10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2005

OR

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

For the transition period from            to

Commission File Number: 0-21990

OXiGENE, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3679168
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

230 THIRD AVENUE
WALTHAM, MA 02451
(Address of principal executive offices, including zip code)

(781) 547-5900
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

As of July 15, 2005, there were 20,042,498 shares of the Registrant’s Common Stock issued and outstanding.

OXiGENE, INC.

Cautionary Factors that may Affect Future Results

The disclosure and analysis by OXiGENE, Inc. (the “Company”) in this report contain “forward-looking statements.” Forward-looking statements give management’s current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words, such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. These include statements, among others, relating to our planned future actions, our clinical trial plans, our research and development plans, our prospective products or product approvals, our beliefs with respect to the sufficiency of our financial resources, our plans with respect to funding operations, projected expense levels, and the outcome of contingencies.

Any or all of our forward-looking statements in this report may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual results may vary materially from those set forth in forward-looking statements. The uncertainties that may cause differences include, but are not limited to: the Company’s history of losses, anticipated continuing losses and uncertainty of future revenues or profitability; the early stage of product development; uncertainties as to the future success of ongoing and planned clinical trials; the unproven safety and efficacy of products under development; the sufficiency of the Company’s existing capital resources; the possible need for additional funds; uncertainty of future funding; the Company’s dependence on others for much of the clinical development of its product candidates under development, as well as for obtaining regulatory approvals and conducting manufacturing and marketing of any product candidates that might successfully reach the end of the development process; the impact of government regulations, health care reform and managed care; competition from other companies and other institutions pursuing the same, alternative or superior technologies; the risk of technological obsolescence; uncertainties related to the Company’s ability to obtain adequate patent and other intellectual property protection for its proprietary technology and product candidates; dependence on officers, directors and other individuals; and risks related to product liability exposure.

We will not update forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. You are advised to consult any further disclosures we make in our reports to the Securities and Exchange Commission, including our 10-Q, 8-K and 10-K reports. Our filings list various important factors that could cause actual results to differ materially from expected results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

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INDEX

	Page
	No.
PART I—FINANCIAL INFORMATION		4
Item 1. Unaudited Financial Statements		4
Condensed Balance Sheets		4
Condensed Statements of Operations		5
Condensed Statements of Cash Flows		6
Notes to Condensed Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures about Market Risks		13
Item 4. Controls and Procedures		13
PART II—OTHER INFORMATION		15
Item 1. Legal Proceedings		15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		15
Item 3. Defaults upon Senior Securities		15
Item 4. Submission of Matters to a Vote of Security Holders		15
Item 5. Other Information		15
Item 6. Exhibits		15
SIGNATURES		16
EX-10.1 Lease Modification Agreement No.1
EX-10.2 Description of Director Compensation Arrangements
EX-10.3 Description of Named Executive Officer Compensation Arrangements
EX-31.1 Sec. 302 CEO Certification
EX-31.2 Sec. 302 CFO Certification
EX-32.1 Sec. 906 CEO and CFO Certification

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements—Unaudited

OXiGENE, Inc.

Condensed Balance Sheets

(All amounts in thousands, except per share data)
(Unaudited)

	June 30, 2005			December 31, 2004
Assets
Current assets:
Cash and cash equivalents	$	21,347		$	15,988
Available-for-sale securities		17,539			14,514
Prepaid expenses		227			59
Other		57			46
Total current assets		39,170			30,607
Furniture and fixtures, equipment and leasehold improvements		962			955
Accumulated depreciation		(905	)		(888	)
		57			67
License agreements, net of accumulated amortization of $577 and $528 at June 30, 2005 and December 31, 2004, respectively		923			971
Deposits		145			112
Total assets	$	40,295		$	31,757
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	202		$	494
Accrued research and development		1,174			1,263
Accrued other		1,087			865
Total current liabilities		2,463			2,622
Commitments and contingencies
Stockholders’ equity:
Common Stock, $.01 par value, 60,000 shares authorized; 20,042 shares at June 30, 2005 and 16,714 shares at December 31, 2004, issued and outstanding		200			167
Additional paid-in capital		133,065			119,527
Accumulated deficit		(95,132	)		(90,046	)
Accumulated other comprehensive loss		(98	)		(94	)
Notes receivable		(182	)		(384	)
Deferred compensation		(21	)		(35	)
Total stockholders’ equity		37,832			29,135
Total liabilities and stockholders’ equity	$	40,295		$	31,757

See accompanying notes.

4

OXiGENE, Inc.

Condensed Statements of Operations

(All amounts in thousands, except per share data)

(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
License revenue	$	—		$	—		$	—		$	7
Costs and expenses:
Research and development		1,570			1,870			2,787			2,822
General and administrative		1,796			1,072			2,793			2,332
Total costs and expenses		3,366			2,942			5,580			5,154
Operating loss		(3,366	)		(2,942	)		(5,580	)		(5,147	)
Investment income		308			138			489			281
Other income, net		—			1			5			1
Net loss	$	(3,058	)	$	(2,803	)	$	(5,086	)	$	(4,865	)
Basic and diluted net loss per common share	$	(0.15	)	$	(0.17	)	$	(0.27	)	$	(0.30	)
Weighted average number of common shares outstanding		20,053			16,669			18,829			16,452

See accompanying notes.

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OXiGENE, Inc.

Condensed Statements of Cash Flows

(All amounts in thousands)

(Unaudited)

	Six months ended
	June 30
	2005			2004
Operating activities:
Net loss	$	(5,086	)	$	(4,865	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation		17			14
Compensation related to issuance of options and restricted stock		—			93
Amortization of licensing agreement		48			48
Changes in operating assets and liabilities:
Restricted cash		—			364
Prepaid expenses and other current assets		(179	)		(343	)
Accounts payable and accrued expenses		(159	)		(441	)
Net cash used in operating activities		(5,359	)		(5,130	)
Investing activities:
Purchase of available-for-sale securities		(10,922	)		(9,780	)
Proceeds from sale of available-for-sale securities		7,894			2,000
Amount paid for license agreements		—			(155	)
Purchase of furniture, fixtures and equipment		(7	)		(17	)
Deposits		(33	)		(4	)
Net cash used in investing activities		(3,068	)		(7,956	)
Financing activities:
Proceeds from the issuance of common stock		13,728			22,410
Payment of notes receivable and related interest		58			82
Net cash provided by financing activities		13,786			22,492
Net increase in cash and cash equivalents		5,359			9,406
Cash and cash equivalents at beginning of period		15,988			878
Cash and cash equivalents at end of period	$	21,347		$	10,284

See accompanying notes.

6

OXiGENE, Inc.

Notes to Condensed Financial Statements

June 30, 2005

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

          The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

          The condensed balance sheet at December 31, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain amounts have been reclassified for the period ended June 30, 2004 to conform to the current year presentation. For further information, refer to the financial statements and footnotes thereto included in the Annual Report on Form 10-K for OXiGENE, Inc. (the “Company”) for the year ended December 31, 2004, which can be found at www.oxigene.com.

Revenue Recognition

          Revenue is deemed earned when all of the following have occurred: all obligations of the Company relating to the revenue have been met and the earnings process is complete; the amounts received or receivable are not refundable irrespective of the research results; and there are neither future obligations nor future milestones to be met by the Company with respect to such revenue.

