<SUBMISSION>
<ACCESSION-NUMBER>0001104659-01-500460
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20010331
<FILING-DATE>20010511
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AEROGEN INC
<CIK>0001039160
<ASSIGNED-SIC>3841
<IRS-NUMBER>330488580
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-31913
<FILM-NUMBER>1629367
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1310 CORONADO DR
<CITY>SANTA CLARA
<STATE>CA
<ZIP>95054
<PHONE>4085432400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1310 ORLEANS DRIVE
<CITY>SUNNYVALE
<STATE>CA
<ZIP>94089
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>j0424_10q.htm
<TEXT>

<HTML>

<head>
<TITLE>Prepared by MerrillDirect</TITLE>
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<body link=blue vlink=purple>

<div>




<hr size=2 width="100%" noshade color=black align=right>






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<p align=center><b><font size=3 face=Times>UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION</font></b><br>
<b>Washington, DC&nbsp; 20549</b></p>

<p align=center><b><font size=3>FORM 10-Q</font></b></p>

<p><b><font size=3>(Mark One)</font></b></p>

<p><font size=3 face=Wingdings>x</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b><font>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p><font size=2 face=Times>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>For
the quarterly period ended March 31, 2001</b></font></p>

<p align=center><b><font size=2 face=Times>OR</font></b></p>

<p><b><font size=3 face=Wingdings>o</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><b><font>TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>

<p><font size=2 face=Times>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>For
the transition period from ________ to ________</b></font></p>

<p align=center><b><font size=3>Commission File
Number:&nbsp; <u>0-31913</u></font></b></p>

<p align=center><b><font size=4>Aerogen, Inc</font></b><b><font size=5>.<br>
</font></b><u><font size=1>(Exact
name of Registrant as specified in its charter)</font></u></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="50%" valign=top><b><font size=3>Delaware</font></b></td>
  <td  align=center width="50%" valign=top><b><font size=3>33-0488580</font></b></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font size=1>(State
  or other jurisdiction of incorporation or organization)</font></td>
  <td  align=center width="50%" valign=top><font size=1>(I.R.S.
  Employer Identification No.)</font></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top>&nbsp;</td>
  <td  align=center width="50%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><b><font size=3>1310 Orleans Drive, Sunnyvale, CA</font></b></td>
  <td  align=center width="50%" valign=top><b><font size=3>94089</font></b></td>
 </tr>
 <tr>
  <td  align=center width="50%" valign=top><font size=1>(Address
  of principal executive offices)</font></td>
  <td  align=center width="50%" valign=top><font size=1>(zip
  code)</font></td>
 </tr>
</TABLE>

</div>

<p><font size=2 face=Times>Registrant&#146;s
telephone number, including area code:&nbsp;
(<u>408) 543-2400</u></font></p>

<p><font size=2>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.</font></p>

<p><font size=2>Yes&nbsp; </font><font size=2 face=Wingdings>x</font><font size=2>&nbsp; No&nbsp; </font><font size=2 face=Wingdings>o</font></p>

<p><font size=2 face=Times>As of
April 30, 2001 there were 19,989,908 shares of the Registrant&#146;s Common Stock
outstanding, par value $0.001 per share.</font></p>





<hr size=1 width="100%" noshade color=black align=right>






<hr size=2 width="100%" noshade color=black align=right>


<PAGE>


<p align=center><b><font size=2>Aerogen, Inc.<br>
</font></b><font size=2>(a company in
the development stage)</font><b><font size=2><br>
Form 10-Q<br>
Table of Contents</font></b></p>

<p><b><font size=2>Part</font></b><font size=2>&nbsp; <b>I. <u>Financial
Information</u></b> <b><u>Page
Number</u></b></font></p>


<p><font size=2>Item
1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financial Statements
(unaudited)</font></p>


<dir><dir>
<p><font size=2><a
href="#Condensed_Consolidated_Balance_Sheets" title="Click to goto Condensed Consolidated Balance Sheets">Condensed
Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000</a></font></p>
</dir></dir>

<dir><dir>
<p><font size=2><a
href="#Condensed_Consolidated_Statements_of_Ope" title="Click to goto Condensed Consolidated Statements of Operations">Condensed
Consolidated Statements of Operations for the three months ended March 31, 2001
and 2000</a></font></p>
</dir></dir>

<dir><dir>
<p><font size=2><a
href="#Condensed_Consolidated_Statements_of_Cas" title="Click to goto Condensed Consolidated Statements of Cash Flows">Condensed
Consolidated Statements of Cash Flows for the three months ended March 31, 2001
and 2000</a></font></p>
</dir></dir>

