------------
                                                                      1996                1995
                                                                     ------               ----
                                                                                 
     Deferred tax assets:
       Capitalized research expenses........................   $    2,663,000       $   2,231,000
       Net operating loss carryforwards.....................       22,177,000          19,490,000
       Research and development credits.....................        3,248,000           2,920,000
       Purchased technology and license fees................        4,523,000           4,519,000
       Other, net...........................................        1,108,000             116,000
                                                               --------------       -------------
       Total deferred tax assets............................       33,719,000          29,276,000
       Valuation allowance for deferred tax assets..........      (32,508,000)        (28,305,000)
                                                               --------------       -------------
                                                                    1,211,000             971,000
     Deferred tax liabilities:
       Patent expenses......................................       (1,211,000)           (971,000)
                                                               --------------       -------------
       Net deferred tax assets..............................   $          ---       $         ---
                                                               ==============       =============



         At December  31,  1996,  the Company  has  federal and  California  net
operating  loss  carryforwards  of  approximately  $61,731,000  and  $9,525,000,
respectively.  The  difference  between  the  federal  and  California  tax loss
carryforwards is primarily  attributable to the  capitalization  of research and
development   expenses  for  California  tax  purposes  and  the  fifty  percent
limitation on California loss carryforwards.  The federal tax loss carryforwards
will begin expiring in 2003, unless previously utilized. The California tax loss
carryforwards  began  expiring  in 1996  and  will  continue  to  expire  unless
previously utilized.  (Approximately $277,000 of the California tax loss expired
in 1996.) The Company also has federal and California  research and  development
tax credit carryforwards of $2,585,000 and $1,019,000,  respectively, which will
begin expiring in 2003 unless previously utilized.

         Federal and California tax laws limit the utilization of income tax net
operating loss and credit  carryforwards  that arise prior to certain cumulative
changes  in a  corporation's  ownership  resulting  in change of  control of the
Company.  The future annual use of net operating loss carryforwards and research
and  development  tax credits will be limited due to the ownership  changes that
occurred during 1990,  1991, 1993 and 1996.  Because of the decrease in value of
the Company's  stock,  the ownership  change which  occurred in 1996 will have a
material impact on the utilization of these carryforwards.

11.  Employee Savings Plan

         The Company began a 401(k)  program in 1994 which allows  participating
employees to contribute up to 15% of their salary, subject to annual limits. The
Board of Directors may, at its sole discretion,  approve Company  contributions.
No such contributions have been approved or made.

12.  Gain on Sale of Technology

         In December 1996, the Company sold the rights to two  development-stage
dermatological products for cash of $373,261.

13.  Contingencies

         On February 5, 1997,  Equity-Linked  Investors,  L.P. and Equity-Linked
Investors-II (collectively,  the "Plaintiffs") who, as a group, beneficially own
more than five  percent of the  outstanding  shares of the  Common  Stock of the
Company  as Series A  preferred  stockholders,  filed  Suit (the  "Suit") in the
Delaware  Court of  Chancery  (the  "Court")  against the  Company,  each of the
Company's directors and the Aries Funds. Through the Suit, the Plaintiffs

                                       48





are seeking to enjoin the transactions described in footnote 8 under the caption
"Subsequent Event" (the "Transactions"),  damages, attorney fees, and such other
and further relief as the Court may deem just and proper.  The Suit alleges that
the Board of Directors of the Company  breached  fiduciary  duties by failing to
consider financing alternatives to the Transactions and further alleges that the
Transactions were not in the best interests of the  stockholders.  Additionally,
the Suit alleges that the Aries Funds aided and abetted such breach of fiduciary
duty through their participation in the Transactions.  On March 4 and 5, 1997, a
trial was held before the Court.  The Court has established a briefing  schedule
and set a hearing for post-trial arguments on April 1, 1997.

         In October 1996, JBL retained a chemical  consulting  firm to advise it
with  respect to  environmental  compliance  regarding  an  incident of soil and
groundwater   contamination   (the  "Spill")  by  small  quantities  of  certain
chemicals.  The Company believes, based upon information known to date, that the
Spill is  relatively  minor and will not have a material  adverse  effect on the
business of the Company, although there can be no assurance thereof.


                                       49





                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Genta Jago Technologies B.V.

         We  have  audited  the  accompanying   balance  sheets  of  Genta  Jago
Technologies  B.V. (a  development  stage  company) as of December  31, 1996 and
1995, and the related  statements of operations,  stockholders'  equity and cash
flows for each of the three years in the period ended  December 31, 1996 and for
the period  December 15, 1992  (inception)  through  December  31,  1996.  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 generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in  all  material  respects,  the  financial  position  of  Genta  Jago
Technologies  B.V. (a development  stage company) at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period  ended  December  31,  1996 and for the period  December  15, 1992
(inception)  through  December 31, 1996 in conformity  with  generally  accepted
accounting principles.

         As discussed  in Note 1 to the  financial  statements,  the Company has
incurred  operating losses since inception and requires  substantial  sources of
financing  to  fund  its  operations   through  1997.   These  conditions  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plan as to this  matter  are  also  described  in Note 1. The 1996
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


                                                               ERNST & YOUNG LLP

San Diego, California
February 28, 1997


                                       50



                          GENTA JAGO TECHNOLOGIES B.V.
                         (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEETS




                                                                                         DECEMBER 31,
                                                                        -----------------------------------------
                                ASSETS                                         1996                  1995
                                                                        -------------------    ------------------

Current assets:
                                                                                                       
   Cash and cash equivalents.................................                      $36,092              $245,172
   Receivables under collaboration agreements................                      903,838                     -
   Advance contract payments to related parties..............                            -             1,538,594
   Other current assets......................................                      105,934                     -
                                                                        -------------------    ------------------
Total current assets.........................................                    1,045,864             1,783,766
Property and equipment, net..................................                        4,900                 7,500
Other assets.................................................                        6,651                 4,492
                                                                        ===================    ==================
                                                                                $1,057,415            $1,795,758
                                                                        ===================    ==================


                 LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)

Current liabilities:
   Accounts payable and accrued expenses ....................                     $571,539              $247,354
   Payable to related parties................................                    2,481,452               794,838
   Deferred contract revenue.................................                            -               317,555
                                                                        -------------------    ------------------
Total current liabilities....................................                    3,052,991             1,359,747
Notes payable to related party...............................                   15,287,099            13,787,099
Stockholders' equity (net capital deficiency):
   Common Stock, 14,700 shares authorized, 10,000 shares issued
      and outstanding at stated value........................                      512,000               512,000
   Additional paid-in capital................................                    3,741,950             3,741,950
   Deficit accumulated during the development stage..........                 (21,536,625)          (17,605,038)
                                                                        -------------------    ------------------
Net capital deficiency.......................................                 (17,282,675)          (13,351,088)
                                                                        ===================    ==================
                                                                                $1,057,415            $1,795,758
                                                                        ===================    ==================



                             See accompanying notes  

                                       51



                          Genta Jago Technologies B.V.
                         (A Development Stage Company)
                            STATEMENTS OF OPERATIONS



                                                                                                            
                                                                                                            
                                                                                                              Cumulative from    
                                                                 Years ended December 31.                           inception   
                                                      -----------------------------------------------        (December 15, 1992)
                                                        1996               1995                1994           to December 31, 1996
                                                      -------------   ----------------    ---------------    ----------------------
                                                                                                              
Revenues:
   Collaborative research
      and development............................         $5,477,059        $2,968,463         $5,284,602        $15,406,378
                                                                                                              
Cost and expenses:                                                                                            
   Research and development,                                                                                  
      including contractual amounts to                                                                        
      related parties of $7,040,438, $9,318,460,                                                              
      and $12,456,985, and $35,629,158 in 1996,                                                               
      1995, 1994 and the period from inception                                                                
      (December 15, 1992) to December 31, 1996,                                                               
      respectively...............................          8,091,465          9,866,038         13,046,365         38,263,584
   General and and administrative................            361,920            470,081            291,782          1,385,383
                                                       ---------------   ----------------    ---------------    ---------------
                                                           8,453,385         10,336,119         13,338,147         39,648,967
                                                       --------------   ----------------    ---------------     --------------
Loss from operations............................          (2,976,326)        (7,367,656)        (8,053,545)       (24,242,589)
Other income (expense):                                                                                       
   Gain on waiver of debt in exchange for return                                                              
      of license rights to related party                           -          4,703,352                  -          4,703,352
Interest income.................................               5,814              2,620              8,215             19,546
Interest expense................................            (961,075)          (749,808)          (306,051)        (2,016,934)
                                                     ----------------   ----------------    ---------------     --------------
                                                            (955,261)          3,956,164          (297,836)          2,705,964
                                                     ----------------   ----------------    ---------------     --------------
Net loss........................................         $(3,931,587)       $(3,411,492)       $(8,351,381)      $(21,536,625)
                                                     ================   ================    ===============     ==============
 
                                                     
                             See accompanying notes  
                                                     
                                       52            
                                                     
                                                    


                          GENTA JAGO TECHNOLOGIES B.V.
                         (A DEVELOPMENT STAGE COMPANY)
           STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
         PERIOD FROM INCEPTION (DECEMBER 15, 1992) TO DECEMBER 31, 1996


                                                                           
                                                             
                                            COMMON                              DEFICIT          STOCKHOLDERS' 
                                             STOCK            ADDITIONAL       ACCUMULATED         EQUITY     
                                      --------------------    PAID-IN           DURING THE       (NET CAPITAL  
                                        SHARES    AMOUNT      CAPITAL       DEVELOPMENT STAGE    DEFICIENCY)
                                      ---------- ---------   -----------   ------------------   -------------
                                                                                          
Issuance of common stock at
 $51.20 per share for cash ....       2,940     $150,528     $      --      $        --           $150,528
Capital contributions in excess   
 of stated value ..............          --           --         12,882               --            12,882
                                    -------     --------     ----------     ------------      ------------
Balance at December 31, 1992 ..       2,940      150,528         12,882               --           163,410
Issuance of common stock at       
 $51.20 per share for cash .....      7,060      361,472             --               --           361,472
Capital contributions in excess   
of stated value ...............          --           --      3,729,068               --         3,729,068
Net loss ......................          --           --             --       (5,842,165)       (5,842,165)
                                     ------     --------     ----------     ------------      ------------
Balance at December 31, 1993 ..      10,000      512,000      3,741,950       (5,842,165)       (1,588,215)
Net loss ......................          --           --             --       (8,351,381)       (8,351,381)
                                     ------     --------     ----------     ------------      ------------
Balance at December 31, 1994 ..      10,000      512,000      3,741,950      (14,193,546)       (9,939,596)
Net loss ......................          --           --             --       (3,411,492)       (3,411,492)
                                     ------     --------     ----------     ------------      ------------
Balance at December 31, 1995 ..      10,000      512,000      3,741,950      (17,605,038)      (13,351,088)
Net loss ......................          --           --             --       (3,931,587)       (3,931,587)
                                     ------     --------     ----------     ------------      ------------
                                     
Balance at December 31, 1996 ..      10,000     $512,000     $3,741,950     $(21,536,625)     $(17,282,675)
                                     ======     ========     ==========     ============      ============



                             See accompanying notes.