          Collaboration revenues are earned based upon research expenses incurred and milestones achieved. Revenue from non-refundable payments received upon initiation of contracts are deferred and amortized over the period in which the Company is obligated to participate on a continuing and substantial basis in the research and development activities outlined in each contract. Amounts received in advance of reimbursable expenses are recorded as deferred revenue until the related expenses are incurred. Milestone payments are recognized as revenue in the period in which the parties agree that the milestone has been achieved and no further obligation is deemed to exist.

          The Company also earns revenue on royalty agreements, which is recognized when payments are received due to their uncertainty. Royalty revenue of $7,000 was recognized during the six months ended June 30, 2004 that was earned as a percentage of the sales generated by a third party selling a Nicoplex compound formerly owned by the Company.

Available-for-Sale Securities

          The Company’s investment policy allows for surplus cash to be invested in commercial paper, asset backed securities, obligations of commercial banks and U.S. Government and corporate debt securities. In accordance with Statement of Financial Accounting Standard No. 115 (“FAS 115”), Accounting for Certain Investments in Debt and Equity Securities, the Company separately discloses cash and cash equivalents from investments in marketable securities. The Company designates its marketable securities as available-for-sale securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, if any, reported as accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. Interest and dividends on securities classified as available-for-sale are included in investment income.

  The Company’s investment objectives are to preserve principal, maintain a high degree of liquidity to meet operating needs and obtain competitive returns subject to prevailing market conditions. The Company assesses the market risk of its investments on an ongoing basis so as to avert risk of loss. The Company assesses the market risk of its investments by continuously monitoring the market prices of its investments and related rates of return, continuously looking for the safest, most risk-averse investments that will yield the highest rates of return in their category. Available-for-sale securities are as follows:

	June 30, 2005		December 31, 2004
Government bonds and notes
Maturing in less than 2 years	$	8,675	$	744
Maturing in 2 to 4 years		991		1,496
Maturing in greater than 4 years		—		1,000
Subtotal government bonds		9,666		3,240
Corporate bonds
Maturing in less than 2 years		3,171		2,674
Maturing in 2 to 4 years		1,199		1,706
Subtotal corporate bonds		4,370		4,380
Commercial Paper		2,383		—
Asset backed securities		1,120		—
Certificates of deposit		—		2,641
Fixed income mutual funds		—		4,253
Total available-for-sale securities	$	17,539	$	14,514

Accrued Research and Development

          The Company charges all research and development expenses, both internal and external costs, to operations as incurred. External costs consist of fees paid to consultants and other outside providers under service contracts. Costs incurred under fixed fee contracts are accrued ratably over the contract period absent any knowledge that the services will be performed other than ratably. Costs incurred under contracts to perform clinical trials are accrued on a patients-treated basis

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consistent with the typical terms of reimbursement. Upon termination of such contracts, the Company is normally only liable for costs incurred to date. As a result, accrued research and development expenses represent the Company’s estimated contractual liability to outside service providers at any of the relevant times.

Net Loss Per Share

          Basic and diluted net loss per share were calculated in accordance with the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share, by dividing the net loss per share by the weighted-average number of common shares outstanding. Diluted net loss per share includes the effect of all dilutive, potentially issuable common equivalent shares as defined using the treasury stock method. All of the Company’s common stock equivalents are antidilutive due to the Company’s net loss position for all periods presented. Accordingly, common stock equivalents of approximately 1,772,800 and 1,979,800 at June 30, 2005, and 2004, respectively, were excluded from the calculation of weighted average shares for diluted loss per share.

Stock-based Compensation

          The Company accounts for stock-based compensation for employees under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and has elected the disclosure-only alternative under SFAS No. 123, “Accounting for Stock-Based Compensation.” Accordingly, when options granted to employees have an exercise price equal to the market value of the stock on the date of grant, no compensation expense is recognized. In accordance with SFAS No. 148, “Accounting for Stock Based Compensation-Transition and Disclosure,” the following tables present the effect on net loss and net loss per share as if compensation cost for the Company’s stock had been determined consistent with SFAS No. 123:

	Three months ended						Six months ended
	June 30,						June 30,
(in thousands, except per share data)	2005			2004			2005			2004
Reported net loss	$	(3,058	)	$	(2,803	)	$	(5,086	)	$	(4,865	)
Add stock-based employee compensation included in reported net loss		—			26			—			64
Less stock-based employee compensation expense determined under the fair value method for all stock options		(440	)		(495	)		(883	)		(1,070	)
Pro forma net loss	$	(3,498	)	$	(3,272	)	$	(5,969	)	$	(5,871	)
Reported basic and diluted loss per share	$	(0.15	)	$	(0.17	)	$	(0.27	)	$	(0.30	)
Pro forma basic and diluted loss per share	$	(0.17	)	$	(0.20	)	$	(0.32	)	$	(0.36	)

          Fair value was estimated on the grant date using the Black-Scholes option-pricing model with the assumptions below for options issued during 2005 and 2004.

	2005			2004
Risk free interest rate		4.02	%		2.03	%
Expected life	4 years			4 years
Expected volatility		133	%		95	%
Dividend yield		0.00	%		0.00	%

The fair value of the options granted based on the assumptions outlined in the table above were $3.95 and $6.01 for the six-month periods ended June 30, 2005 and 2004, respectively.

Comprehensive Income (Loss)

          Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (“SFAS 130”), establishes rules for the reporting and display of comprehensive income (loss) and its components and requires unrealized gains or losses on the Company’s available-for-sale securities and the foreign currency translation adjustments to be included in other comprehensive income (loss).

          Accumulated other comprehensive loss consisted of an unrealized loss on available-for-sale securities of $98,000 at June 30, 2005 and $94,000 at December 31, 2004.

          A reconciliation of comprehensive loss is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(In thousands)
Net loss as reported	$	(3,058	)	$	(2,803	)	$	(5,086	)	$	(4,865	)
Unrealized gains (losses)		24			(412	)		(4	)		(233	)
Comprehensive loss	$	(3,034	)	$	(3,215	)	$	(5,090	)	$	(5,098	)

2. Stockholders’ Equity

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          On March 7, 2005, the Company received gross proceeds of approximately $15,000,000 from the sale of 3,336,117 shares of its Common Stock and net proceeds of approximately $13,718,000 after the deduction of fees and expenses, pursuant to a shelf registration statement on Form S-3 filed with the Securities and Exchange Commission in October 2003, allowing it to sell up to $50,000,000 of its Common Stock, debt securities and/or warrants to purchase its securities. The Company plans to use these proceeds to accelerate the development of its two lead product candidates, Combretastatin A4P (CA4P) and OXi4503, in oncology and ophthalmology. To date, the Company has received a total of approximately $39,200,000 of gross proceeds pursuant to the offerings made under this shelf registration.