<dir><dir>
<p><font size=2><a
href="#NOTES_TO_CONDENSED_CONSOLIDATED_FINANCIA" title="Click to goto NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS">Notes
to Condensed Consolidated Financial Statements </a></font></p>
</dir></dir>


<p><font size=2><a
href="#Item_2__Managements_Discussion_and_Analy" title="Click to goto Item  2.&#9;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations">Item
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations</a></font></p>



<p><font size=2><a
href="#Item_3__Quantitative_and_Qualitative_Dis" title="Click to goto Item  3.&#9;Quantitative and Qualitative Disclosure About Market Risk">Item
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Quantitative and
Qualitative Disclosures About Market Risk and Factors that May Affect Future
Operating Results</a></font></p>


<p><b><font size=2>Part</font></b><font size=2>&nbsp; <b>II.</b>&nbsp; <b><u>Other Information</u></b></font></p>


<p><font size=2><a
href="#Item_1__Legal_Proceedings" title="Click to goto Item 1.&#9;Legal Proceedings">Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Legal Proceedings </a></font></p>



<p><font size=2><a
href="#Item_2__Changes_in_Securities_and_Use_of" title="Click to goto Item 2.&#9;Changes in Securities and Use of Proceeds">Item
2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in Securities and
Use of Proceeds</a></font></p>



<p><font size=2><a
href="#Item_3__Defaults_Upon_Senior_Securities" title="Click to goto Item 3.&#9;Defaults Upon Senior Securities">Item 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Defaults Upon Senior Securities </a></font></p>



<p><font size=2><a
href="#Item_4__Submission_of_Matters_to_a_Vote_" title="Click to goto Item 4.&#9;Submission of Matters to a Vote of Security Holders">Item
4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Submission of Matters to
a Vote of Security Holders </a></font></p>



<p><font size=2><a
href="#Item_5__Other_Information" title="Click to goto Item 5.&#9;Other Information">Item 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other information </a></font></p>



<p><font size=2><a
href="#Item_6__Exhibits_and_Reports_on_Form_8K" title="Click to goto Item 6.&#9;Exhibits and Reports on Form 8-K">Item 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits and Reports on Form 8-K </a></font></p>



<p><font size=2><a href="#Signatures" title="Click to goto Signatures">Signatures</a></font></p>


<PAGE>


<p><b><font size=2>Part</font></b><font size=2>&nbsp; <b>I.&nbsp; </b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b><u>Financial Information</u></b></font></p>

<p><b><font size=2>Item</font></b><font size=2>&nbsp; <b>1.</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Financial
Statements</b></font></p>

<p align=center><b><font size=2>Aerogen, Inc.<br>
</font></b><font size=2>(a development stage company)<br>
<a name="Condensed_Consolidated_Balance_Sheets"><b>Condensed Consolidated Balance Sheets</b></a><br>
(unaudited; in thousands)</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr height=56>
  <td  align=center width="75%" height=56 valign=bottom>&nbsp;</td>
  <td  align=center width="12%" height=56 valign=bottom><font   size=2>March
  31,<br>
  2001</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=center width="12%" height=56 valign=bottom><font   size=2>December
  31,<br>
  2000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><b><font size=2>ASSETS</font></b></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Current assets:</font></td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$40,968</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$48,810</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Available-for-sale securities</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>15,992</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>12,166</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>851</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>762</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other
  current assets</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,099</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,201</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current assets</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>58,910</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>62,939</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Property and equipment, net</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,902</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,905</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Goodwill and other
  intangible assets, net</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>1,614</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>1,823</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Other assets</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>45</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>45</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$62,471</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$66,712</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><b><font size=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</font></b></td>
  <td width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp; &nbsp;&nbsp;Current liabilities:</font></td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$725</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$915</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued liabilities</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,952</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,135</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenues</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>248</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>250</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total
  current liabilities</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>2,925</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>2,300</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Other long-term liabilities</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>172</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>184</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>3,097</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>2,484</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp; Stockholders&#146; equity:</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>20</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>20</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional paid-in capital</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>110,349</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>110,692</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notes receivable from
  stockholders</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(672)</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(665)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Deferred stock-based compensation, net</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>(5,428)</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>(6,095)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive
  income (loss)</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(107)</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>15</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deficit accumulated during
  development stage</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>(44,788)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>(39,739)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders&#146;
  equity</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>59,374</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>64,228</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and
  stockholders&#146; equity</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$62,471</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$66,712</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p align=center><font size=2>The
accompanying notes are an integral part of these condensed consolidated
financial statements.</font></p>