                                       53


                          GENTA JAGO TECHNOLOGIES B.V.
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS



                                                                                                          CUMULATIVE FROM
                                                                                                             INCEPTION
                                          YEARS ENDED  DECEMBER 31,                                      (DECEMBER 15, 1992)
                                          ------------------------------------- --------------------
                                               1996                1995                 1994           TO DECEMBER 31, 1996
                                          ---------------   -------------------   -----------------    ----------------------
OPERATING ACTIVITIES
                                                                                                             
Net loss                                    $(3,931,587)          $(3,411,492)        $(8,351,381)             $(21,536,625)
Items reflected in net loss not
requiring cash:
   Depreciation and amortization                   2,600                 2,600               3,451                    13,168
   Technology license fee                                                                                            192,580
                                                       -                     -                   -
   Gain on waiver of debt in exchange
     for return of license rights to                                                                   
     related party                                     -            (4,703,352)                  -                (4,703,352)
   Changes in operating assets and liabilities:
      Advance contract payments
         to related parties                    1,538,594               435,276           1,016,053
                                                                                                                           -
      Receivables under collaboration
         agreements                            (903,838)                     -                   -                  (903,838)
      Other current assets                     (105,934)                68,440             (56,770)                 (105,934)
      Accounts payable and accrued expenses     324,185                112,227              20,112                   571,539
      Payable to related parties               1,686,614               277,479             267,085                 2,481,452
      Deferred contract revenue                (317,555)           (1,071,863)           1,065,672
                                          ---------------   -------------------   -----------------    ----------------------
Net cash used in operating activities        (1,706,921)           (8,290,685)         (6,035,778)              (23,991,010)
INVESTING ACTIVITIES
Purchase of property and equipment and
other                                            (2,159)               (4,492)                   -                  (24,719)
                                          ---------------   -------------------   -----------------    ----------------------
Net cash used in investing activities            (2,159)               (4,492)                   -                  (24,719)

FINANCING ACTIVITIES
Proceeds from issuance of common stock
   and capital contributions                           -                     -                   -
Proceeds from notes payable to related         1,500,000             8,415,407           6,688,756                20,590,643
party
Repayment of notes payable to related                                          
party                                                  -                     -           (600,192)                 (600,192)
                                          ---------------   -------------------   -----------------    ----------------------
Net cash provided by financing activities      1,500,000             8,415,407           6,088,564                24,051,821
                                          ---------------   -------------------   -----------------    ----------------------
Increase (decrease) in cash and
   cash equivalents                            (209,080)               120,230              52,786                    36,092
Cash and cash equivalents at
   beginning of period                           245,172               124,942              72,156                         -
                                          ---------------   -------------------   -----------------    ----------------------
Cash and cash equivalents at end
   of period                                     $36,092              $245,172            $124,942                   $36,092
                                          ===============   ===================   =================    ======================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
   Interest paid                          $           -        $             -            $299,808                  $299,808
                                          ===============   ===================   =================    ======================



                             See accompanying notes.

                                       54





                          Genta Jago Technologies B.V.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS


1.  Organization and Significant Accounting Policies

       Organization and Business

         Genta  Jago  Technologies  B.V.  ("Genta  Jago")  was  incorporated  in
December 1992 under the laws of the  Netherlands.  Genta Jago is a joint venture
owned and controlled 50% by Genta  Incorporated  ("Genta") and 50% by Jagotec AG
("Jagotec"), a subsidiary of Jago Holding AG which was acquired by SkyePharma in
May 1996. Genta Jago was formed to develop and commercialize  pharmaceuticals in
six major therapeutic areas, and commenced  research and development  activities
in  January  1993.  Genta  Jago is  managed  under the  direction  of a Board of
Managing  Directors  consisting of two members  appointed from each of Genta and
Jagotec and one outside member.

         Pursuant to terms of the joint  venture  arrangement,  Jagotec  granted
Genta  Jago  an  exclusive  license  to its  GEOMATRIX  oral  controlled-release
technology  for  the  development  and  commercialization  of  approximately  25
specified products.  In May 1995, Genta and Jagotec entered into an agreement to
expand  Genta  Jago by  adding  the  rights  to  develop  and  commercialize  an
additional 35 products (see  "Expansion of Genta Jago").  With these  additional
products,  Genta Jago now  maintains  the  rights to develop  controlled-release
formulations of approximately 60 products using Jagotec's GEOMATRIX technology.

         Genta  Jago is  dependent  on future  funding  from  Genta (see Note 2,
"Capital  Contributions and Working Capital  Agreement") and corporate  partners
and is considered a Development  Stage Company.  Genta has incurred  significant
operating losses since its inception and requires substantial additional sources
of  financing  to fund its  operations  through  1997,  conditions  which  raise
substantial  doubt about Genta's ability to continue as a going concern.  In the
event funding  sources prove to be unavailable  or inadequate to Genta,  Genta's
ability to provide further funding to Genta Jago could be significantly limited.
In this event,  Genta Jago would be dependent on  collaborative  funding and may
have to  consider  the  delay  or  curtailment  of  certain  of its  development
programs.

       Revenue Recognition

         Collaborative  research and development revenues are recorded as earned
as research and  development  activities  are  performed  under the terms of the
contracts,  with such revenues  generally  approximating  costs  incurred on the
programs. Payments received in excess of amounts earned are deferred.

       Research and Development Expenses

         Research and development costs are expensed as incurred.

       Depreciation

         The costs of furniture and equipment are depreciated over the estimated
useful lives of the assets using the straight-line method.

       Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of 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.


                                       55





2.  Related Party Transactions

        License Agreements

         Genta Jago entered into  license  agreements  with Jagotec and Genta in
connection with the planned development and  commercialization of GEOMATRIX oral
controlled-release  products and Anticode  products,  respectively.  The license
with Genta was terminated in 1995 in connection  with Genta Jago's return of the
right to develop six Anticode  products to Genta.  Pursuant to such  agreements,
Genta Jago  recorded  license fee expense of  $620,000,  $85,000,  and  $170,000
during the years ended December 31, 1996,  1995 and 1994,  respectively,  and is
obligated  to make  future  annual  license  fee  payments of $85,000 to Jagotec
through 1997.

       Research and Development and Service Agreements

         Genta Jago has  contracted  with Genta and Jagotec to conduct  research
and  development  and  provide  certain  other  services.  Under  terms  of such
agreements,  Genta Jago generally is required to reimburse the parties for their
respective  costs incurred plus a specified  mark-up.  Payments for research and
development  services are  generally  made in advance and are  refundable if the
services are not  performed.  For the years ended  December  31, 1996,  1995 and
1994, Genta Jago incurred  expenditures of $7 million,  $9.2 million,  and $12.3
million,  respectively,  pursuant to such research and  development  and service
agreements.

       Capital Contributions and Working Capital Agreement

         In  connection  with the  formation  of the  joint  venture,  Genta was
required to make an initial capital contribution of $4 million to Genta Jago. In
addition,  Genta Jago entered into a working capital  agreement with Genta which
expires in October 1998.  Pursuant to this agreement,  Genta is required to make
working  capital  loans to  Genta  Jago up to a  mutually  agreed  upon  maximum
principal  amount,  which  amount is  established  by the  parties on a periodic
basis.  As of December 31, 1996,  Genta had advanced  working  capital  loans of
approximately  $15.3 million to Genta Jago, net of principal  repayments and the
loan credit discussed below. Such loans bear interest at rates per annum ranging
from 5.81% to 7.5%,  and are payable in full on October 20, 1998,  or earlier in
the event  certain  revenues  are  received  by Genta  Jago and  specified  cash
balances are maintained by Genta Jago.

       Expansion of Genta Jago

         In May 1995,  Genta and Jagotec  entered  into an  agreement  to expand
Genta Jago by adding the rights to develop and  commercialize  an  additional 35
products (the "Additional Products"). With these Additional Products, Genta Jago
now  maintains  the  rights  to  develop   controlled-release   formulations  of
approximately  60  products  using  Jagotec's  GEOMATRIX  technology.  Under the
agreement, Genta Jago also acquired certain manufacturing rights with respect to
such  products.  In  connection  with the  expansion of Genta Jago,  the parties
elected   to  focus   Genta   Jago's   activities   exclusively   on   GEOMATRIX
oral-controlled  release products. As a result, Genta Jago returned to Genta the
right to develop six Anticode  products  licensed from Genta in connection  with
the  formation  of Genta  Jago in 1992.  In  connection  with the  return of the
Anticode license rights to Genta in May 1995, Genta Jago's note payable to Genta
was  credited  with a principal  reduction  of  approximately  $4.4  million and
accrued interest payable to Genta was reduced by approximately  $300,000.  Genta
Jago recorded the loan credit and related  accrued  interest as a gain on waiver
of debt in exchange for return of license rights to related party.

         To obtain the rights to the Additional  Products and the  manufacturing
rights in May 1995,  Genta applied $5 million in option and related fees paid to
Jagotec  and its  affiliates,  of which  $3.85  million was paid during 1994 and
$1.15  million  was paid in the first  quarter  of 1995.  Genta  also  issued an
additional  1.24  million  unregistered  shares of  Genta's  common  stock to an
affiliate  of  Jagotec  in May  1995.  Genta  Jago is  required  to pay  certain
additional  fees to Jagotec  upon Genta  Jago's  receipt of revenues  from third
parties, and pay manufacturing royalties to Jagotec.


                                       56



3.  Collaborative Research and Development Agreements

         In January 1993, Genta Jago entered into a collaboration agreement with
Gensia   for   the   development   and   commercialization   of   certain   oral
controlled-release  pharmaceutical  products  for  treatment  of  cardiovascular
disease.  Under the  agreement,  Gensia  provides  funding for  formulation  and
preclinical  development  to be conducted by Genta Jago and is  responsible  for
clinical development,  regulatory submissions and marketing. Genta Jago received
$2.2 million,  $1.9 million, and $4.9 million of funding in 1996, 1995 and 1994,
respectively, pursuant to the agreement. Collaborative revenues of $2.8 million,
$3 million,  and $4.2 million were  recognized  under the  agreement  during the
years ended December 31, 1996, 1995 and 1994,  respectively.  Effective  October
1996,  Gensia  and  SkyePharma  reached an  agreement  whereby  Brightstone  was
assigned Gensia's rights (and those of Gensia's partner, Boehringer Mannheim) to
develop and co-promote the potentially  bioequivalent  nifedipine  product under
the  collaboration  agreement  with Genta Jago.  The  assignment was accepted by
Genta Jago and has no impact on the terms of the original agreement.  Genta Jago
is still  entitled to receive  additional  milestone  payments from  Brightstone
triggered upon  regulatory  submissions  and approvals,  as well as royalties or
profit sharing ranging from 10% to 21% of product sales, if any.

         In March 1996,  Genta Jago entered into a  collaborative  licensing and
development  agreement  with  Apothecon.  Under  the  terms  of  the  agreement,
Apothecon  will provide  funding to Genta Jago up to a specified  maximum amount
for  the   formulation,   development  and  clinical   testing  of  a  GEOMATRIX
controlled-release  formulation  of Q-CR  ketoprofen  (Oruvail(R)),  subject  to
certain early termination  rights. The agreement also provides for Genta Jago to
receive potential  milestone  payments and royalties on product sales.  Terms of
the agreement  provide  Apothecon  exclusive rights to market and distribute the
products on a worldwide  basis.  During 1996,  Genta Jago  recorded  revenue and
received  $1.1 million in funding  under the  arrangement  and  recognized  $1.3
million of collaborative revenue.

         In October 1996, Genta Jago entered into five  collaborative  licensing
and development agreements with Krypton,  whereby Genta Jago would sublicense to
Krypton,   rights  to  develop  and  commercialize   potentially   bioequivalent
GEOMATRIX(R)  versions of five currently marketed  products,  as well as another
agreement  granting  Krypton  an option to  sublicense  rights  to  develop  and
commercialize  an improved  version of a sixth product.  During 1996, Genta Jago
received funding of $1 million under the collaborative agreements and recognized
$1 million of collaborative revenue.

4.  Income Taxes

         Significant  components  of Genta  Jago's  deferred  tax  assets  as of
December 31, 1996 are shown below. A valuation  allowance of $2,154,000 has been
recognized  to offset the deferred tax assets as  realization  of such assets is
uncertain.




                                                                                             December 31,
                                                                                             ------------
Deferred tax assets:                                                                   1996              1995
                                                                                       ----              ----

                                                                                                         
         Net operating loss carryforwards                                             $ 2,154,000       $1,761,000

         Valuation allowance for deferred tax assets                                  (2,154,000)       (1,761,000)
                                                                                    -------------      ------------

         Net deferred tax assets                                                   $      ---         $      ---
                                                                                   ==============     ==============




         At  December  31,  1996,  Genta Jago has  foreign  net  operating  loss
carryforwards of approximately  $21,537,000.  The foreign tax loss carryforwards
will begin expiring in 2000, unless previously utilized.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         Not Applicable.

                                       57



                                    Part III

Item 10. Directors and Executive Officers of the Registrant

         (a) The sections  labeled  "Proposal Two -- Election of Directors"  and
"Section  16(a)  Beneficial  Ownership  Reporting  Compliance"  appearing in the
Company's Proxy Statement are incorporated herein by reference.

         (b)  Information  concerning  the Company's  Executive  Officers is set
forth in Part I of this Form 10-K.

Item 11. Executive Compensation

         The section labeled  "Compensation of Executive Officers and Directors"
appearing in the Company's Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The  section  labeled  "Stock   Ownership  of  Management  and  Certain
Beneficial  Owners"  appearing in the Company's  Proxy Statement is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions

         The section labeled "Certain  Relationships  and Related  Transactions"
appearing in the Company's Proxy Statement is incorporated herein by reference.

                                     Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)  (1)  Financial statements

     Reference is made to the Index to Financial Statements under Item 8 of this
     report on Form 10-K.