          Under a Restricted Stock Program adopted in January 2002, 208,541 shares of restricted Common Stock were issued to employees and consultants. The shares vested over a three-year period beginning on the first anniversary of the date of grant. During the three and six months ended June 30, 2004, the Company recognized compensation expense of approximately $26,000 and $64,000, respectively, in connection with this program. No expense was recognized for the three and six months ended June 30, 2005 as shares issued in connection with this program were fully vested in prior periods. Under the terms of the program, participants were permitted to request a loan from the Company, the proceeds of which were to be used to satisfy any participant’s tax obligations that arose from the awards. Each of these loans was evidenced by a promissory note. Principal amounts outstanding under the promissory notes accrued interest at a rate of 10% per year. The principal amount, together with accrued interest on the principal amount to be repaid, were scheduled to be repaid in three equal installments, on the first three anniversary dates of the stock grant date, unless extended by the Company. As of June 30, 2005, all loans made and interest accrued in connection with these grants have been repaid.

          Certain stock options have been exercised with the presentation of non-recourse promissory notes to the Company. The interest rate on the non-recourse promissory notes is 5.6% with maturity terms of one to three years. In June 2005, a note including accrued interest totaling approximately $151,000 was not repaid, and therefore, 10,856 shares of common stock were forfeited. As of June 30, 2005, one note, including accrued interest totaling approximately $182,000, is outstanding from a director of the Company. The note becomes due in November 2006. A total of 20,000 shares of common stock were issued and are outstanding in connection with the exercise of this option.

          During the three and six months ended June 30, 2005, the Company recognized compensation expense of approximately $7,000 and $0, respectively, in connection with options issued to non-employees. During the three and six months ended June 30, 2004, the Company recognized non-employee stock-based compensation expense of approximately $0 and $28,000, respectively.

3. License agreement

          Our primary drug development programs are based on a series of natural products called Combretastatins. Arizona State University (ASU) has granted us an exclusive, worldwide, royalty-bearing license with respect to the commercial rights to particular Combretastatins. The terms of our agreement with ASU provide for the payment of amounts in connection with certain patent rights upon the achievement of certain milestones and events as described in the agreement. In the six months ended June 30, 2005 we recognized and paid a research and development charge of $200,000 in accordance with the terms of the agreement. The agreement provides for additional payments in future periods based upon the achievement of certain milestones and events as described in the agreement. As of June 30, 2005, the achievement of any future milestones was indeterminable. Total payments in connection with these patent rights could total $900,000, including the $200,000 described above, should we achieve all of the milestones defined in the agreement.

4. Leases

          In May 2005, the Company executed a modification to its existing lease for its Waltham, Massachusetts headquarters. The lease modification expands the amount of space leased and extends the end of the base term to May 31, 2009. This modification resulted in a change in the Company’s estimate of whether it would reoccupy its former headquarters location resulting in a charge of approximately $247,000 in the second quarter of 2005. The amount recorded represents the difference between the amounts owed to the landlord of the Company’s former Watertown headquarters location and amounts due from the Company’s subtenant of that space over the remaining life of the lease.

5. New Accounting Pronouncements

          In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123(R)”) “Share-Based Payment,” which is a revision of SFAS 123 and supersedes APB 25 and its related implementation guidance. Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values at the date of grant. Pro forma disclosure is no longer an alternative. SFAS 123(R) is effective for public companies (excluding small business issuers as defined in SEC regulations) at the beginning of the first fiscal year beginning after June 15, 2005.

          SFAS 123(R) permits public companies to adopt its requirements using one of two methods. A “modified prospective” method which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date of SFAS 123(R) that remain unvested on the effective date. A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. We have yet to determine which method to use in adopting SFAS 123(R). As permitted by SFAS 123, we currently account for share-based payments to employees using APB 25’s intrinsic value method. Accordingly, the adoption of SFAS 123(R)’s fair value method will have a significant impact on our results of operations. We are evaluating SFAS 123(R) and have not yet determined the impact in future periods.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          Our Management’s Discussion and Analysis of Financial Condition and Results of Operations as of June 30, 2005 and 2004 should be read in conjunction with the sections of our audited consolidated financial statements and notes thereto, as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in our Annual Report on Form 10-K for the year ended December 31, 2004.

Overview

          We were incorporated in 1988 in the state of New York and reincorporated in 1992 in the state of Delaware, and are a biopharmaceutical company developing novel small-molecule therapeutics to treat cancer and certain eye diseases. Our focus is the development and commercialization of drug candidates that selectively disrupt abnormal blood vessels associated with solid tumor progression and visual impairment. Currently, we do not have any products available for sale, however, we have four therapeutic product candidates in various stages of clinical and preclinical development.

          Our primary drug development programs are based on a series of natural products called Combretastatins. We have developed two distinct technologies that are based on Combretastatins. We refer to the first technology as vascular targeting agents, or VTAs. We are currently developing VTAs for indications in both oncology and ophthalmology. We refer to the second technology as ortho-quinone prodrugs, or OQPs. We are currently developing OQPs for indications in oncology. Our most advanced clinical compound is CA4P, a VTA, which is in multiple ongoing clinical trials in various oncology and ophthalmic indications.

          We are committed to a disciplined financial strategy and maintain a limited employee and facilities base, with development, scientific, finance and administrative functions, which include, among other things, product development, regulatory oversight and clinical testing, managed from our Waltham, Massachusetts headquarters. Our research and development team typically works on a number of development projects concurrently. Accordingly, we do not separately track the costs for each of these research and development projects to enable separate disclosure of these costs on a project-by-project basis. We conduct substantial scientific activities pursuant to collaborative arrangements with universities. Regulatory and clinical testing functions are generally contracted out to third-party, specialty organizations.

          Our failure to successfully complete human clinical trials, develop and market products over the next several years, or to realize product revenues, would materially adversely affect our business, financial condition and results of operations. Royalties or other revenue generated by us from commercial sales of our potential products are not expected for several years, if at all.

          We have generated a cumulative net loss of approximately $95,132,000 for the period from our inception through June 30, 2005. We expect to incur significant additional operating losses over at least the next several years, principally as a result of our continuing clinical trials and anticipated research and development expenditures. The principal source of our working capital has been the proceeds of private and public equity financing and the exercise of warrants and stock options; we currently have no material amount of licensing or other fee income. As of June 30, 2005, we had no long-term debt or loans payable.

Results of Operations

Revenue

Three Months Ended June 30, 2005 and 2004

          For the three months ended June 30, 2005 and June 30, 2004 we did not report any license revenue. Currently, our only source of revenue is from the license to a third party of our formerly owned nutritional and diagnostic technology. Future revenues from this license agreement are expected to be minimal. We do not expect to generate material revenue or fee income unless we enter into a major licensing arrangement.

Six Months Ended June 30, 2005 and 2004

          We reported $0 and $7,000 in license revenue for the six months ended June 30, 2005 and 2004, respectively. The amounts received are in connection with the license to a third party of our formerly owned nutritional and diagnostic technology. Future revenues from this license agreement are expected to be minimal.

Costs and expenses

Three Months Ended June 30, 2005 and 2004

          Total costs and expenses for the three months ended June 30, 2005 and 2004 amounted to approximately $3,366,000 and $2,942,000, respectively.

          Research and development expenses were approximately $1,570,000 during the three months ended June 30, 2005 and were approximately $1,870,000 for the comparable 2004 period, a decrease of approximately $300,000 or 16%. The decrease was primarily attributable to lower contracted research expenses offset by higher salaries and employee-related costs. In the three months ended June 30, 2004, we incurred significant contracted research expenses in both our pre-clinical and manufacturing development programs that did not recur in the three months ended June 30, 2005 in preparation for the additional clinical trials we are now engaged in. In order to support the increased number of our clinical trial programs, we have been hiring additional clinical management and staff. We anticipate that research and development costs will increase over current levels as we make progress in our ongoing clinical trial programs.