<PAGE>


<p align=center><b><font size=2>Aerogen, Inc.</font></b><font size=2><br>
(a development stage company)<br>
<a name="Condensed_Consolidated_Statements_of_Ope"><b>Condensed Consolidated Statements of Operations</b></a><br>
(unaudited; in thousands, except per share data)</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr height=56>
  <td  align=center width="75%" height=56 valign=bottom>&nbsp;</td>
  <td  align=center width="24%" colspan=2 height=56 valign=bottom><font   size=2>Three Months Ended</font><b><font size=2><br></font></b><font size=2>March 31,</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td  align=center width="75%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" valign=bottom><font   size=2>2001</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=center width="12%" valign=bottom><font   size=2>2000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>Revenues:</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development revenues</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>$609</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>$1,139</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Royalty, fee and other revenues</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>66</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>&#151;</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>675</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,139</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>Operating expenses:</font></td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and
  development</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>5,012</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>2,937</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; General and administrative</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>1,520</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>928</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>6,532</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>3,865</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>Loss from operations</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(5,857)</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>(2,726)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>Interest income, net</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>808</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>88</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>Net loss</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>$(5,049)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>$(2,638)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>Net loss per common
  share, basic and diluted</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$(0.26)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font   size=2>$(1.28)</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font size=2>Shares used in
  computing net loss per common share, basic and diluted</font></td>
  <td  align=right width="12%" valign=bottom><font   size=2>19,466</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font   size=2>2,054</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p align=center><font size=2>The
accompanying notes are an integral part of these condensed consolidated
financial statements.</font></p>

<PAGE>


<p align=center><b><font size=2>Aerogen,
Inc.<br>
</font></b><font size=2>(a development
stage company)</font><b><font size=2><br>
<a name="Condensed_Consolidated_Statements_of_Cas">Condensed Consolidated
Statements of Cash Flows</a><br>
</font></b><font size=2>(unaudited; in
thousands)</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td  align=center width="75%" valign=bottom>&nbsp;</td>
  <td  align=center width="24%" colspan=2 valign=bottom><font size=2>Three Months Ended<br>
  March 31,</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td  align=center width="75%" valign=bottom>&nbsp;</td>
  <td  align=center width="12%" valign=bottom><font size=2>2001</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=center width="12%" valign=bottom><font size=2>2000</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><b><font size=2>Cash
  Flows From Operating Activities:</font></b></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>Net
  loss</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(5,049)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>$(2,638)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font size=2>Adjustments
  to reconcile net loss to net cash used in operating activities:</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>398</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>147</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of deferred
  stock-based compensation</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>326</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>63</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest on notes receivable
  from stockholders</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(7)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(5)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in assets and liabilities:</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(90)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>19</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other
  current assets</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>103</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(56)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(189)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>172</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued liabilities</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>817</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>489</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenue</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(2)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>99</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in operating
  activities</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(3,693)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(1,710)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><b><font size=2>Cash
  Flows From Investing Activities:</font></b></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquisition of property and
  equipment</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(187)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(340)</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of available-for-sale
  securities</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(12,118)</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>-</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from maturities of
  marketable investments</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>8,300</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>18</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in investing
  activities</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(4,005)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(322)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
  <td  align=right width="12%" valign=bottom>&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><b><font size=2>Cash
  Flows From Financing Activities:</font></b></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from issuance of
  convertible preferred stock, net</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>-</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>2,465</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from issuance of common
  stock</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>6</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>27</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repurchase of common stock</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(8)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>-</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayment of notes payable</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>-</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(77)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by (used in)
  financing activities</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(2)</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>2,415</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>Effect
  of exchange rates on cash</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>(142)</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>-</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff"><font   size=2>Net
  increase (decrease) in cash and cash equivalents</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>(7,842)</font></td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff"><font size=2>383</font></td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>Cash
  and cash equivalents, at beginning of the period</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>48,810</font>
<hr size=1 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>1,822</font>
<hr size=1 width="95%" noshade color=black align=right></td>
 </tr>
 <tr>
  <td width="75%" valign=top bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
  <td  align=right width="12%" valign=bottom bgcolor="#cceeff">&nbsp;</td>
 </tr>
 <tr>
  <td width="75%" valign=top><font   size=2>Cash
  and cash equivalents, at&nbsp; end of the
  period</font></td>
  <td  align=right width="12%" valign=bottom><font size=2>$40,968</font>
<hr size=2 width="95%" noshade color=black align=right></td>
  <td  align=right width="12%" valign=bottom><font size=2>$2,205</font>
<hr size=2 width="95%" noshade color=black align=right></td>
 </tr>
</TABLE>