          (2)  All schedules are omitted because they are not required,  are not
               applicable,  or  the  required  information  is  included  in the
               consolidated financial statements or notes thereto.

          (3)  Reference is made to Paragraph (c) below for Exhibits required by
               Item 601 of Regulation S-K,  including  management  contracts and
               compensatory plans and arrangements.

     (b) Reports on Form 8-K.  During the fourth  quarter of 1996,  the  Company
         filed the following report on Form 8-K: On October 8, 1996, the Company
         filed a report  on Form 8-K to  disclose  the  resignation  of James C.
         Blair,  Ph.D.  as a  Director  and as Vice  Chairman  of the  Board  of
         Directors of the Company.

     (c) Exhibits  required by Item 601 of Regulation  S-K with each  management
         contract,  compensatory  plan  or  arrangement  required  to  be  filed
         identified.

                                       58





 Exhibit
 Number        Description of Document
 ------        -----------------------

3(i).1(1)      Restated   Certificate  of   Incorporation   as  amended  by  the
               Certificate of the Powers,  Designations,  Preferences and Rights
               of the  Series B  Convertible  Preferred  Stock as amended by the
               Certificate of the Powers,  Designations,  Preferences and Rights
               of the Series C Convertible Preferred Stock.

3(i).2(18)     Certificate  of  Designations  of Series D Convertible  Preferred
               Stock of the Company.

3(ii).1(2)     By-laws of the Company.

    4.1(5)     Specimen Common Stock Certificate.

    4.2(4)     Specimen Series A Convertible Preferred Stock Certificate.

    4.3(4)     Specimen Warrant.

    4.4(4)     Form of Unit Purchase Agreement dated as of September 23, 1993 by
               and  between  the  Company  and the  Purchasers  of the  Series A
               Convertible Preferred Stock and Warrants.

   4.5(11)     Form of Rights  Agreement  dated as of December  16, 1993 between
               Genta Incorporated and First Interstate Bank of California, which
               includes as Exhibit A the form of  Certificate  of  Designations,
               Rights and Preferences of Series F Participating Preferred Stock.

    4.6(8)     Form of Regulation S Subscription  Agreement entered into between
               the Company and certain  purchasers  of the Series B  Convertible
               Preferred Stock.

    4.7(1)     Form of Securities  Subscription  Agreement  entered into between
               the Company and certain  purchasers  of the Series C  Convertible
               Preferred Stock.

    4.8(1)     Common Stock Purchase Warrant dated December 14, 1995 between the
               Company and Lease Management Services, Inc.

   4.9(17)     Warrant for the Purchase of 213,415 Shares of Common Stock issued
               to Lyon & Lyon in October 1996.

  4.10(17)     Warrant for the Purchase of 100,000 Shares of Common Stock issued
               to Michael Arnouse in October 1996.

10.1(3)(6)(6) Amended and Restated 1991 Stock Plan of Genta Incorporated.

   10.2(5)     Master Lease  Agreement No. 10300 dated as of May 4, 1989 between
               the Company and Lease Management Services,  Inc. and Master Lease
               Agreement  No.  10428  dated as of August 15,  1991  between  the
               Company and Lease Management Services, Inc.

  10.3(5)      Standard  Industrial  Lease dated  October 24, 1988,  as amended,
               between the Company and General Atomics.

  10.4(5)      Revised and Restated  Lease dated as of March 1, 1990 between JBL
               Scientific, Inc. and Granada Associates.


                                       59





 10.5(5)(6)    Employment  Agreement dated February 20, 1991 between the Company
               and Dr. Robert E. Klem.

 10.6(5)(6)    Employment  Agreement dated February 20, 1991 between the Company
               and Dr. Lauren R. Brown.

 10.7(5)(6)    Form  of  Indemnification  Agreement  entered  into  between  the
               Company and its directors and officers.

 10.8(5)       Preferred  Stock Purchase  Agreement dated September 30, 1991 and
               Amendment Agreement dated October 2, 1991.

10.9(5)(6)     Consulting  Agreement  dated February 2, 1989 between the Company
               and Dr. Paul O.P. Ts'o.

10.10(5)(7)    Development,  License and Supply Agreement dated February 2, 1989
               between the Company and Gen-Probe Incorporated.

10.12(5)(7)    License  Agreement dated February 2, 1989 among the Company,  Dr.
               Ts'o, Dr. Miller and Mr. Finch.

10.13(5)(7)    License  Agreement dated May 15, 1990 between the Company and The
               Johns Hopkins University.

10.19(6)(1)    Promissory  Note dated March 7, 1996  between the Company and Dr.
               Donald Picker.

10.21(7)(9)    Common Stock  Transfer  Agreement  dated as of December 15, 1992,
               between the Company and Dr. Jacques Gonella.

10.32(9)       Consulting  Agreement dated as of December 15, 1992,  between the
               Company and Dr. Jacques Gonella.

10.36(7)(9)    Common Stock  Transfer  Agreement  dated as of December 15, 1992,
               between the Company and Jagotec AG.

10.37(7)(9)    Collaboration  Agreement  dated as of January 22,  1993,  between
               Jobewol  Investments  B.V. (now known as Genta Jago  Technologies
               B.V.) and Gensia, Inc.

 10.46(10)     Form of  Purchase  Agreement  between  the  Company  and  certain
               purchasers of Common Stock.

 10.47(10)     Common  Stock  Purchase  Warrant  dated May 8, 1995  between  the
               Company and Index Securities S.A.

10.48(7)(12)   Restated Joint Venture and Shareholders Agreement dated as of May
               12, 1995 between the  Company,  Jagotec AG, Jago Holding AG, Jago
               Pharma AG and Genta Jago Technologies B.V.

10.50(7)(12)   Limited  Liability  Company  Agreement of Genta Jago Delaware LLC
               dated as of May 12,  1995  between  GPM  Generic  Pharmaceuticals
               Manufacturing Inc. and the Company.

10.51(7)(12)   Restated Transfer Restriction  Agreement dated as of May 12, 1995
               between the Company and Jagotec AG.

10.52(7)(12)   Transfer  Restriction  Agreement dated as of May 12, 1995 between
               the Company, GPM Generic  Pharmaceuticals  Manufacturing Inc. and
               Jago Holding AG.

                                       60






 10.53(7)(12)  Common Stock Transfer  Agreement dated as of May 30, 1995 between
               the Company and Jago Finance Limited.

 10.54(7)(12)  Stockholders'  Agreement  dated as of May 30,  1995  between  the
               Company,  Jagotec  AG,  Dr.  Jacques  Gonella  and  Jago  Finance
               Limited.

 10.55(7)(12)  Restated Geomatrix Research and Development Agreement dated as of
               May 12,  1995  between  Jago Pharma AG, the  Company,  Genta Jago
               Delaware, L.L.C. and Genta Jago Technologies B.V.

 10.56(7)(12)  Restated Services Agreement dated as of May 12, 1995 between Jago
               Pharma AG, the Company,  Genta Jago  Delaware,  L.L.C.  and Genta
               Jago Technologies B.V.

 10.57(7)(12)  Restated  Working Capital  Agreement dated as of May 12, 1995 and
               Amendment No. 1 to Restated Working Capital Agreement dated as of
               July 11, 1995  between  the  Company and Genta Jago  Technologies
               B.V.

 10.58(7)(12)  Restated  Promissory  Note dated as of  January  1, 1994  between
               Genta Jago Technologies B.V. and the Company.

 10.59(7)(12)  Restated  License  Agreement  dated  as of May 12,  1995  between
               Jagotec AG and the Company.

 10.61(7)(12)  Restated  Geomatrix  License  Agreement  dated as of May 12, 1995
               between Jagotec AG and Genta Jago Technologies B.V.

 10.62(7)(12)  Geomatrix  Manufacturing  License  Agreement  dated as of May 12,
               1995 between Jagotec AG and Genta Jago Technologies B.V.

 10.63(7)(12)  Restated  Geomatrix  Supply  Agreement  dated as of May 12,  1995
               between Jago Pharma AG and Genta Jago Technologies B.V.

 10.65(13)     Form of Regulation S Subscription  Agreement entered into between
               the Company and certain  purchasers  of the Series B  Convertible
               Preferred Stock.

  10.66(1)     Promissory  Note dated  November 8, 1995  between the Company and
               Domain Partners, L.P.

  10.67(1)     Promissory  Note dated  November 8, 1995  between the Company and
               Domain Partners II, L.P.

  10.68(1)     Promissory  Note dated  November 8, 1995  between the Company and
               Institutional Venture Partners, IV.

 10.69(14)     Amendment to Promissory Note effective March 22, 1996 between the
               Company and Institutional Venture Partners, IV.

 10.70(14)     Amendment to Promissory Note effective March 22, 1996 between the
               Company and Domain Partners, L.P.

 10.71(14)     Amendment to Promissory Note effective March 22, 1996 between the
               Company and Domain Partners II, L.P.

 10.72(15)     Amendments  to the  Series C  Securities  Subscription  Agreement
               dated April 23, 1996.


                                       61





 10.73(16)     Form of Regulation S Securities  Subscription  Agreement  entered
               into  between  the  Company  and  certain  purchasers  of  the 4%
               Convertible Debentures, Due August 1, 1997.

 10.74(16)     Form of 4% Convertible Debenture Due August 1, 1997.

 10.75(19)     Note and Warrant Purchase Agreement dated as of January 28, 1997,
               by and among the Company,  The Aries Fund, A Cayman  Island Trust
               (the   "Trust")  and  The  Aries   Domestic   Fund,   L.P.   (the
               "Partnership").

 10.76(19)     Letter dated January 28, 1997 from Genta Incorporated.

 10.77(19)     Senior  Secured  Convertible  Bridge  Note of the  Company  dated
               January 28, 1997 for $1,050,000.

 10.78(19)     Senior  Secured  Convertible  Bridge  Note of the  Company  dated
               January 28, 1997 for $1,950,000.

 10.79(19)     Class  A  Bridge  Warrant  of the  Company  for the  purchase  of
               2,730,000 shares of Common Stock.

 10.80(19)     Class  A  Bridge  Warrant  of the  Company  for the  purchase  of
               5,070,000 shares of Common Stock.

 10.81(19)     Class  B  Bridge  Warrant  of the  Company  for the  purchase  of
               4,270,000 shares of Common Stock.

 10.82(19)     Class  B  Bridge  Warrant  of the  Company  for the  purchase  of
               7,930,000 shares of Common Stock.

 10.83(19)     Security  Agreement  dated as of January  28,  1997  between  the
               Company and Paramount Capital, Inc.

 10.84(19)     Letter  Agreement  dated  January  28,  1997  among the  Company,
               Paramount Capital, Inc., the Partnership and the Trust.

 10.85(19)     Amendment No. 1 dated as of January 28, 1997 to Rights Agreement,
               dated  as  of  December  16,   1997,   between  the  Company  and
               ChaseMellon Shareholder Services L.L.C.

10.86(20)(6)   Executive  Compensation  Agreement  dated as of  January  1, 1996
               between the Company and Howard Sampson.

 10.87(20)     Collaboration  Agreement  dated  December  26,  1995  between the
               Company and Johnson & Johnson Consumer Products, Inc.

 10.88(20)     Assignment   Agreement   (of   Gensia   Inc.'s   rights   in  the
               Collaboration  Agreement  between  Genta Jago and  Gensia,  Inc.,
               dated  January  23,  1993) to  Brightstone  Pharma,  Inc.,  dated
               October 1, 1996 among Gensia, Inc., Genta Jago Technologies B.V.,
               Brightstone Pharma, Inc., and SkyePharma PLC.

 22.1(20)      Subsidiaries of the Registrant.

 23.1(20)      Consent of Ernst & Young LLP, Independent Auditors.

 24.1          Power of Attorney. (See page 65)

                                       62



(1)      Incorporated  herein by reference to the exhibits of the same number to
         the Company's  Annual  Report on Form 10-K for the year ended  December
         31, 1995, Commission File No. 0-19635.

(2)      Exhibit 3(ii).1 is  incorporated  herein by reference to the Exhibit of
         the same number  contained in Post-  Effective  Amendment  No. 1 to the
         Company's   Registration   Statement  on  Form  S-3,  Registration  No.
         33-72130.

(3)      Exhibit 10.1 is incorporated herein by reference to Exhibit 10.1 to the
         Company's   Registration   Statement  on  Form  S-8,  Registration  No.
         33-85887.