          General and administrative expenses for the three months ended June 30, 2005 were approximately $1,796,000 and were $1,072,000 for the comparable 2004 period, an increase of approximately $724,000 or 68%. The increase is primarily attributable to a rent charge of approximately $247,000, higher professional consulting and advisory expenses of approximately $404,000 and higher salaries and employee-related costs of approximately $73,000. In May 2005, we executed a modification to our existing lease for our Waltham, Massachusetts headquarters. The lease modification expands the amount of space leased and extends the end of the base term to May 31, 2009. This modification resulted in a charge of approximately $247,000 related to future net rent obligations on our former Watertown headquarters location. We have added additional management and staff and incurred advisory consulting costs to prepare for and manage activities for both current and anticipated development programs.

Six Months Ended June 30, 2005 and 2004

          Total costs and expenses for the six months ended June 30, 2005 and 2004 amounted to approximately $5,580,000 and $5,154,000, respectively.

          Research and development expenses were approximately $2,787,000 during the six months ended June 30, 2005 and were approximately $2,822,000 for the comparable 2004 period, a decrease of approximately $35,000 or 1%. Lower contracted research expenses were offset by higher salaries and employee-related costs. During the first six months of fiscal 2004, we incurred significant preclinical and manufacturing development costs in preparation for anticipated additional clinical trials of both our CA4P and OXi4503 product candidates. These costs did not recur in the first six months of fiscal 2005 but have been offset by higher clinical trial costs than those experienced in the first six months of fiscal 2004. We anticipate that research and development costs will increase over current levels as we make

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progress in our ongoing clinical trial programs.

          General and administrative expenses for the six months ended June 30, 2005 were approximately $2,793,000 and were $2,332,000 for the comparable 2004 period, an increase of approximately $461,000 or 20%. The increase is attributable to a rent loss charge of approximately $247,000 in connection with the lease modification of our Waltham, Massachusetts headquarters and higher salaries and employee-related costs.

Other income and expenses

          Investment income increased to approximately $308,000 in the three-month period ended June 30, 2005 compared to approximately $138,000 in the three- month period ended June 30, 2004. Investment income increased to approximately $489,000 in the six-month period ended June 30, 2005 compared to approximately $281,000 in the six-month period ended June 30, 2004. The increases in both the three and six-month periods are due primarily to a higher average rate of return on our invested cash balances during the 2005 periods.

Liquidity and Capital Resources

          We have experienced net losses and negative cash flow from operations each year since our inception, except in fiscal 2000. As of June 30, 2005, we had an accumulated deficit of approximately $95,132,000. We expect to incur expenses, resulting in operating losses, over the next several years due to, among other factors, our continuing clinical trials, planned future clinical trials, and other anticipated research and development activities. Our cash, cash equivalents and available-for-sale securities balance was approximately $38,886,000 at June 30, 2005, compared to approximately $30,502,000 at December 31, 2004.

          In the six-month period ended June 30, 2005, we experienced an increase in cash and cash equivalents of $5,359,000. The increase in cash and cash equivalents is due to cash provided by financing activities of $13,786,000, offset in part by cash used in operating activities of $5,359,000 and cash used in investing activities of $3,068,000.

          The net cash provided by financing activities of $13,786,000 is attributable to proceeds from the issuance of common stock of $13,728,000, of which approximately $13,718,000 is attributable to proceeds from the sale of 3,336,117 shares of our common stock in March 2005, pursuant to a takedown from a shelf registration statement on Form S-3 filed with the Securities and Exchange Commission in October 2003, and $10,000 is attributable to proceeds from the exercise of options. Proceeds from the receipt of payments on outstanding notes receivable of $58,000 are also included in the $13,786,000 total.

          Cash used in operating activities of $5,359,000 is primarily attributable to the net loss of $5,086,000 and increases in both prepaid expenses and other current assets of $179,000 and accounts payable and accrued expenses of $159,000.

          Net cash used in investing activities of $3,068,000 is primarily attributable to the purchase of available-for-sale marketable securities for $10,922,000 offset in part by proceeds from the sale of available-for-sale marketable securities of $7,894,000.

          We anticipate that our cash, cash equivalents and available-for-sale marketable securities will be sufficient to satisfy our projected cash requirements at least through approximately the first half of fiscal 2007. Our cash requirements may vary materially from those now planned for or anticipated by us due to numerous risks and uncertainties. These risks and uncertainties include, but are not limited to: the progress of and results of our pre-clinical testing and clinical trials of our VTAs and OQPs under development, including CA4P, our lead compound, and OXi4503; the progress of our research and development programs; the time and costs expended and required to obtain any necessary or desired regulatory approvals; the resources, if any, that we devote to developing manufacturing methods and advanced technologies; our ability to enter into licensing arrangements, including any unanticipated licensing arrangements that may be necessary to enable us to continue our development and clinical trial programs; the costs and expenses of filing, prosecuting and, if necessary, enforcing our patent claims, or defending ourselves against possible claims of infringement by us of third party patent or other technology rights; the costs of commercialization activities and arrangements, if any, undertaken by us; and, if and when approved, the demand for our products, which demand will depend in turn on circumstances and uncertainties that cannot be fully known, understood or quantified unless and until the time of approval, for example, the range of indications for which any product is granted approval.

          If our existing funds are not sufficient to continue operations, we would be required to seek additional funding and/or take other measures. If additional financing is needed, there can be no assurance that additional financing will be available on acceptable terms when needed, if at all. We have no material commitments for capital expenditures as of June 30, 2005.

          The following table presents our contractual obligations and commercial commitments as of June 30, 2005:

			Payments due by period
			(All amounts in thousands)
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Pre-clinical and clinical development commitments (1)	$	3,735	$	3,678	$	57	$	—	$	—
Operating leases		2,769		542		1,185		907		135
Total contractual cash obligations	$	6,504	$	4,220	$	1,242	$	907	$	135

(1) Payments under the pre-clinical and clinical development contracts are based on the completion of activities as specified in the contract. The amounts in the table above assume the successful completion, by third-party contractors, of all of the activities contemplated in the agreements with such parties.

          Our primary drug development programs are based on a series of natural products called Combretastatins. Arizona State University (ASU) has granted us an exclusive, worldwide, royalty-bearing license with respect to the commercial rights to particular Combretastatins. The terms of our agreement with ASU provide for the payment of amounts in connection with certain patent rights upon the achievement of certain milestones and events as described in the agreement. In the six months ended June 30, 2005 we recognized and paid a $200,000 charge in accordance with the terms of the agreement. The agreement provides for additional payments in future periods based upon the achievement of certain milestones and events as described in the agreement. As of June 30, 2005, the achievement of any future milestones was indeterminable. Total payments in connection with these patent rights could total $900,000, including the $200,000 described above, should we achieve all of the milestones defined in the agreement.

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Critical Accounting Policies and Significant Judgments and Estimates

  Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to intangible assets. We base our estimates on historical experience and on various other factors that are believed to be appropriate under the circumstances, the results of which form the basis for making the judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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  While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004 and in our financial statements set forth in Item 1 of this Quarterly Report on Form 10-Q, we believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial results.