<p align=center><font size=2>The
accompanying notes are an integral part of these condensed consolidated
financial statements.</font></p>

<PAGE>


<p align=center><b><font size=2>AEROGEN, INC.</font></b><font size=2><br>
(a development stage company)<br>
<a name="NOTES_TO_CONDENSED_CONSOLIDATED_FINANCIA"><b>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</b></a></font></p>

<p><b><font size=2>Note 1 &#150; SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES</font></b></p>

<p><b><font size=2>Organization and Business of
the Company</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Aerogen,
Inc., formerly Fluid Propulsion Technologies, Inc. (the &#147;Company&#148; or
&#147;Aerogen&#148;), was incorporated in November 1991 to develop products using a
proprietary aerosol generator.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company is in the development stage and since inception has devoted
substantially all of its efforts to developing its products, including engaging
in research and development activities with and without partners, raising
capital, and recruiting personnel.&nbsp; The
Company has incurred net losses since inception and is expected to incur
substantial losses for the next several years.&nbsp;
To date, the Company has funded its operations primarily through the
sale of equity securities, payments from partners, and interest income.</font></p>

<p><b><font size=2>Basis of&nbsp; presentation</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
accompanying unaudited condensed consolidated financial statements of Aerogen
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 10-01 of Securities and Exchange
Commission Regulation S-X.&nbsp; Accordingly,
they do not contain all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.&nbsp; In the opinion of management, the
accompanying unaudited, condensed consolidated financial statements reflect all
adjustments (consisting of normal, recurring adjustments) considered necessary
for a fair presentation of the Company's interim financial information.&nbsp; These financial statements and notes should
be read in conjunction with the audited financial statements and notes thereto
of the Company included in the Company's Annual Report on Form 10-K for the
year ended December, 31, 2000.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the operating results that may be reported for the
fiscal year ending December 31, 2001 or for any other future period.</font></p>

<p><b><font size=2>Basis of consolidation</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
May&nbsp;2000, the Company acquired Cerus, Ltd. which is now Aerogen (Ireland)
Limited, a wholly owned subsidiary of the Company.&nbsp; The consolidated financial statements include the accounts of the
Company and its subsidiary.&nbsp; All
intercompany balances and transactions have been eliminated in consolidation.</font></p>

<p><b><font size=2>Cash and cash equivalents</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.&nbsp; Cash and cash equivalents include money
market and deposit accounts.</font></p>

<p><b><font size=2>Available-for-sale securities</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All
investments are classified as available&ndash;for&ndash;sale and therefore are
carried at fair market value.&nbsp;
Unrealized gains and losses on such investments are reported as a
separate component of stockholders&#146; equity.&nbsp;
Realized gains and losses on sales of all such investments are reported
in earnings and computed using the specific identification cost method.</font></p>

<PAGE>


<p><b><font size=2>Revenue recognition</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research
and development revenues are earned under agreements with third parties for
contract research and development activities and are recorded as the related
expenses are incurred, up to contractual limits.&nbsp; Charges to these third parties are based upon negotiated rates
for full time equivalent employees of the Company, and such rates are intended
to approximate the Company&#146;s anticipated costs.&nbsp; Payments received that are related to future performance are
recorded as deferred revenue and recognized as revenues as they are earned.
None of the revenues recognized to date are refundable if the relevant research
effort is not successful.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Royalty
revenues are recorded as earned.&nbsp; Fee
and other revenues are recorded in accordance with Staff Accounting Bulletin
No. 101 (&#147;SAB&nbsp; No. 101&#148;), &#147;Revenue
Recognition in Financial Statements&#148;.</font></p>

<p><b><font size=2>Research and development expenses</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research
and development costs are charged to operations as incurred.&nbsp; Certain research and development projects
are funded under agreements with third parties, and the costs related to these
activities are included in research and development expenses.</font></p>

<p><b><font size=2>Foreign currency translation</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company&#146;s Irish subsidiary uses its local currency as its functional
currency.&nbsp; Assets and liabilities are
translated at exchange rates in effect at the balance sheet date and income and
expense amounts at the average exchange rates during the period.&nbsp; Resulting translation adjustments are
recorded directly to a separate component of stockholders&#146; equity.</font></p>

<p><b><font size=2>Comprehensive income (loss)</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive
income (loss) generally represents all changes in stockholders&#146; equity except
those resulting from investments or contributions by stockholders.&nbsp; The Company&#146;s unrealized gains and losses on
available-for-sale securities and foreign currency translation gains and losses
represent the only components of comprehensive income (loss) that are excluded
from the Company&#146;s net loss.</font></p>