(4)      Exhibits 4.2, 4.3, and 4.4 are incorporated by reference to Exhibits of
         the  same  number  to the  Company's  Report  on Form  8-K  dated as of
         September 24, 1993, Commission File No. 0-19635.

(5)      Incorporated  herein by  reference to the exhibit of the same number to
         the  Company's  Registration  Statement on Form S-1,  Registration  No.
         33-43642.

(6)      Indicates management contract, compensatory plan or arrangement.

(7)      The Company has been granted confidential treatment of certain portions
         of this exhibit.

(8)      Exhibit  4.6 is  incorporated  by  reference  to  Exhibit  10.65 to the
         Company's Report on Form 8-K dated as of December 29, 1995,  Commission
         File No. 0-19635.

(9)      Incorporated  by  reference  to the  exhibits of the same number to the
         Company's   Registration   Statement  on  Form  S-3,  Registration  No.
         33-58362.

(10)     Incorporated  by  reference  to the  exhibits of the same number to the
         Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
         1995, Commission File No. 0-19635.

(11)     Incorporated  by  reference to Exhibit 5.1 to the  Company's  Report on
         Form 8-K dated as of December 16, 1993, Commission File No. 0-19635.

(12)     Incorporated  by  reference  to the  exhibits of the same number to the
         Company's  Quarterly  Report on Form 10-Q/A for the quarter  ended June
         30, 1995, Commission File No. 0-19635.

(13)     Incorporated  herein by  reference to the exhibit of the same number to
         the Company's Report on Form 8-K dated as of December 29, 1995.

(14)     Incorporated  herein by  reference  to  exhibits  10.1,  10.2 and 10.3,
         respectively,  to the  Company's  Registration  Statement  on Form  S-3
         (Registration No. 333-3846)

(15)     Incorporated  herein by  reference  to  Exhibit  10.1 to the  Company's
         Quarterly  Report on Form 10-Q for the  quarter  ended  June 30,  1996,
         Commission File No. 0-19635.

(16)     Exhibits  10.73 and  10.74 are  incorporated  herein  by  reference  to
         Exhibits 10.1 and 10.2 to the Company's  Report on Form 8-K dated as of
         September 17, 1996, Commission File No. 0-19635.

(17)     Exhibits 4.9 and 4.10 are incorporated  herein by reference to Exhibits
         4.1 and 4.2 respectively to the Company's Quarterly Report on Form 10-Q
         for the quarter ended September 30, 1996, Commission File No. 0-19635.

(18)     Exhibit  3(i).2 is  incorporated  by  reference  to Exhibit 3(i) to the
         Company's  Report on Form 8-K dated as of January 28, 1997,  Commission
         File No. 0-19635.


                                       63



(19)     Exhibits 10.75, 10.76, 10.77, 10.78, 10.79, 10.80, 10.81, 10.82, 10.83,
         10.84 and 10.85 are incorporated  herein by reference to Exhibits 10.1,
         10.2,  10.3,  10.4,  10.5,  10.6,  10.7,  10.8,  10.9,  10.10 and 10.11
         respectively  to the  Company's  Report on Form 8-K dated as of January
         28, 1997, Commission File No.
         0-19635.

(20)     Filed herewith.

         (d) See (a)(2) above.

                                       64





                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly  authorized,  on this 13th day of
March, 1997.
 
                                                   Genta Incorporated

                                                   By /s/Thomas H. Adams
                                                      ------------------
                                                      Thomas H. Adams, Ph.D.
                                                      Chairman and Chief 
                                                        Executive Officer

                                POWER OF ATTORNEY

      KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears
below   constitutes  and  appoints   Thomas  H.  Adams,   his  true  and  lawful
attorney-in-fact   and  agent,   each  with  full  power  of  substitution   and
resubstitution,  for  him  and in his  name,  place  and  stead,  in any and all
capacities, to sign any and all amendments to this report, and to file the same,
with  exhibits  thereto and other  documents in connection  therewith,  with the
Securities  and Exchange  Commission,  granting unto said  attorney-in-fact  and
agent,  full power and  authority to do and perform each and every act and thing
requisite  and  necessary to be done, as fully to all intents and purposes as he
might or could do in  person,  hereby  ratifying  and  confirming  all that said
attorney-in-fact and agent or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities  Exchange Act of 1934, 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/ Thomas H. Adams                                Chairman and Chief Executive Officer               March 13, 1997
- ------------------------------------------         (Principal Executive Officer) and Director
           Thomas H. Adams                 

/s/ Robert E. Klem                                 Director                                           March 11, 1997
- ------------------------------------------
           Robert E. Klem

/s/ Paul O.P. Ts'o                                 Director                                           March 11, 1997
- ------------------------------------------
           Paul O.P. Ts'o

/s/ Sharon B. Webster                              Director                                           March 13, 1997
- ------------------------------------------
          Sharon B. Webster



                                       65

EX-10.86

                                 EXHIBIT 10.86
                        EXECUTIVE COMPENSATION AGREEMENT


         THIS  AGREEMENT is entered  into as of January 1, 1996,  by and between
Howard Sampson (the "Employee") and Genta Incorporated,  a Delaware  corporation
(the  "Company").  This  Agreement  supersedes any prior  agreements  previously
entered into between Employee and Company.

         1.       Term of Employment.

         (a)  Basic  Rule.   The  Company  agrees  to  continue  the  Employee's
employment,  and the Employee  agrees to remain in employment  with the Company,
from the date hereof until the date when the  Employee's  employment  terminates
pursuant to Subsection (b), (c) or (d) below.

         (b) Early  Termination.  Subject to  Sections 6 and 7, the  Company may
terminate  the  Employee's  employment  by giving the Employee 30 days'  advance
notice in writing.  The  Employee may  terminate  his  employment  by giving the
Company 1 day's  advance  notice in writing.  The  Employee's  employment  shall
terminate automatically in the event of his death. Any waiver of notice shall be
valid  only if it is made in  writing  and  expressly  refers to the  applicable
notice requirement of this Section 1.

         (c)  Cause.  The  Company  may at any  time  terminate  the  Employee's
employment for Cause by giving the Employee notice in writing.  For all purposes
under this Agreement, "Cause" shall mean:

               (i) A  willful  act  by  the  Employee  which  constitutes  gross
          misconduct  (as  determined by an  independent  tribunal) or fraud and
          which is injurious to the Company; or

               (ii)  Conviction  of, or a plead of "guilty" or no contest" to, a
          felony.

No act, or failure to act, by the Employee shall be considered  "willful" unless
committed  without  good faith and without a  reasonable  belief that the act or
omission was in the Company's best interest.

         (d)  Disability.  The  Company  may  terminate  the  Employee's  active
employment  due to Disability by giving the Employee 30 days' advance  notice in
writing. For all purposes under this Agreement, "Disability" shall mean that the
Employee,  at the time notice is given, has become eligible to receive immediate
long-term disability benefits under the Company's long-term disability insurance
plan or, if there is no such plan, under the federal Social Security program. In
the event that the Employee resumes the performance of substantially  all of his
duties hereunder before the termination of his active employment under this




Subsection (d) becomes effective,  the notice of termination shall automatically
be deemed to have been revoked.

         (e) Rights Upon Termination. Except as expressly provided in Sections 6
and 7,  upon the  termination  of the  Employee's  employment  pursuant  to this
Section 1, the Employee shall only be entitled to the compensation, benefits and
reimbursements  described  in Sections 3, 4 and 5 for the period  preceding  the
effective date of the termination. The payments under this Agreement shall fully
discharge  all  responsibilities  of  the  Company  to  the  Employee  upon  the
termination of his employment.

         (f)  Termination of Agreement.  This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied.

         2.       Duties and Scope of Employment.

         (a)  Position.  The Company  agrees to employ the Employee as its Chief
Financial  Officer  for the term of his  employment  under this  Agreement.  The
Employee shall report to the Company's President.

         (b)  Obligations.   During  the  term  of  his  employment  under  this
Agreement,  the Employee shall devote his full business  efforts and time to the
Company and its  subsidiaries.  The  Employee  shall not render  services to any
other for-profit  corporation or entity without the prior written consent of the
Company's  Board of  Directors  (the  "Board").  This  Subsection  (b) shall not
preclude the Employee from engaging in  appropriate  professional,  educational,
civic,  charitable or religious  activities or from devoting a reasonable amount
of time to  private  investments  that do not  interfere  or  conflict  with his
responsibilities to the Company.

         3.       Base Compensation and Incentive Compensation.

         (a) Base  Compensation.  During the term of his  employment  under this
Agreement,  the  Company  agrees to pay the  Employee  as  compensation  for his
services a base  salary at the annual rate of $175,000 or at such higher rate as
the Company may determine  from time to time.  Any  difference  between the Base
Compensation  payable  on a  bi-monthly  basis and that  actually  paid  between
January  1,  1996,  and the date this  Agreement  is  executed  shall be paid to
Employee in one lump sum upon execution of this Agreement.  Such salary shall be
payable in  accordance  with the Company's  standard  payroll  procedures.  (The
annual compensation  specified in this Section 3, together with any increases in
such  compensation  that the Company may grant from time to time, is referred to
in this Agreement as "Base Compensation.")

         (b) Incentive Compensation. In addition, Employee shall be eligible for
participation in an annual incentive compensation


                                        2




program, if any, to be determined in the sole discretion of the Company.

         (c) Stock  Compensation.  In addition to such options and Company stock
compensation  available to Employee as of the execution of this Agreement,  upon
execution of this  Agreement  Employee  shall  receive  75,000 shares of Company
stock at no cost to Participant.  Such shares shall be fully vested when granted
and shall  not be  subject  to any  right of  repurchase  by the  Company.  As a
condition of this grant, Employee agrees to satisfy such requirements as Company
deems necessary to satisfy its federal and state tax withholding requirements.

         4.       Employee Benefits.

         During the term of his employment  under this  Agreement,  the Employee
shall be eligible  for the employee  benefit  plans and  executive  compensation
programs maintained by the Company for other senior executives,  subject in each
case to the generally  applicable terms and conditions of the plan or program in
question and to the determinations of any person or committee administering such
plan or program.

         5.       Business Expenses.

         During the term of his employment  under this  Agreement,  the Employee
shall be authorized to incur necessary and reasonable travel,  entertainment and
other business  expenses in connection  with his duties  hereunder.  The Company
shall reimburse the Employee for such expenses upon  presentation of an itemized
account and  appropriate  supporting  documentation,  all in accordance with the
Company's generally applicable policies.

         6.       SkyePharma Transaction.

         (a) General.  As of September 25, 1996, the Company is  contemplating a
transaction  with  SkyePharma.  If the  transaction is  contemplated by June 30,
1997,  Employee  shall be paid a lump sum cash bonus of $50,000  upon closing of
the  transaction.  Closing  means  execution  of  a  definitive  agreement  with
shareholder approval, if necessary.  Such bonus shall not be paid to Employee if
he is not  employed  by the  Company on the date of closing  unless  Employee is
either involuntarily terminated without cause or terminates with Good Reason.

         (b) Good Reason.  For all purposes under this Agreement,  "Good Reason"
shall mean that the Employee:

               (i)  Has  incurred  a  material  reduction  in his  authority  or
          responsibility except for reason of demonstrated lack of performance;

               (ii)  Has   incurred   one  or  more   reductions   in  his  Base
          Compensation; or


                                        3




               (iii) Has been notified that the Company's  headquarters  will be
          relocated by a distance of 50 miles or more.

         7.       Termination for Any Reason Without Cause.

         (a) Continuation Period. Except as otherwise  specifically provided for
this Agreement, in the event that during the term of this Agreement, the Company
terminates the Employee's employment for any reason other than Cause or Employee
voluntarily terminates under circumstances where an involuntary  termination for
Cause is not otherwise warranted, then the Employee shall be entitled to receive
all of the  payments  and benefit  coverage  described  in this  Section 7. Such
payments and benefit  coverage shall continue for the period (the  "Continuation
Period") commencing on the date when the employment termination is effective and
ending on the date twelve months after such date.

         (b) Compensation. During the Continuation Period, the Company shall pay
the Employee  compensation  at an annual rate equal to his Base  Compensation at
the rate in effect on the date of the employment termination.  Such amount shall
be paid at periodic  intervals in accordance with the Company's standard payroll
procedures.