   Available-for-Sale Securities

  We designate our marketable securities as available-for-sale securities. Available-for-sale securities are carried at fair value with the unrealized gains and losses, net of tax, if any, reported as accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in investment income. Interest and dividends on securities classified as available-for-sale are included in investment income.

   Accrued Research and Development

  We charge all research and development expenses, both internal and external costs, to operations as incurred. External costs consist of fees paid to consultants and other outside providers under service contracts. Costs incurred under fixed fee contracts are accrued ratably over the contract period absent any knowledge that the services will be performed other than ratably. Costs incurred under contracts to perform clinical trials are accrued on a patients-treated basis consistent with the typical terms of reimbursement. Upon termination of such contracts, we are normally only liable for costs incurred to date. As a result, accrued research and development expenses represent our estimated contractual liability to outside service providers at any of the relevant times.

   Impairment of Long-lived Assets

  On August 2, 1999, we entered into an exclusive license for the commercial development, use and sale of products or services covered by certain patent rights owned by Arizona State University. The present value of the amount payable under the license agreement has been capitalized based on a discounted cash flow model and is being amortized over the term of the agreement (approximately 15.5 years). We review this asset for impairment whenever there are indications of impairment based on an undiscounted net cash flow approach, in accordance with the Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS 144”). If the undiscounted cash flows of an intangible asset are less than the carrying value of an intangible asset, the intangible asset is written down to the discounted cash flow value.

   Stock-Based Compensation

  We account for stock options and stock appreciation rights granted to employees in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations rather than the alternative fair value accounting provided for under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), which requires the use of option valuation models that were not developed for use in valuing employee stock options. The Company also has issued options to non-employees for services provided to the Company. Such options have been accounted for at fair value in accordance with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction With Selling Goods or Services. Such compensation expense is recognized based on the vested portion of the compensation cost at the respective balance sheet dates. Pro forma information regarding net loss and net loss per share has been determined as if the Company had accounted for its employee stock options and stock appreciation rights under the fair value method of SFAS 123. The fair value for these options and stock appreciation rights was estimated at the date of grant using the Black-Scholes option-pricing model.

Tax Matters

          As of December 31, 2004, the Company had net operating loss carry forwards of approximately $109,000,000 for U.S. and foreign income tax purposes, of which approximately $68,700,000 expires for U.S. purposes through 2024. Due to the degree of uncertainty related to the ultimate use of these loss carry forwards, the Company has fully reserved this tax benefit. Additionally, the future utilization of the U.S. net operating loss carry forwards is subject to limitations under the change in stock ownership rules of the Internal Revenue Service.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

          At June 30, 2005, the Company did not hold any derivative financial instruments, commodity-based instruments or other long-term debt obligations. The Company has adopted an Investment Policy and maintains its investment portfolio in accordance with the Investment Policy. The primary objectives of the Investment Policy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields while preserving principal. Although the Company’s investments are subject to credit risk, OXiGENE follows procedures to limit the amount of credit exposure in any single issue, issuer or type of investment. The Company’s investments are also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature of the Company’s investments and their relatively short duration, OXiGENE believes interest rate risk is mitigated. The Company’s cash and cash equivalents are maintained in U.S. dollar accounts and amounts payable for research and development to research organizations are contracted primarily in U.S. dollars. Accordingly, the Company’s exposure to foreign currency risk is limited because its transactions are primarily based in U.S. dollars.

Item 4. Controls and Procedures

          Evaluation of Disclosure Controls and Procedures.

          The Securities and Exchange Commission requires that as of the end of the period covered by this report on Form 10-Q, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) evaluate the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, or the Exchange Act, and report on the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we record, process, summarize and report the information we must disclose in reports that we file or submit under the Exchange Act, within the time periods specified in the SEC’s rules and forms.

          Changes in Internal Control.

          There were no changes in the Company’s internal controls over financial reporting, identified in connection with the evaluation of such controls that occurred during the last fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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          Important considerations.

          The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

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PART II—OTHER INFORMATION

   Item 1. Legal Proceedings

None.

   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

   Item 3. Defaults upon Senior Securities

None.

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

None.

   Item 5. Other Information

None.

   Item 6. Exhibits

10.1	Lease Modification Agreement No. 1 by and between The Realty Associates Fund III and the Registrant, dated as of May 25, 2005.
10.2	Description of Director Compensation Arrangements.
10.3	Description of Named Executive Officer Compensation Arrangements.
31.1	Certification of Principal Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	OXiGENE, INC.
	(Registrant)
Date: July 28, 2005	By:	/s/ Frederick W. Driscoll
		Frederick W. Driscoll
		President and Chief Executive Officer
Date: July 28, 2005	By:	/s/ James B. Murphy
		James B. Murphy
		Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit
Number	Description
10.1	Lease Modification Agreement No. 1 by and between The Realty Associates Fund III and the Registrant, dated as of May 25, 2005.
10.2	Description of Director Compensation Arrangements.
10.3	Description of Named Executive Officer Compensation Arrangements.
31.1	Certification of Principal Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-10.1

Exhibit 10.1

LEASE MODIFICATION AGREEMENT
NO. 1

     THIS LEASE MODIFICATION AGREEMENT NO. 1 (this “First Amendment”) dated May 25, 2005, by and between The Realty Associates Fund III, a Delaware limited partnership (“Landlord”) and OXiGENE, INC., a Delaware corporation (“Tenant”).

WITNESSETH

     WHEREAS, Landlord and Tenant entered into a Lease dated as of August 8, 2003 (the “Lease”) covering approximately 4,000 rentable square feet of space (the “Existing Premises”) on the fifth floor of the building (the “Building”) known as 230 Third Avenue, Waltham, Massachusetts (the Original Lease, as amended and affected by this First Amendment, is hereinafter referred to as the “Lease”); and

     WHEREAS, the Term of the Lease commenced on September 15, 2003 and, in the absence of the execution and delivery of this First Amendment, is scheduled to expire by its terms at 11:59 p.m., local time on December 31, 2008; and

     WHEREAS, Landlord and Tenant mutually desire to increase the size of the premises and to relocate the premises from the Existing Premises to the sixth (6^th) floor of the Building (the “Replacement Premises”), and to adjust the amount of rent and other charges payable therefor, and to make other changes to the Lease, all as set forth herein; and

     WHEREAS, Landlord and Tenant mutually intend and desire to modify the Lease on and subject to the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, each to the other paid, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

          1.      (a) Tenant currently occupies the Existing Premises, and Tenant agrees that Landlord is not responsible or liable to perform any work therein to prepare the same for Tenant’s occupancy thereof, or to pay any further allowance or contribution toward the cost of any work performed by or for Tenant therein.

          (b) On that date (the “Effective Date”) which is the later to occur of (i) the Relocation Completion Date (as hereinafter defined), and (ii) July 1, 2005, Tenant shall vacate the Existing Premises and relocate its furnishings, equipment and personal property to the Replacement Premises. On the Effective Date, Tenant shall deliver up the Existing Premises to Landlord in accordance with the Original Lease, including without limitation the provisions of Section 7.2(b) thereof, provided that Landlord agrees that Tenant shall not be required to remove any alterations or improvements heretofore made by Tenant in the Existing Premises (and Tenant shall not remove any of the existing telecommunication or data communication wiring or cabling

in the Existing Premises). Commencing upon the execution and delivery of this First Amendment by both parties, and upon recovery by Landlord of full possession of the Replacement Premises from the existing tenant, Tenant shall have access to the Replacement Premises for the purpose of installing Tenant’s furniture, equipment and telephone/data wiring, provided that such access shall be subject to all of the terms and conditions of the Lease, other than the payment of Rent. Tenant’s access shall be subject to reasonable scheduling and other requirements of Landlord and Landlord’s contractor, and Tenant shall deliver to Landlord certificates of liability, casualty and workmen’s compensation insurance prior to having any such access.