         (c) Insurance  Coverage.  During the Continuation  Period, the Employee
(and,  where   applicable,   his  dependents)  shall  be  entitled  to  continue
participation in the group insurance plans maintained by the Company,  including
life,  disability and health insurance programs, as if he were still an employee
of the Company.  Where  applicable,  the Employee's  salary for purposes of such
plans shall be deemed to be equal to his Base  Compensation.  To the extent that
the Company finds it impossible to cover the Employee under its group  insurance
policies during the Continuation  Period, the Company shall provide the Employee
with  individual  policies  which offer at least the same level of coverage  and
which impose not more than the same costs on him. The foregoing notwithstanding,
in the event that the Employee  becomes  eligible for comparable group insurance
coverage in connection with new employment, the coverage provided by the Company
under  this  Subsection  (c)  shall  terminate  immediately.  Any  group  health
continuation  coverage  that the  Company is required to offer under COBRA shall
commence when coverage under this Subsection (c) terminates.

         (d) Incentive  Programs.  The  Continuation  Period shall be counted as
employment  with the Company for  purposes  of vesting  under all stock  option,
stock  appreciation  rights,  restricted  stock,  phantom stock or similar plans
maintained   by  the   Company   (any   contrary   provisions   of  such   plans
notwithstanding).  The preceding  sentence shall not be construed to require the
Company to grant any new awards to the Employee during the Continuation  Period.
The Continuation Period shall also be counted as employment with the Company for
purposes of determining the


                                        4




expiration  date of any stock  option  granted  by the  Company  and held by the
Employee when his employment  terminates.  Any other provision of this Agreement
notwithstanding,  the  Continuation  Period for purposes of this  Subsection (d)
shall not exceed  three  months in the event  that the  Company  terminates  the
Employee's   employment  for   performance-related   reasons  (considering  only
performance  after the date this  Agreement is  executed),  as determined by the
Board.  (There is no  Continuation  Period for any purpose in the event that the
termination is for Cause.)

         (e) No  Mitigation.  The Employee shall not be required to mitigate the
amount of any  payment  contemplated  by this  Section 7 (whether by seeking new
employment or in any other manner).  Except as expressly  provided in Subsection
(c) above,  no such payment  shall be reduced by earnings  that the Employee may
receive from any other source.

         8.  Covenant  Not to Compete.  As a condition to  Employee's  rights to
receive  payments under Section 6 or 7 of this  Agreement,  the parties agree to
the following:

         (a) Competition.  Employee hereby agrees,  so long as Company is not in
material  default  (subject  to notice and a 30- day cure  period) of any of its
material  obligations  under this  Agreement,  that Employee will not, except as
specifically provided for in this Covenant, at any time during the Covenant Term
(as defined in Section 8(b) below),  directly or indirectly,  whether or not for
compensation,  engage  in any  business  activity,  or have any  interest  in or
relationship  with any person,  firm,  corporation  or  business  (whether as an
employee,  shareholder,  proprietor,  officer, director, agent, security holder,
trustee,  partner,  consultant or  otherwise),  which is  competitive  with, the
antisense and geomatrix  drug delivery  business of Company or its  subsidiaries
now being conducted in the Covered Area;  provided,  however,  that Employee may
own  shares of  companies  whose  securities  do not  constitute  more than five
percent (5%) of the outstanding securities of any such company. Employee further
agrees that as long as the Covenant remains in effect, Employee will not, in any
way which  materially  adversely  affects the  Company's  business or  financial
position  divert or attempt to divert,  directly or indirectly,  any business of
Company or any of its subsidiaries,  or any customers of their business,  to any
competitor  in the  Covered  Area or induce or attempt to  induce,  directly  or
indirectly, any person to leave his or her employment with Company or any of its
subsidiaries.

         (b)  Covenant  Term.  The Term of this  Covenant  ("Covenant  Term") is
defined to be the period commencing on the effective date of this Agreement, and
ending upon the last payment made to Employee pursuant of Section 6 or 7.

         (c)  Covered  Area.  The  Covered  Area  shall be the area in which the
Company or any of its wholly-owned subsidiaries is


                                        5




operating  at the  time  of the  alleged  violation  of the  covenants  of  this
paragraph.

         9.       Limitation on Payments.

         (a) Basic Rule. Any other provision of this Agreement  notwithstanding,
the Company  shall not be required to make any payment or property  transfer to,
or for the benefit of, the Employee  (under this  Agreement or  otherwise)  that
would be non-deductible by the Company by reason of section 280G of the Internal
Revenue  Code of 1986,  as  amended  (the  "Code"),  or that would  subject  the
Employee  to the  excise  tax  described  in  section  49999  of the  Code.  All
calculations  required by this Section 9 shall be  performed by the  independent
auditors  retained by the Company most  recently  prior to the Change in Control
(the "Auditors"), based on information supplied by the Company and the Employee,
and shall be binding on the Company and the  Employee.  All fees and expenses of
the Auditors shall be paid by the Company.

         (b)  Reductions.  If the amount of the  aggregate  payments or property
transfers  to the  Employee  must be  reduced  under  this  Section  9, then the
Employee  shall  direct  in which  order the  payments  or  transfers  are to be
reduced,  but no change in the timing of any payment or  transfer  shall be made
without the Company's consent.  As a result of uncertainty in the application of
sections  280G and 4999 of the Code at the time of an initial  determination  by
the Auditors hereunder, it is possible that a payment will have been made by the
Company that should not have been made (an  "Overpayment") or that an additional
payment  that will not have been made by the  Company  could  have been made (an
"Underpayment").  In the event that the Auditors,  based upon the assertion of a
deficiency by the Internal  Revenue  Service against the Company or the Employee
that the Auditors believe has a high  probability of success,  determine that an
Overpayment has been made, such Overpayment shall be treated for all purposes as
a loan to the  Employee  that he  shall  repay  to the  Company,  together  with
interest at the applicable  federal rate specified in section  7872(f)(2) of the
Code; provided,  however, that no amount shall be payable by the Employee to the
Company if and to the extent that such payment  would not reduce the amount that
is nondeductible  under section 280G of the Code or is subject to the excise tax
under section 4999 of the Code. In the event that the Auditors determine that an
Underpayment  has  occurred,   such  Underpayment  shall  promptly  be  paid  or
transferred  by the Company to, or for the  benefit of, the  Employee,  together
with interest at the applicable  federal rate specified in section 7872(f)(2) of
the Code.

         10.      Successors.

         (a)  Company's  Successors.  The Company  shall  require any  successor
(whether   direct  or  indirect   and  whether  by  purchase,   lease,   merger,
consolidation, liquidation or otherwise) to all or


                                        6



substantially  all of the Company's  business and/or assets,  by an agreement in
substance and form satisfactory to the Employee, to assume this Agreement and to
agree  expressly  to perform  this  Agreement in the same manner and to the same
extent as the  Company  would be  required  to  perform  it in the  absence of a
succession.  The  Company's  failure  to  obtain  such  agreement  prior  to the
effectiveness  of a  succession  shall be a breach of this  Agreement  and shall
entitle the Employee to all of the  compensation  and benefits to which he would
have been entitled  hereunder if the Company had  involuntarily  terminated  his
employment,  without Cause immediately after such succession  becomes effective.
For all purposes  under this  Agreement,  the term  "Company"  shall include any
successor to the Company's  business  and/or assets which  executes and delivers
the assumption agreement described in this Subsection (a) or which becomes bound
by this Agreement by operation of law.

         (b)  Employee's  Successors.  This  Agreement  and  all  rights  of the
Employee  hereunder  shall inure to the benefit of, and be  enforceable  by, the
Employee's  personal  or  legal  representatives,   executors,   administrators,
successors, heirs, distributees, devisees and legatees.

         11.      Miscellaneous Provisions.

         (a) Notice.  Notices and all other communications  contemplated by this
Agreement  shall be in writing  and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt  requested  and postage  prepaid.  In the case of the  Employee,  mailed
notices  shall be addressed to him at the home  address  which he most  recently
communicated  to the  Company in  writing.  In the case of the  Company,  mailed
notices shall be addressed to its corporate headquarters,  and all notices shall
be directed to the attention of its Secretary.

         (b) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification,  waiver or discharge is agreed to in writing
and signed by the Employee and an authorized  officer of the Company (other than
the  Employee).  No waiver by either  party of any breach  of, or of  compliance
with,  any condition or provision of this  Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

         (c) Whole Agreement.  No agreements,  representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this  Agreement have been made or entered into by either party with
respect to the subject matter hereof.

         (d) No Setoff;  Withholding Taxes. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against payments to
the Employee under this


                                        7




Agreement.  All payments made under this Agreement shall be subject to reduction
to reflect taxes required to be withheld by law.

         (e)  Choice of Law.  The  validity,  interpretation,  construction  and
performance  of this  Agreement  shall be  governed  by the laws of the State of
California.

         (f) Severability.  The invalidity or  unenforceability of any provision
or provisions of this Agreement shall not affect the validity or  enforceability
of any other provision hereof, which shall remain in full force and effect.

         (g)  Arbitration.  Except  as  otherwise  provided  in  Section  9, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof,  shall be settled by  arbitration  in San Diego in accordance  with the
Commercial Arbitration Rules of the American Arbitration Association.  Discovery
shall be permitted to the same extent as in a proceeding under the Federal Rules
of  Civil  Procedure,  including  (without  limitation)  such  discovery  as  is
specifically  authorized  by  section  1283.05 of the  California  Code of Civil
Procedure,  without  need  of  prior  leave  of  the  arbitrator  under  section
1283.05(e) of such Code. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction  thereof.  All fees and expenses of the
arbitrator and such  Association  shall be paid as determined by the arbitrator.
Any  attorney  fees  paid  to  enforce  this  Agreement  shall  be  paid  by the
non-prevailing party.

         (h) No  Assignment.  The rights of any person to  payments  or benefits
under this Agreement  shall not be made subject to option or assignment,  either
by  voluntary  or  involuntary  assignment  or by  operation  of law,  including
(without  limitation)  bankruptcy,  garnishment,  attachment or other creditor's
process, and any action in violation of this Subsection (h) shall be void.

         IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized  officer,  as of the day and year
first above written.


                                             /s/ Howard Sampson
                                             -------------------------------
                                             Howard Sampson


                                             GENTA INCORPORATED


                                             By /s/ Thomas H. Adams

                                             Title __________________________


                                        8

EX-10.87

                                 EXHIBIT 10.87
                         [Johnson & Johnson Letterhead]

                                    AGREEMENT


         This Agreement,  made and entered into this 26th day of December, 1995,
by and between

         GENTA  INCORPORATED,  having offices at 3550 General Atomics Court, San
Diego, California 92121 (hereinafter "GENTA"), and

         JOHNSON & JOHNSON CONSUMER PRODUCTS,  INC., having offices at Grandview
Avenue, Skillman, New Jersey 08550 (hereinafter "CPI").

                               W I T N E S S E T H

         WHEREAS,  GENTA  is a  research-based  company  which  focuses  on  the
discovery of biopharmaceuticals;

         WHEREAS,  CPI  develops,  manufactures  and  sells  skin and hair  care
products; and

         WHEREAS,  GENTA and CPI desire to cooperate in the  development  of new
skin care agents and active ingredients.

         NOW  THEREFORE,  in  consideration  of the covenants and conditions set
forth herein, and other good valuable consideration, the sufficiency of which is
hereby acknowledged by each of the parties hereto, it is agreed as follows:

1.       General Purpose

         It is the general  purpose of this  Agreement  to provide for GENTA and
CPI to cooperate in a feasibility  study for the potential joint  development of
new and improved  skin and hair care  products and active  ingredients  with the
objective of GENTA manufacturing and supplying such ingredients to CPI. In order
to accomplish this purpose,  CPI will evaluate the use of one or more of GENTA's
compounds  that  are  selective  for the  mRNA of the  human  androgen  receptor
(hereinafter,  "the Compound") as a prophylactic  and/or  therapeutic  agent for
androgen receptor mediated conditions (such as control of hair growth, sebaceous
gland  activity,  etc.).  These will be evaluated in a study that is designed to
quantify the reduction in sebum production resulting from topical application of
the Compound to the forehead of selected patients (hereinafter, "the Study").

         The Compound and the  Formulation  (as defined below) provided by GENTA
to CPI under this  Agreement  (a) shall remain the sole  property of GENTA,  (b)
shall be used by and under the  control  of CPI solely in order to carry out its
obligations  under this  Agreement,  (c) shall not be used by or delivered to or
for the benefit of any third party without the prior express  written consent of
GENTA.




         GENTA and CPI each shall comply in all material  respects with all laws
and governmental  rules,  regulations and guidelines which are applicable to the
Compound,  the Formulation or the use thereof,  including biosafety  procedures,
and with any safety  precautions  described in a writing which  accompanies  the
Compound or the Formulation.