          2. Effective from and after the Effective Date, the following definitions set forth in Article 1 of the Lease shall be deemed amended as follows:

     Premises: A portion of the sixth floor of the Building, as shown on Exhibit “A-l” attached hereto.

     Rentable Area of the Premises: Agreed to be 9,901 square feet.

     Expiration Date: 11:59 p.m., local time, on May 31, 2009 (subject to Section 7 hereof).

     Base Rent: Commencing on the Effective Date, the Base Rent shall be as follows:

				MONTHLY			BASE RENT PER
LEASE YEAR	ANNUAL BASE RENT			PAYMENT			SQUARE FOOT
1	$	252,475.50	*	$	21,039.63	*	$	25.50
2	$	262,376.50		$	21,864.70		$	26.50
3	$	272,277.50		$	22,689.79		$	27.50
4	$	282,178.44		$	23,514.87		$	28.50

     For the purposes hereof, the first Lease Year in respect of the Replacement Premises shall commence on the Effective Date and end on the last day of the twelfth full calendar month following the Effective Date, and succeeding Lease Years shall be successive periods of twelve calendar months (and any portion of such a twelve-month period at the end of the Term).

     * - So long as there exists no default on the part of Tenant under the Lease prior to September 30, 2005, from the Effective Date through September 30, 2005, Base Rent shall be computed on the basis of 6,601 rentable square feet, or at the rate of $14,027.13 per month.

     Security Deposit: $67,000.00, subject to reduction as herein provided.

     Tenant’s Share: 3.38%

     Tax Base Year: Fiscal Year 2006 (July 1, 2005 through June 30, 2006).

     Operating Cost Base Year: Calendar Year 2005

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     Number of Tenant Parking Spaces: Thirty (30) spaces, to be used in common and on an unassigned basis.

          3.      (a) Landlord has prepared a space plan for the Replacement Premises (the “New Plan”) showing the general layout and location of improvements to be constructed by Landlord. The New Plan is dated March 31, 2005, and was prepared by Nelco Architecture, Inc. (“Landlord’s Architect”), and has been approved by Tenant and Landlord and is attached hereto as Exhibit B-1. Promptly upon execution and delivery of this Lease by both parties, Landlord shall have plans (the “Replacement Plans”) for the interior finish and other tenant improvements to the Replacement Premises prepared in accordance with Landlord’s current Building standards, a copy of which has been provided to Tenant. The Replacement Plans shall be submitted to Tenant for its approval, which shall not be unreasonably withheld or delayed. Failure by Tenant to disapprove any submission or resubmission of the Replacement Plans within five (5) days after submission or any resubmission shall constitute approval thereof. Any disapproval shall be accompanied by a specific statement of the reasons therefor.

                   (b) Promptly after recovery of full possession of the Replacement Premises from the prior tenant, and approval of the Replacement Plans, Landlord shall commence and use reasonable diligence to substantially complete the work to be performed by Landlord pursuant to the Replacement Plans (“Landlord’s Expansion Work”), at Landlord’s sole cost and expense. Landlord’s Expansion Work shall include, without limitation, the items shown or referred to on Exhibit C-l hereto. Landlord shall undertake Landlord’s Expansion Work in a good and workmanlike manner, free of all liens against Tenant’s interests and in accordance with applicable laws.

                   (c) The Replacement Premises shall be deemed ready for occupancy on the first day as of which (i) Landlord’s Expansion Work has been completed except for items of work (and, if applicable, adjustment of equipment and fixtures) which can be completed after occupancy has been taken without causing undue interference with Tenant’s use of the Replacement Premises (i.e. so-called “punch list” items), (ii) Landlord has received a certificate of occupancy therefor (which certificate may be temporary if any conditions therefor are to be performed by Tenant hereunder), and (iii) Landlord’s Architect has certified that Landlord’s Expansion Work has been completed in substantial accordance with the Replacement Plans. Such date is hereinafter called the “Relocation Completion Date.” Landlord shall give Tenant ten (10) business days’ advance notice of the date on which Landlord reasonably anticipates that the Relocation Completion Date will occur. Landlord shall use commercially reasonable efforts to substantially complete Landlord’s Expansion Work on or before July 1, 2005, but shall have no liability for failure to do so (except with respect to the Sublease Space as provided below). Landlord and Tenant shall schedule an inspection walk-through of the Premises prior to the occurrence of the Relocation Completion Date to review Landlord’s Expansion Work and to prepare the punch list. Landlord shall use commercially reasonable efforts to compete any punch-list items of work within thirty (30) days after the Relocation Completion Date, and Tenant shall afford Landlord access to the Replacement Premises therefor. Landlord and Tenant acknowledge that Tenant currently occupies certain space (the “Sublease Space”) on the fifth floor of the Building, containing approximately 3,300 rentable square feet, pursuant to a

3

Sublease between the Tenant and Schwartz Communications, Inc., and that the term of that Sublease expires September 30, 2005. If Landlord determines that the Relocation Completion Date will not occur on or before September 15, 2005, Landlord will so notify Tenant and, upon written request by Tenant, Landlord will allow Tenant to remain in the Sublease Space on all of the terms and conditions of the Lease from September 30, 2005 until the Relocation Completion Date. Tenant’s right to use and occupy the Sublease Space shall cease as of 5:00 p.m. on the day specified by Landlord in Landlord’s notice to Tenant pursuant to Section 3(c) hereof, at or before which time Tenant shall vacate and surrender the Sublease Space and relocate to the Replacement Premises. During the period that Tenant occupies the Sublease Space after September 30, 2005, the Sublease Space shall for all purposes of the Lease be deemed to constitute a portion of the Premises demised under the Lease, except that (except to the extent that any delay in the Relocation Completion Date is due to a Tenant Expansion Delay) the Base Rent and additional rent payable to Landlord with respect to the Sublease Space between September 30, 2005 and the Relocation Completion Date shall be the same as is payable under the existing Sublease.

          4. Tenant shall give Landlord written notice, not later than nine calendar months after the Relocation Completion Date (which shall be extended to twelve calendar months as to defects that could not be discovered by a careful visual inspection or by normal use), of any respects in which Landlord has not performed Landlord’s Expansion Work fully, properly and in accordance with the terms of this First Amendment. Except as identified in any such notice from Tenant to Landlord, Tenant shall have no right to make any claim that Landlord has failed to perform any of Landlord’s Expansion Work fully, properly and in accordance with the terms of the Lease, or to require Landlord to perform any further Landlord’s Expansion Work. Except for Landlord’s Expansion Work, the Premises are being leased in their present condition, AS IS, WITHOUT REPRESENTATION OR WARRANTY by Landlord. Tenant acknowledges that it has inspected the Replacement Premises and Common Areas and, subject to completion of Landlord’s Expansion Work, has found the same satisfactory.

          5. (a) If a delay shall occur in the Relocation Completion Date, and such delay would not have occurred but for the occurrence of any of the following:

(i)	any request by Tenant that Landlord delay the commencement or completion of Landlord’s Expansion Work for any reason;
(ii)	any delay by Tenant in the approval of the Replacement Plans, or any request by Tenant for any change in any of the Replacement Plans after the Tenant’s approval thereof;
(iii)	any other act or omission of Tenant or its officers, agents, employees or contractors, including without limitation any act in connection with Tenant’s early access to the Replacement Premises as provided above, provided that Landlord shall notify Tenant reasonably promptly after obtaining knowledge that such act or omission is reasonably likely to cause a delay in the Relocation Completion Date;

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(iv)	any special requirement of the approved Replacement Plans not in accordance with Landlord’s Building standards, provided that Landlord shall notify Tenant reasonably promptly after obtaining knowledge that such special requirement is reasonably likely to cause a delay in the Relocation Completion Date; or
(v)	any reasonably necessary displacement of any of Landlord’s Expansion Work from its place in Landlord’s construction schedule resulting from any of the causes for delay referred to in this paragraph (a) and the fitting of such Landlord’s Expansion Work back into such schedule;

then on the Relocation Completion Date (as delayed), Tenant shall pay to Landlord for each day of such delay the amount of Base Rent, Additional Rent and other charges that would have been payable hereunder had the Tenant’s obligation to pay Base Rent in respect of the Replacement Premises (without regard to any period of free or reduced rent) commenced immediately prior to such delay.

          (b) If a delay in the Relocation Completion Date, or if any substantial portion of such delay, is the result of Force Majeure, and such Force Majeure delay would not have occurred but for a delay described in paragraph (a), such Force Majeure delay shall be added to the delay described in paragraph (a), provided that Landlord shall notify Tenant reasonably promptly after obtaining knowledge that the Force Majeure is reasonably likely to cause a further delay in the Relocation Completion Date. The delays referred to herein and in paragraph (a) are herein referred to collectively and individually as “Tenant’s Expansion Delay.”

          6. Landlord and Tenant acknowledge that Tenant has heretofore delivered to Landlord a cash security deposit in the amount of $34,000.00 to be held and applied as provided in Section 5 of the Lease. Landlord and Tenant further agree that, on or before the Effective Date, Tenant shall deliver an additional security deposit of $33,000.00. Landlord shall hold and apply the same as provided in Section 5 of the Lease. Notwithstanding the foregoing, so long as: (x) on the first anniversary of the Effective Date, there has existed no Event of Default under the terms of the Lease, nor any event or circumstance which, with the passage of time or the giving of notice, or both, would constitute an Event of Default, and Tenant has not made any payment of Base Rent on any day after the same was due and payable under the Lease; and (y) on the first anniversary of the Effective Date the Lease is in full force and effect; then Tenant shall be entitled to reduce the face amount of the LC at such anniversary, to $34,000.00. Landlord shall return the difference in said security deposit to Tenant within ten (10) days following receipt of written request therefor.

          7. Landlord and Tenant agree that Section 27.1 of the Lease shall be deleted in its entirety and restated as follows:

     “27.1 Tenant’s Right. Provided that, at the time of such exercise, (i) there exists no Event of Default; (ii) Tenant has not assigned the Lease or sublet all of any portion of the Premises (other than to any entity described in the last sentence of Section 12.1 hereof); and (iii) the Lease is still in full force and effect, Tenant shall have the right to extend the Term of the Lease for one extended term (the “Extended Term”) of three (3) years, commencing June 1, 2009

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and ending May 31, 2012. If Tenant so requests in writing, not sooner than March 31, 2008, Landlord shall, within thirty (30) days, advise Tenant of Landlord’s then good faith determination of what the Fair Market Rental Value of the Premises would be as of the Determination Date (as such terms are defined in Section 27.2). Tenant shall exercise such option to extend by giving written notice to Landlord not later than May 31, 2008. Tenant further agrees that Tenant’s right to extend the Term for the Extended Term is expressly subject only to the rights of Hewitt Associates under an existing lease dated as of February 19, 2004 to expand into the Premises as of June 1, 2009, and that the Premises may not be available to Tenant during the Extended Term. Not later than June 30, 2008, Landlord shall advise Tenant of whether the Premises will be available to Tenant during the Extended Term. If the Premises will not be available during the Extended Term, then Tenant’s option to extend shall be void and without any effect, and the Lease Term will end on the Expiration Date set forth herein.

          8. Landlord shall have the right at any one time during the Lease Term, upon not less than one hundred twenty (120) days’ prior written notice, to relocate Tenant to any other leasable space in the Building (the “Substitute Space”), which space shall be reasonably comparable to the Premises in terms of quality and level of finish. Prior to the date that Tenant is relocated to the Substitute Space, Tenant shall remain in the Premises and shall continue to perform all of its obligations under this Lease. After Tenant moves into the Substitute Space, this Lease shall remain in full force and effect and be deemed applicable to the Substitute Space, except as to Base Rent, Tenant’s Share of Operating Expense increases, Tenant’s Share of Real Property Tax increases and the number of parking spaces Tenant shall be entitled to use, all Of which shall be adjusted based on the relationship between the number of rentable square feet in the original Premises and the number of rentable square feet in the substituted space. Upon Tenant’s relocation, Landlord and Tenant shall amend the Lease to provide for the relocation of the Premises. Landlord shall pay for all actual, substantiated costs to Landlord or Tenant in connection with Tenant’s relocation to the Substitute Space, such as the cost of moving Tenant’s furniture and equipment to the Substitute Space and the cost associated with telephone/data cabling/network wiring (as well as the cost of purchasing and installing any equipment necessary to adequately cool Tenant’s computer room in the Substitute Space) and the cost of a reasonable quantity of Tenant’s stationery products (on which the floor on which the Premises are located is specified), but such costs shall not include the costs of Tenant’s personnel engaged in preparing for or carrying out such relocation.

          9. In accordance with Section 47 of the Lease, Landlord agrees to provide, at Landlord’s sole cost and expense, building standard signage in the elevator lobby located on the 6^th floor and at the entrance to the Premises during the Term of the Lease (as it may be extended).

          10.       (a) As a material inducement to Landlord entering into this First Amendment, Tenant certifies to Landlord that as of the date hereof: (i) the Lease contains the entire agreement between the parties hereto relating to the Premises and that there are no other agreements between the parties relating to the Premises, the Lease or the Building which are not contained or referred to herein or in the Lease, (ii) Landlord is not in default in any respect in any of the terms, covenants and conditions of the Lease; (iii) Tenant has no existing setoffs, counterclaims or defenses against Landlord under the Lease; and (iv) Tenant has not assigned its

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interest in the Lease, or sublet or licensed any portion of the Existing Premises, to any third party or parties. Tenant certifies to Landlord that Tenant is not, and the performance by Tenant of its obligations hereunder shall not render Tenant, insolvent within the meaning of the United States Bankruptcy Code, the Internal Revenue Code or any other applicable law, code or regulation.