         CPI shall return to GENTA all unused quantities of the Compound and the
Formulation after the completion, or earlier termination, of the Study.

         THE COMPOUND AND THE  FORMULATION  ARE PROVIDED "AS IS" AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF  MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR
ANY WARRANTY THAT THE USE OF THE COMPOUND OR THE  FORMULATION  WILL NOT INFRINGE
OR VIOLATE ANY PATENT OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.

         It is understood  by the parties that "CPI",  unless  expressly  stated
otherwise, shall mean Johnson & Johnson Consumer Products, Inc., the corporation
of New Jersey as above described, together with its Affiliates.  "Affiliate" of,
or an entity  "Affiliated"  with,  a  specified  entity,  means an  entity  that
controls (in other words, owns directly or indirectly or otherwise has the power
to vote more than fifty percent (50%) of the voting stock), is controlled by, or
is under common control with, the entity specified.

2.       Responsibility of the Parties

         GENTA will  provide the Compound and an  appropriate  delivery  vehicle
(hereinafter,  "the  Formulation").  GENTA will supply the  Formulation  free of
charge to CPI in quantities  sufficient to complete CPI's  evaluation.  CPI will
(1) provide technical resources to develop an acceptable topical formulation for
use in the Study,  (2)  conduct  appropriate  toxicological  tests,  (3) design,
conduct  and  evaluate  the  results of the Study and (4)  provide  GENTA with a
written summary of all tests conducted in progress  reports on the status of the
Study and copies of all results. The Study will take place outside of the United
States.  CPI will be responsible  for  fulfilling  regulatory  requirements  for
shipping the Formulation outside the United States.

         The  Results  shall  be  jointly  owned by GENTA  and  CPI,  and  shall
constitute  Confidential  Information of GENTA and CPI for purposes of Section 4
below.

3.       Expenses

         Each party will bear its own  expenses in the initial  preparation  and
evaluation of compounds under this Agreement,  with the following exception: CPI
shall  within  fifteen  (15)  days  of  signing  this  Agreement,  pay  GENTA  a
non-refundable  commitment fee of Fifty Thousand Dollars ($50,000.00) which will
not be creditable toward any further purchases or license fees.


                                        2




4.       Confidentiality

         In order to  accomplish  the  objectives of this  Agreement,  it may be
necessary  for the  parties to  exchange  materials  and  information  which are
considered to be  confidential  and  proprietary to the disclosing  party.  Each
party agrees to limit its  disclosure of  Confidential  Information to the other
party to that reasonably necessary to achieve the objectives of this Agreement.

         All  information   disclosed  hereunder  which  is  considered  by  the
disclosing  party to be  confidential  and  proprietary  shall be in writing and
marked "Confidential",  or if initially disclosed orally or visually, designated
as being  confidential at the time of disclosure and confirmed in writing within
thirty (30) days (hereinafter "Confidential Information"). All written documents
containing Confidential  Information and other confidential material in tangible
form received by either party under this Agreement  shall remain the property of
the  originating  party,  and all and any such other materials shall be promptly
returned to the  originating  party upon request;  provided,  however,  that the
receiving  party  shall  have the right to  retain  one copy of any and all such
materials solely in its Law Department files.

         Each party agrees that all Confidential  Information  received from the
other party under this  Agreement  shall be  maintained  in  confidence  and not
disclosed to a third party during the term of this Agreement and for a period of
five (5)  years  thereafter,  and the  receiving  party  agrees  not to use such
Confidential Information for any purpose other than to further the objectives of
this Agreement  without the prior written consent of the other party. Each party
shall  use  the  same  standard  of  care  to  protect  the  confidentiality  of
information  received  from  the  other  party  as it  uses to  protect  its own
confidential  information,  and shall limit  disclosure of such  information  to
those of its personnel and  consultants who have an actual need to know and have
a written obligation to protect the confidentiality thereof.

         Notwithstanding  the  preceding   provisions,   obligations   regarding
confidentiality  and use of Confidential  Information  disclosed hereunder shall
not include:

         a) information which, at the time of disclosure,  was published,  known
publicly, or otherwise in the public domain;

         b) information  which,  after disclosure,  is published,  becomes known
publicly, or otherwise becomes part of the public domain through no fault of the
receiving party;

         c) information which, prior to the time of disclosure,  is known to the
receiving  party without any obligation of  confidentiality  as evidenced by its
written records;

         d)  information  which,  after  disclosure,  is made  available  to the
receiving  party in good faith by a third  party who is under no  obligation  of
confidentiality or secrecy to the disclosing party; and


                                        3



         e) information which is independently  developed by employees or others
on behalf of the receiving  party,  without access to or use of the Confidential
Information of the disclosing party.

         Notwithstanding  the  preceding   provisions,   obligations   regarding
confidentiality  and use of Confidential  Information  disclosed hereunder shall
not  apply to the  extent  that the  receiving  party is  required  to  disclose
information by law,  order or regulation of a governmental  agency or a court of
competent jurisdiction,  provided that the receiving party shall provide written
notice  thereof  to the  disclosing  party and  sufficient  opportunity  for the
disclosing  party to object to any such  disclosure  or to request  confidential
treatment thereof.

         The disclosure of  Confidential  Information  hereunder by either party
shall not result in any right or  license  under any  patent or  know-how  being
granted to the other  party,  nor shall it be  construed  to impose on the other
party any restriction, duty or obligation other than that of confidentiality and
non-use as expressly provided herein.

5.       Designated Representatives

         The following representatives are designated by the parties to disclose
and receive Confidential Information under this Agreement:

                  For CPI:          Stanley Shapiro, Ph.D.
                                    Worldwide Director
                                    Dermatology Research and Drug Discovery

                  For GENTA:        Dr. Donald Picker
                                    Senior Vice President
                                    Research & Development

6.       Competitive Activity

         GENTA  acknowledges  that CPI and its affiliates are in the business of
manufacturing and selling cosmetic and pharmaceutical  products for the purposes
of caring  for the skin and hair and has an  ongoing  research  and  development
effort relating to such products. In addition, CPI may consult with, supply, and
jointly develop with third parties skin and hair care compositions and products.
Nothing  contained herein shall be construed to prevent CPI from continuing such
activities  provided only that CPI does not reveal to such third parties, or use
for any purpose (other than as permitted by this Agreement),  the Compound,  the
Formulation or any Confidential Information of GENTA covered by this Agreement.

7.       Inventions

         Any invention,  discovery, or improvement made or technology developed,
whether  patentable  or not (an  "Invention")  as a  result  of  work  performed
pursuant to this  Agreement  shall be owned by the party making the Invention if
such Invention is made independently of the other party.


                                        4




         Inventions made jointly by  representatives of both GENTA and CPI shall
be jointly owned by CPI and GENTA.  GENTA and CPI shall promptly disclose to the
other party all such solely or jointly  owned  Inventions.  Both  parties  shall
cooperate in the filing and prosecution of patent applications  related to joint
inventions  and shall share equally the costs  associated  with such filings and
prosecution.  With respect to such joint inventions, the parties will grant each
other a  non-assignable,  sole  license to make,  have  made,  use and sell such
inventions  without the right to sublicense  without the mutual agreement of the
parties.  With respect to joint inventions and inventions made by GENTA pursuant
to this  Agreement,  CPI shall have the right of first  refusal for an exclusive
license to make, have made, use and sell the inventions in the field of skin and
hair care.

         Nothing  in this  Agreement  shall be  construed  to grant to a party a
license or other  rights  under any  intellectual  property  rights of the other
party, unless expressly provided in this Agreement.

8.       Future Rights

         Simultaneous  with the  performance  of the  Study,  CPI and GENTA will
negotiate  the terms of a  mutually  acceptable  full  development,  supply  and
product license  agreement  (hereinafter,  "the License  Agreement").  Under the
License Agreement,  CPI shall have the exclusive  worldwide rights to have made,
use and sell GENTA's antisense  compounds which are selective to the mRNA of the
human  androgen  receptor  for the  field  of skin and hair  care.  The  License
Agreement  shall  be  complete  prior  to  the  completion  of  the  Study.  The
negotiations to develop the License  Agreement between CPI and GENTA shall begin
no later than two (2) months after the execution of this Agreement.

         At the  completion of the Study,  CPI shall notify GENTA that the Study
has been  completed.  Within sixty (60) days after CPI  notifies  GENTA that the
Study has been  completed,  CPI shall notify GENTA  whether it intends to pursue
the development of the Compound commercially. Upon notification that CPI intends
to pursue the  development  of the  Compound  commercially,  the  parties  shall
execute  the  License  Agreement  and CPI shall pay GENTA One  Hundred and Fifty
Thousand Dollars ($150,000.00).  The License Agreement will include at least the
following provisions:  (i) GENTA will supply the Compound exclusively to CPI for
use in its skin and hair care products,  (ii) CPI will purchase its requirements
of such compounds from GENTA,  if GENTA is capable,  at a negotiated fair market
price which shall be at least as favorable as GENTA's  price to other  customers
for  similar  compounds,  and  (iii)  CPI will  pay  GENTA  mutually  acceptable
royalties on Net Sales of products and milestone payments.

9.       Exclusivity

         During  the  duration  of the Study,  GENTA  shall not engage any third
party to study the  androgen  receptor  mediated  dermatological  effects of the
Compound or discuss with or negotiate  with any third party  regarding the right
to make, have made, use or sell the Compound.


                                        5






10.      Term and Termination

         The term of this Agreement  shall be one (1) year from the date written
above.  This  Agreement  may be  terminated  by CPI upon  thirty (30) days prior
written notice to GENTA,  provided,  however, that the obligations of each party
under Paragraph 4 hereof shall survive such termination of this Agreement.

11.      Miscellaneous

         This Agreement may not be superseded,  amended,  or modified  except by
written agreement signed on behalf of both parties hereto.

         Notices  given by either  party hereto shall be in writing and shall be
effective  upon receipt and shall be sent by  registered  or  certified  mail or
overnight courier to the other party at the address set forth above.

         Each party's rights and obligations under this Agreement shall enure to
the benefit of, and shall be binding upon, its successors.

         This  Agreement  shall  in no way  constitute  a  commitment  by CPI to
purchase any goods from GENTA or by GENTA to produce and sell any goods to CPI.

         This  Agreement  shall be governed by and construed in accordance  with
the  laws of the  State of  Delaware,  without  regard  to the  conflict  of law
principles thereof.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly  authorized  representatives  on the day and
year first above written.

GENTA INCORPORATED                             JOHNSON & JOHNSON
                                               CONSUMER PRODUCTS, INC.


By:   /s/Thomas H. Adams                       By:  /s/
      ------------------                            ---------------------
      Thomas H. Adams
                                               Title:  Vice President,        
Title:__________________                               Licensing & Acquisition
                                               


                                        6

EX-10.88

                                 EXHIBIT 10.88
                              ASSIGNMENT AGREEMENT
           (OF COLLABORATION AGREEMENT BETWEEN GENTA JAGO AND GENSIA)


This ASSIGNMENT  AGREEMENT effective as of October 1, 1996 (this "AGREEMENT") is
entered  into  among  GENSIA,  INC.,  a Delaware  corporation  having a place of
business  at 9360 Towne  Center  Drive,  San  Diego,  California  92121,  U.S.A.
(hereinafter referred to as "GENSIA"), and GENTA JAGO TECHNOLOGIES B.V., a Dutch
company,  having a place of  business  at  Grundstrasse  12,  CH-6343  Rotkreuz,
Switzerland  (hereinafter  referred to as "GENTA JAGO"), and BRIGHTSTONE PHARMA,
INC., a Delaware  corporation  having a place of business at 109 MacKenan Drive,
Cary, North Carolina 27511,  U.S.A.  (hereinafter  referred to as "BRIGHTSTONE")
and SKYEPHARMA PLC, an English public company, having a place of business at 105
Piccadilly, London (hereinafter referred to as "SKYEPHARMA").