          (b) As a material inducement to Tenant entering into this First Amendment, Landlord certifies to Tenant that as of the date hereof: (i) the Lease contains the entire agreement between the parties hereto relating to the Premises and that there are no other agreements between the parties relating to the Premises, the Lease or the Building which are not contained or referred to herein or in the Lease, and (ii) to the best of Landlord’s knowledge, Tenant is not in default in any respect in any of the terms, covenants and conditions of the Lease.

          10. Tenant covenants, represents and warrants to Landlord that Tenant has had no dealings or communications with any broker or agent (other than Meredith & Grew, Inc. and CB Richard Ellis/Whittier Partners) in connection with this First Amendment, and Tenant covenants and agrees to pay, hold harmless and indemnify the Landlord from and against any and all cost, expense (including reasonable attorneys’ fees) or liability for any compensation, commission or charges to any broker or agent (other than the foregoing named broker) claiming through the Tenant with respect hereto. Landlord covenants, represents and warrants to Tenant that Landlord has had no dealings or communications with any broker or agent (other than Meredith & Grew, Inc. and CB Richard Ellis/Whittier Partners) in connection with this First Amendment, and Landlord covenants and agrees to pay, hold harmless and indemnify the Tenant from and against any and all cost, expense (including reasonable attorneys’ fees) or liability for any compensation, commission or charges to any broker or agent (including the foregoing named brokers) claiming through the Landlord with respect hereto. Landlord shall be responsible for payment of the fees and commissions due to Meredith & Grew and CB Richard Ellis/Whittier Partners in connection with this First Amendment.

          11. Tenant represents and warrants that it has taken all necessary corporate, partnership or other action necessary to execute and deliver this First Amendment, and that this First Amendment constitutes the legally binding obligation of Tenant, enforceable in accordance with its terms. Tenant further represents and warrants that it has full and complete authority to enter into and execute this First Amendment and acknowledges that Landlord is relying upon Tenant’s representation of its authority to execute this First Amendment and Tenant shall save and hold Landlord harmless from any claims or damages, including reasonable attorneys’ fees, arising from Tenant’s misrepresentation of its authority to enter into and execute this First Amendment. Landlord represents and warrants that it has taken all necessary corporate, partnership or other action necessary to execute and deliver this First Amendment, and that this First Amendment constitutes the legally binding obligation of Landlord, enforceable in accordance with its terms. Landlord further represents and warrants that it has full and complete authority to enter into and execute this First Amendment and acknowledges that Tenant is relying upon Landlord’s representation of its authority to execute this First Amendment and Landlord shall save and hold Tenant harmless from any claims or damages, including reasonable attorneys’ fees, arising from Landlord’s misrepresentation of its authority to enter into and execute this First Amendment.

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          12. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Lease.

          13. As amended by this First Amendment, the Lease is ratified and confirmed and declared to be in full force and effect.

[Signatures Appear on Following Page]

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     IN WITNESS WHEREOF, parties have set their respective hands as of the date first above written.

LANDLORD

THE REALTY ASSOCIATES FUND III, L.P., a

Delaware limited partnership

By: Realty Associates Fund III GP Limited

Partnership, a Delaware limited partnership, its

general partner

By: Realty Associates Fund III, LLC, a

Delaware limited liability company, its

   sole general partner

By: Realty Associates Fund III Trust, a

Massachusetts business trust, its sole

member

By:	/s/ James P. Knowles
Name:     James P. Knowles
Title:       Regional Director

By: Realty Associates Fund III Texas Corporation, a

Texas corporation, its general partner

By:	/s/ James P. Knowles
Name:    James P. Knowles
Title:      Regional Director

TENANT

OXIGENE, INC.

By:	/s/ James Murphy
Name: James Murphy
Title:   VP CFO

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EXHIBIT A-1

Plan of Replacement Premises

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EXHIBIT B-1

NEW PLAN

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EXHIBIT C-l

DESCRIPTION OF LANDLORD’S EXPANSION WORK

1. Supplemental HVAC system with a capacity sufficient to cool Tenant’s equipment (consisting of not more than four servers requiring approximately 2,000 watts of power and 10,000 BTU’s of cooling) located in Tenant’s server room on a 24/7 basis;

2. Building standard paint and carpeting in color of Tenant’s choice;

3. Building standard lock sets on all office doors keyed as specified by Tenant;

4. Network wiring cutouts/pull strings in all offices and conference rooms pursuant to the below list;

5. Relocation and installation of Tenant’s existing dishwasher (or provide a new dishwasher, at Landlord’s election and cost) and refrigerator;

6. Electrical metering or submetering at Landlord’s election.

7. Three dedicated 20-ampere duplex receptacles in the server room;

8. List of locations for network wiring cutouts/pull-strings:

a. One per office, located on the same wall as the desk return as shown on the approved space plan, and two in certain offices as specified prior to construction commencement;

b. Two in each of the two locations shown on the plan as “File/Fax/Copy areas;”

c. One in each of the two file rooms;

d. Two in the server room; and

e. One cutout per wall in each of the two conference rooms.

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EX-10.2

Exhibit 10.2

OXiGENE, Inc.

Description of Director Compensation Arrangements

  Effective with the election of the non-employee directors at OXiGENE’s (the “Company”) Annual Meeting on July 7, 2005, the Company pays each non-employee director an annual fee of $30,000 for service as a director of the Company and $1,500 for attendance at each board meeting. The Company pays each non-employee director who serves as chairman of a committee of the Board an annual fee of $7,500 and each committee member, including the Chairman, $1,000 for attendance at each committee meeting. In addition, non-employee directors are eligible to participate in the Company’s 2005 Stock Plan. There are currently 2,500,000 shares of common stock reserved for issuance under the 2005 Stock Plan. The Plan authorizes the issuance of stock grants and other stock-based awards and the grant of non-qualified stock options to non-employee directors.

EX-10.3

Exhibit 10. 3

OXiGENE, Inc.

Named Executive Officers Compensation Arrangements

     The following are our named executive officers. Their annual base salaries for 2005 are as follows:

Named Executive Officer	Position	2005 Salary
Frederick W. Driscoll	President and Chief Executive Officer	$	325,000
David Chaplin	Chief Scientific Officer and Head of
	Research and Development	$	325,000
Scott Young (1)	Chief Operating Officer	$	240,000
James B. Murphy (1)	Vice President and Chief Financial Officer	$	220,000

(1) The annual base salaries listed for both Mr. Young and Mr. Murphy became effective in June 2005.

EX-31.1

Exhibit 31.1

Certification Under Section 302

I, Frederick W. Driscoll, certify that:

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

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

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

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

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

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

     a) all significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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

Date: July 28, 2005	By:	/s/ Frederick W. Driscoll
		Frederick W. Driscoll
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Under Section 302

I, James B. Murphy, certify that:

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

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

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

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

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

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

     a) all significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

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

Date: July 28, 2005	By:	/s/ James B. Murphy
		James B. Murphy
		Vice President and Chief Financial Officer and Chief Accounting Officer

EX-32.1

Exhibit 32.1

Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of OXiGENE, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the six months ended June 30, 2005 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 28, 2005	By:	/s/ Frederick W. Driscoll
		Frederick W. Driscoll
		President and Chief Executive Officer

Date: July 28, 2005	By:	/s/ James B. Murphy
		James B. Murphy
		Vice President and Chief Financial Officer and Chief Accounting Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.