                                   WITNESSTH:


         WHEREAS,   GENSIA   and  GENTA  JAGO  have   entered   into  a  certain
Collaboration  Agreement  dated as of January 22, 1993 (as amended as of October
7,  1994,  and  thereafter,   hereinafter  the  "GJT  Collaboration  Agreement")
regarding  the  development  of - inter  alia - a  GEOMATRIX(R)  formulation  of
Nifedipine (hereinafter the "Nifedipine Product"); and

         WHEREAS,  GENSIA  and  Jagotec  AG,  a Swiss  corporation  (hereinafter
"JAGOTEC") have entered into a certain License Agreement dated as of January 22,
1993 (as amended as of October 7, 1994 and thereafter;  hereinafter the "License
Agreement")  regarding  manufacturing  rights for - inter alia - the  Nifedipine
Product; and

         WHEREAS,  GENSIA and JAGO Pharma AG, a Swiss  corporation  (hereinafter
"JAGO PHARMA") have entered into a certain Supply  Agreement dated as of January
22,  1993 (as  amended  as of October 7, 1994 and  thereafter;  hereinafter  the
"Supply Agreement") regarding the manufacturing and supply of - inter alia - the
Nifedipine Product; and

         WHEREAS, GENSIA and Boehringer Mannheim Pharmaceuticals  Corporation, a
Maryland  corporation  (hereinafter  "BMPC") have entered into a certain License
and Collaboration  Agreement dated as of October 10, 1994 (hereinafter the "BMCT
License and Collaboration Agreement") regarding the development and marketing of
the Nifedipine Product; and

         WHEREAS,  as  the  result  of  an  internal  corporate   restructuring,
Boehringer Mannheim Corporation,  Therapeutics  Division ("BMCT"),  succeeded to
the rights and  obligations  of BMPC under the BMCT  License  and  Collaboration
Agreement;

         WHEREAS, BRIGHTSTONE desires to assume, and GENSIA desires to assign to
BRIGHTSTONE,  all of GENSIA's rights and obligations under the GJT Collaboration
Agreement as of the  Effective  Date (as defined  below) and under the terms and
subject to the conditions of this Agreement; and

         WHEREAS,  GENTA JAGO is willing to consent to GENSIA's  assignment  and
BRIGHTSTONE's  assumption  of  GENSIA's  rights  and  obligations  under the GJT
Collaboration  Agreement,  under the terms and subject to the conditions of this
Agreement; and


                                      - 1 -




         WHEREAS,  the  GENTA  JAGO and  BRIGHTSTONE  desire  to  amend  certain
provisions of the GJT  Collaboration  Agreement as of the Effective  Date as set
forth below.


         NOW,  THEREFORE,  for  and in  consideration  of the  premises,  mutual
covenants  and  agreements  contained  herein and  intending to be legally bound
hereby, the parties hereby agree as follows:


                                    ARTICLE 1
                      ASSIGNMENT, SUBSTITUTION AND RELEASE

         As of the  Effective  Date and subject to the terms and  conditions of
         this Agreement,

1.1      GENSIA does assign and transfer to BRIGHTSTONE  all of GENSIA's  right,
         title and interest in and to, and all of GENSIA's  liabilities,  duties
         and obligations  arising or becoming due on or after the Effective Date
         under the GJT Collaboration Agreement;

1.2      BRIGHTSTONE  does  assume  such right,  title,  interest,  liabilities,
         duties  and  obligations  of  GENSIA  and does  agree  that it shall be
         substituted for GENSIA under the GJT  Collaboration  Agreement and that
         it will  perform  the  obligations,  liabilities  and  duties of GENSIA
         arising or becoming due on or after the  Effective  Date  thereunder in
         accordance with the terms hereof and thereof;

1.3      SKYEPHARMA agrees to guarantee the performance of BRIGHTSTONE under the
         GJT  Collaboration   Agreement  as  it  will  be  amended  concurrently
         herewith; and

1.4      GENTA JAGO does consent to such assignment and substitution.


                                    ARTICLE 2
                         REPRESENTATIONS AND WARRANTIES

2.1      Of Each Party to the Others.  Each party hereby represents and warrants
         to the other parties as follows:

         (a) Corporate  Existence.  Such party is a corporation  duly organized,
         validly  existing and in good  standing  under the laws of the state or
         other jurisdiction in which it is incorporated.

         (b)  Authorization  and Enforcement of Obligations.  Such party has the
         corporate  power and  authority  and the legal right to enter into this
         Agreement  and to perform its  obligations  hereunder and has taken all
         necessary  corporate  action on its part to authorize the execution and
         delivery  of this  Agreement  and the  performance  of its  obligations
         hereunder.  This  Agreement  has been duly  executed  and  delivered on
         behalf  of such  party  and  constitutes  a legal,  valid  and  binding
         obligation,  enforceable  against  such  party in  accordance  with its
         terms.

         (c) Consents.  All necessary consents,  approvals and authorizations of
         all governmental  authorities and other persons required to be obtained
         by such party in connection with this Agreement have been obtained.


                                      - 2 -




         (d) No Conflict.  The execution and delivery of this  Agreement and the
         performance of such party's obligations  hereunder do not conflict with
         or violate any requirement of applicable laws or regulations and do not
         conflict  with,  or  constitute  a  default  under,   any   contractual
         obligation  of  such  party,   except  such   conflicts  that  do  not,
         individually  or in the  aggregate,  have a material  adverse effect on
         such party or do not materially  adversely  affect such party's ability
         to perform its obligations under this Agreement.

2.2      Of GENSIA and GENTA JAGO to Each  Other,  SKYEPHARMA  and  BRIGHTSTONE.
         Each of GENSIA and GENTA JAGO hereby  represents  and  warrants to each
         other,  SKYEPHARMA  and  BRIGHTSTONE  that,  immediately  prior  to the
         Effective  Date, (a) the GJT  Collaboration  Agreement is in full force
         and effect;  (b) the GJT Collaboration  Agreement has not been amended,
         modified or altered (by amendment,  side agreement or otherwise)  other
         than as described in the  recitals to this  Agreement,  (c) all amounts
         owing as of such date by  GENSIA  to GJT  under  the GJT  Collaboration
         Agreement have been paid in full; (d) it has not received any notice of
         uncured past default under the GJT Collaboration  Agreement,  (e) there
         exists no uncured  default  or event  which  (with only the  passage of
         time, the giving of notice or both) would constitute an uncured default
         of a material obligation under the GJT Collaboration  Agreement,  other
         than any default under the GJT  Collaboration  Agreement which directly
         or  indirectly  derives  from  or  relates  to the  same  or a  related
         occurrence  (or  series of  occurrences)  which  BMCT  alleges  (or may
         allege)  constitutes a default under the BMCT License and Collaboration
         Agreement or the BMCT Amended License and  Collaboration  Agreement and
         (f) to the best of its knowledge,  there exists no pending  litigation,
         arbitration  or similar  proceeding to which it is a party,  and it has
         not received written notice of any threatened  litigation,  arbitration
         or similar proceeding,  relating to the GJT Collaboration  Agreement or
         the activities contemplated by the GJT Collaboration Agreement.



                                    ARTICLE 3
                                    RELEASES


3.1      Release of GENSIA.  GENTA JAGO,  BRIGHTSTONE  and  SKYEPHARMA do hereby
         release,   remise  and  forever  discharge  GENSIA  and  its  officers,
         directors,  shareholders,  employees and agents from (i) liabilities of
         GENSIA resulting from acts of GENTA JAGO on or after the Effective Date
         arising  from  the  GJT   Collaboration   Agreement;   and  (ii)  those
         liabilities of GENSIA to GENTA JAGO,  BRIGHTSTONE or SKYEPHARMA arising
         from the GJT  Collaboration  Agreement  which have accrued prior to the
         Effective  Date and are actually  known by GENTA JAGO,  BRIGHTSTONE  or
         SKYEPHARMA.   In  no  event  shall  the  foregoing   release  apply  to
         obligations and liabilities of GENSIA owing to third parties.

3.2      Release of GENTA JAGO,  BRIGHTSTONE and SKYEPHARMA.  GENSIA does hereby
         release,  remise and forever discharge each of GENTA JAGO,  BRIGHTSTONE
         and SKYEPHARMA and its officers, directors, shareholders, employees and
         agents from any and all liabilities  and obligations  arising out of or
         related to the GJT Collaboration  Agreement which have accrued prior to
         the Effective Date and are actually known by GENSIA.  In no event shall
         the foregoing  release apply to  obligations  and  liabilities of GENTA
         JAGO, BRIGHTSTONE or SKYEPHARMA owing to third parties.


                                      - 3 -




                                    ARTICLE 4
                                 INDEMNIFICATION

4.1      Indemnification  Provision.  Each of SKYEPHARMA,  BRIGHTSTONE AND GENTA
         JAGO severally agree to indemnify  GENSIA and hold GENSIA harmless from
         and against all losses,  liabilities,  damages and expenses,  including
         reasonable  attorneys'  fees and  costs,  incurred  as a result  of any
         claim,  demand,  action or other  proceeding  arising  from the acts or
         omissions  of  SKYEPHARMA,  BRIGHTSTONE  AND GENTA JAGO,  respectively,
         under  the  GJT  Collaboration  Agreement  accruing  on and  after  the
         Effective Date.  GENTA JAGO further agrees to indemnify GENSIA and hold
         GENSIA harmless from and against all losses,  liabilities,  damages and
         expenses,  including reasonable attorneys' fees and costs, arising from
         liabilities  and  obligations of GENSIA to GENTA JAGO arising out of or
         related  to the  GJT  Collaboration  Agreement  which  liabilities  and
         obligations  have accrued prior to the Effective  Date and are actually
         known  by  GENTA  JAGO;  provided,  however,  that  in no  event  shall
         SKYEPHARMA,  BRIGHTSTONE OR GENTA JAGO  indemnify  GENSIA in respect of
         obligations  and  liabilities of GENSIA owing to third parties.  GENSIA
         agrees to indemnify  GENTA JAGO and hold GENTA JAGO  harmless  from and
         against  all  losses,  liabilities,  damages  and  expenses,  including
         reasonable  attorneys'  fees and costs,  arising from  liabilities  and
         obligations  of GENTA JAGO to GENSIA  arising  out of or related to the
         GJT  Collaboration  Agreement which  liabilities  and obligations  have
         accrued prior to the Effective  Date and are actually  known by GENSIA;
         provided,  however,  that in no event shall GENSIA indemnify GENTA JAGO
         in respect of obligations  and liabilities of GENTA JAGO owing to third
         parties.  GENSIA agrees to indemnify  SKYEPHARMA,  BRIGHTSTONE or GENTA
         JAGO and  hold  each of them  harmless  from and  against  all  losses,
         liabilities, damages and expenses, including reasonable attorneys' fees
         and costs,  arising from liabilities and obligations of GENSIA owing to
         third parties  related to the GJT  Collaboration  Agreement,  provided,
         however, that the foregoing  indemnification shall not apply to losses,
         liabilities,  damages and expenses of the indemnified  parties incurred
         as a result of the operation of the first sentence of this Section 4.1.
         The  foregoing  notwithstanding,  in no event will any party  hereto be
         required to indemnify another party hereunder for any loss,  liability,
         damage  or  expense  to  the  extent  it is  caused  by  acts  of  such
         indemnified party  constituting  gross negligence or willful misconduct
         or constituting a breach of this Agreement.

4.2      Procedure.   A  party  (the   "Indemnitee")   that   intends  to  claim
         indemnification   under  this  Section  4  shall  promptly  notify  the
         indemnifying party (the "Indemnitor") of any claim,  demand,  action or
         other  proceeding in respect of which the  Indemnitee  intends to claim
         such  indemnification,  and the  Indemnitor  shall  have  the  right to
         participate  in, and, to the extent the Indemnitor so desires,  jointly
         with any other  Indemnitor  similarly  noticed,  to assume the  defense
         thereof with counsel  selected by the  Indemnitor,  provided,  however,
         that an Indemnitee shall have the right to retain its own counsel, with
         the fees  and  expenses  to be paid by the  Indemnitee.  The  indemnity
         obligations  under this  Section 4 shall not apply to  amounts  paid in
         settlement  of any claim,  demand,  action or other  proceeding if such
         settlement  is effected  without the consent of the  Indemnitor,  which
         consent  shall not be  unreasonably  withheld.  The  failure to deliver
         notice  to  the   Indemnitor   within  a  reasonable   time  after  the
         commencement  of any such  action,  if  prejudicial  to its  ability to
         defend such action,  shall relieve such  Indemnitor of any liability to
         the  Indemnitee  under this  Section 4, but the  omission so to deliver
         notice to the  Indemnitor  will not relieve it of any liability that it
         may have to any  Indemnitee  otherwise  than under this  Section 4. The
         Indemnitor may not settle the action or otherwise consent to an adverse
         judgment in such action that  diminishes the rights or interests of the
         Indemnitee without the express written consent of the Indemnitee, which
         consent  shall  not  be  unreasonably  withheld.  The  Indemnitee,  its
         employees


                                      - 4 -




         and agents  shall  cooperate  fully with the  Indemnitor  and its legal
         representatives in the investigation of any action,  claim or liability
         covered by this indemnification.


                                    ARTICLE 5
                  AMENDMENTS TO THE GJT COLLABORATION AGREEMENT

         The GJT Collaboration Agreement is hereby amended as follows:

5.1      The  reference  to GENTA JAGO in the  ingress of the GJT  Collaboration
         Agreement:

                  JOBEWOL  INVESTMENTS  BV  (proposed  to be renamed  GENTA JAGO
                  TECHNOLOGIES BV), a Dutch corporation ("Technologies"), having
                  a place  of  business  located  at  Vijzelstraat  32,  NL-1017
                  Amsterdam, Netherlands,

                  shall be deleted and replaced by the following:

                  GENTA JAGO TECHNOLOGIES BV, A DUTCH COMPANY  ("TECHNOLOGIES"),
                  HAVING  A  PLACE  OF  BUSINESS  AT  GRUNDSTRASSE  12,  CH-6343
                  ROTKREUZ, SWITZERLAND,

5.2      In Section  1.2,  the  qualifying  threshold  of voting  stock or other
         ownership interest shall be increased from at least forty percent (40%)
         to MORE THAN FIFTY PERCENT (50%).

5.3      Section  1.11 shall be  deleted in its  entirety  and  replaced  by the
         following new Section:

         1.11 "GEOMATRIX(R)  TECHNOLOGY" SHALL MEAN THE ORAL  CONTROLLED-RELEASE
         DRUG  DELIVERY  AND  RELATED  TECHNOLOGY  LICENSED TO  TECHNOLOGIES  BY
         JAGOTEC AG WHICH UTILIZES A HYDROPHILIC  DRUG-CONTAINING  MATRIX TABLET
         WHICH  CONTROLS  THE RELEASE OF THE DRUG THROUGH THE USE OF ONE OR MORE
         BARRIER LAYERS, TOGETHER WITH ALL IMPROVEMENTS THEREON AND THERETO.

5.4      Section  2.5 shall be  deleted  in its  entirety  and  replaced  by the
         following new Section:

         2.5 RIGHTS TO  GEOMATRIX(R)  TECHNOLOGY.  TECHNOLOGIES  REPRESENTS  AND
         WARRANTS THAT IT HAS THE  EXCLUSIVE  RIGHT AND LICENSE FOR SALE AND USE
         IN THE FIELD UNDER THE PATENT RIGHTS,  THE GEOMATRIX(R)  TECHNOLOGY AND
         THE KNOW-HOW NECESSARY AND REQUIRED TO GRANT THE LICENSES UNDER ARTICLE
         6.1 BELOW, AND THAT IT HAS THE RIGHT TO GRANT THE LICENSES HEREUNDER.

5.5      Section 14.4 shall be amended by the following new sub-section

         14.4     TERMINATION OF THE LICENSE AGREEMENTS.
         14.4.1 IN THE EVENT THAT THE LICENSE  AGREEMENT IS TERMINATED  PRIOR TO
         THE  EXPIRATION  OF THE  LAST TO  EXPIRE  OF THE  PATENTS  LICENSED  TO
         TECHNOLOGIES  IN THE  TERRITORY,  THEN  JAGOTEC  SHALL  GRANT A  DIRECT
         LICENSE  TO  BRIGHTSTONE  WHEREUNDER  THE SAME  LICENSE  RIGHTS  AS ARE
         GRANTED  UNDER THE  LICENSE  AGREEMENT  TO  TECHNOLOGIES  ARE  DIRECTLY
         GRANTED TO  BRIGHTSTONE.  IN THIS EVENT JAGOTEC SHALL ASSUME ALL RIGHTS
         AND OBLIGATIONS OF TECHNOLOGIES UNDER THIS AGREEMENT AND SHALL PROMPTLY
         CURE ALL DEFAULTS OF TECHNOLOGIES UNDER THIS AGREEMENT, IF ANY.


                                      - 5 -




         14.4.2  NOTWITHSTANDING  ANYTHING  CONTAINED IN THIS SECTION  14.4,  NO
         ACTION  TAKEN BY  JAGOTEC  AND/OR  BRIGHTSTONE  TO  CONTINUE  OR NOT TO
         CONTINUE THE LICENSE SHALL RELIEVE  TECHNOLOGIES FROM ANY LIABILITY FOR
         ANY UNCURED  DEFAULTS UNDER THIS  AGREEMENT OR THE LICENSE  AGREEMENTS,
         AND  SUCH  ACTION  BY  JAGOTEC  AND/OR  BRIGHTSTONE  SHALL  BE  WITHOUT
         PREJUDICE TO ANY OTHER RIGHTS OR REMEDIES  JAGOTEC  AND/OR  BRIGHTSTONE
         MAY HAVE IN LAW OR EQUITY.

5.6      In Section 20.1, the notice  addresses to BRIGHTSTONE and  Technologies
         are amended as follows:

         If to BRIGHTSTONE:   BRIGHTSTONE PHARMA INC.
                              109 MacKenan Drive
                              Cary, NC 27511, U.S.A.
                              att: Joseph F. Bozman, Jr.


                                      - 6 -




         with copies to:     SKYEPHARMA PLC
                             105 Piccadilly
                             London W1V 9FN, England
                             att: Company Secretary

         and:                RINDERKNECHT GLAUS & STADELHOFER
                             Beethovenstrasse 7
                             P.O. Box 4451
                             CH-8022 Zurich, Switzerland
                             att: Dr. Thomas M. Rinderknecht

         If to TECHNOLOGIES: GENTA JAGO TECHNOLOGIES BV
                             Swiss Branch
                             Grundstrasse 12
                             CH-6343 Rotkreuz
                             att: Management Committee

         with copies to:     remains unchanged

5.7      Section 20.6 (Non-Competition) shall be deleted in its entirety.


                                    ARTICLE 6
                                 CONFIDENTIALITY

6.1      For a  period  of ten  years  from the  Effective  Date,  GENSIA  shall
         maintain in  confidence  and shall not use in any way  information  and
         data resulting from or related to the development of the Products under
         the GJT Collaboration  Agreement and, to the extent not included in the
         foregoing, information supplied by GENTA JAGO and marked "Confidential"
         (collectively the "Information").

6.2      The  obligation not to disclose or use  Information  shall not apply to
         any part of such Information that (a) is or becomes patented, published
         or otherwise  part of the public domain other than by acts of GENSIA or
         its Affiliates or sublicensees in contravention of this Agreement,  (b)
         is disclosed to GENSIA or its  Affiliates  or  sublicensees  by a Third
         Party,  provided that such  Information  was not obtained by such Third
         Party  directly or indirectly  on a  confidential  basis,  (c) prior to
         disclosure  to  GENSIA  was  already  in  possession  of  GENSIA or its
         Affiliates or sublicensees,  provided such Information was not obtained
         directly  or  indirectly  from GENTA  JAGO under the GJT  Collaboration
         Agreement,  or (d) is  disclosed  in a press  release  agreed to by all
         parties  hereto.   GENSIA  agrees  that  it  shall  not,   directly  or
         indirectly,  perform  research and  development  on,  promote,  sell or
         distribute  another sustained release  formulation of Nifedipine in the
         Territory,   provided,  however,  that  the  foregoing  non-competition
         obligation  shall  not  apply to  GENSIA  in the  event of a change  of
         control (as defined in Section 13.2.4 of the License and  Collaboration
         Agreement between GENSIA and BMCT).

6.3      Furthermore,  GENSIA  shall not  disclose to any third party any of the
         terms  or  conditions  of  the  GJT  Collaboration  Agreement  or  this
         Agreement  without  the prior  written  consent  of the  other  parties
         hereto,  except  where and to the extent  required by  applicable  law.
         Notwithstanding the foregoing, prior to the Effective Date, the parties
         hereto shall agree on the substance of


                                      - 7 -




         information   to  describe  the  terms  of  this   transaction,   which
         information may be disclosed by GENSIA without the consent of the other
         parties hereto.


                                    ARTICLE 7
                 CLOSING, CONDITION PRECEDENT AND EFFECTIVE DATE

7.1      The closing of the transaction  contemplated  hereby  ("Closing") shall
         take  place at the  offices of Bryan Cave LLP,  counsel  for BMCT,  700
         Thirteenth Street,  N.W.,  Washington,  D.C., or at such other place as
         the parties may agree at 1:00 p.m. EST on February  24, 1997,  provided
         that the following conditions precedent have been fulfilled:

         (a)      GENSIA, JAGOTEC, BRIGHTSTONE and SKYE PHARMA shall have agreed
                  upon and duly  executed an assignment  agreement  (hereinafter
                  the "JAGOTEC Assignment")  providing for the assignment of all
                  of GENSIA's rights and obligations under the License Agreement
                  to, and the assumption thereof by, BRIGHTSTONE under terms and
                  conditions reasonably acceptable to all parties thereto; and

         (b)      GENSIA,  JAGO PHARMA,  BRIGHTSTONE  and SKYE PHARMA shall have
                  agreed  upon  and  duly  executed  an   assignment   agreement
                  (hereinafter the "JAGO PHARMA  Assignment")  providing for the
                  assignment of all of GENSIA's rights and obligations under the
                  Supply   Agreement   to,  and  the   assumption   thereof  by,
                  BRIGHTSTONE under terms and conditions  reasonably  acceptable
                  to all parties thereto; and

         (c)      GENSIA,  BMCT,  BRIGHTSTONE  and SKYE PHARMA shall have agreed
                  upon and duly  executed an assignment  agreement  (hereinafter
                  the "BMPC Assignment")  providing for the assignment of all of
                  GENSIA's rights and  obligations  under the BMPC Agreement to,
                  and the  assumption  thereof by,  BRIGHTSTONE  under terms and
                  conditions reasonably acceptable to all parties thereto.

7.2      Provided  that the Closing  shall take place as provided  hereinbefore,
         the "Effective Date" of this transaction shall be October 1, 1996.


                                    ARTICLE 8
                                  MISCELLANEOUS

8.1      This  Agreement  embodies  the entire  understanding  among the parties
         hereto   and   supersedes   any  prior   representations,   agreements,
         arrangements or understandings  among them regarding the subject matter
         hereof, including but not limited to the letter of intent dated October
         17, 1996.  There are no  representations,  agreements,  arrangements or
         understandings, oral or written, among the parties hereto regarding the
         subject matter hereof which are not fully expressed herein.

8.2      No  change,  modification,  extension,  termination  or  waiver of this
         Agreement,  or any provision  herein  contained,  shall be valid unless
         made in writing and duly signed by  authorized  representatives  of the
         parties hereto.

8.3      This  Agreement  may be executed in two or more  counterparts,  each of
         which  shall be deemed an  original,  but all of which  together  shall
         constitute one and the same instrument.


                                      - 8 -




IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date first written above.

GENSIA, INC.

   /s/David F. Hale
- ---------------------------------
By:  David F. Hale
Its:  Chairman, President and CEO


GENTA JAGO Technologies B.V.


  /s/                                            /s/Thomas H. Adams
- ---------------------------------              ---------------------------------
By:                                            By: Thomas H. Adams, Ph.D.
Its:  Managing Director                        Its:  Managing Director


BRIGHTSTONE PHARMA INC.


  /s/
- ---------------------------------
By:
Its:  President


SKYE PHARMA PLC


   /s/
- ---------------------------------
By:
Its:  Chairman

EX-22.1

                                  EXHIBIT 22.1

                               GENTA INCORPORATED
                         SUBSIDIARIES OF THE REGISTRANT

JBL Scientific,  Inc., a California corporation, is a wholly owned subsidiary of
Genta Incorporated.

Genta  Pharmaceuticals  Europe  S.A.,  a French  corporation,  is a wholly owned
subsidiary of Genta Incorporated.

EX-23.1

                                                                    EXHIBIT 23.1

               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

         We  consent  to the  incorporation  by  reference  in the  Registration
Statements  on Forms S-3 and S-8 of our reports  dated  February 28, 1997,  with
respect to the consolidated  financial  statements of Genta Incorporated and the
financial  statements  of Genta Jago  Technologies  B.V.,  included in the Genta
Incorporated Annual Report (Form 10-K) for the year ended December 31, 1996.



                                                /s/ ERNST & YOUNG LLP

                                                ERNST & YOUNG LLP

San Diego, California
March 13, 1997

EX-27

 


<ARTICLE>                     5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS
OF OPERATIONS CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

       
                             
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<PERIOD-START>                     JAN-01-1996
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