<p><b><font size=2>Note 2 &#150; NET LOSS PER COMMON SHARE</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic
net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of vested common shares outstanding
for the period.&nbsp; Diluted net loss per
share is computed giving effect to all potential dilutive common shares,
including options, warrants and convertible preferred stock.&nbsp; Options, warrants, unvested outstanding
stock, and convertible preferred stock were not included in the diluted net
loss per share calculations because the effect would be antidilutive.</font></p>

<p><b><font size=2>Note 3 &#150; EQUITY</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company issued 4,140,000 shares of common stock at $12.00 per share for net
proceeds of approximately $44.5 million in its initial public offering (IPO)
in&nbsp; November and December 2000.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; During
2000, the Company issued 1,923,078 shares of&nbsp;
Series E convertible preferred stock at $2.60 per share for gross
proceeds of approximately $5 million, in conjunction with research and
development agreements.&nbsp; The Company
also issued 1,725,000 shares of Series E convertible preferred stock in
conjunction with the acquisition of Cerus Limited, now Aerogen (Ireland)
Limited.&nbsp;&nbsp; Additionally, in July 2000,
the Company issued 7,498,223 shares of Series F convertible preferred stock at
$2.25 per share for gross proceeds of $16,871,002. Concurrent with the closing
of the Company&#146;s IPO , all outstanding shares of preferred stock (39,010,653
shares) were converted into 13,003,514 shares of common stock of the Company.</font></p>

<PAGE>


<p><b><font size=2>Note 4 &#150; RECENT ACCOUNTING PRONOUNCEMENT</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effective
January 1, 2001 the Company adopted No.&nbsp;133 (&#147;SFAS No.&nbsp;133&#148;),
&#147;Accounting for Derivative Instruments and Hedging Activities.&#148;&nbsp; SFAS No.&nbsp;133 requires that all
derivatives be recognized at fair value in the statement of financial position,
and that the corresponding gains or losses be reported either in the statement
of operations or as a component of comprehensive income, depending on the type
of relationship that exists. The Company does not currently hold derivative
instruments or engage in hedging activities and does not believe that the
adoption of SFAS No.&nbsp;133 will have any significant impact on its financial
position or results of operations.</font></p>

<p><a name="Item_2__Managements_Discussion_and_Analy"><b><font size=2>Item&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations</font></b></a></p>

<p><i><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In addition to historical information, this report
contains predictions, estimates and other 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.&nbsp; Actual results could differ materially from
any future performance suggested in this report as a result of many factors,
including those referred to in &#147;Factors That May Affect Future Operating
Results,&#148; elsewhere in this report and in the Company's Annual Report on Form
10-K for the year ended December 31, 2000 (the &#147;Form 10-K&#148;).&nbsp; The following discussion should be read in
conjunction with the unaudited condensed consolidated financial statements and
notes included elsewhere in this report and the information included in the
Form 10-K.</font></i></p>

<p><b><font size=2>Overview</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Aerogen
was incorporated in November&nbsp;1991.&nbsp;
We specialize in the controlled delivery of drugs to the lungs.&nbsp; Our core technology consists of a
proprietary aerosol generator.&nbsp; We are
using the technology to develop respiratory products for marketing by us, and
we are developing products in collaboration with pharmaceutical and
biotechnology companies for both respiratory therapy and for the delivery of
drugs via the lungs to the bloodstream.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
are in the development stage and since inception have devoted substantially all
of our efforts to the development of products.&nbsp;
We have an accumulated deficit of approximately $44.8&nbsp;million as of March&nbsp;31, 2001.&nbsp; We expect to incur significant additional
operating losses over the next several years and expect cumulative losses to
increase primarily due to the expansion of our research and development
activities, an increase in the number and size of clinical trials, the costs
associated with the manufacturing and marketing of our products, and the
general expansion of our business activities.&nbsp;
To date, we have not had product sales.&nbsp;
We anticipate that our quarterly financial results will fluctuate for
the foreseeable future.&nbsp; Therefore,
period to period comparisons should not be relied upon as predictive of the
results in future periods.&nbsp; Our sources
of working capital have been equity financings, research and development
revenues, interest earned on investments and, to a lesser extent, equipment
lease financings and royalties.</font></p>

<p><b><font size=2>Results of Operations</font></b></p>

<p><b><font size=2>Revenues</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research
and development revenues for the first quarter of 2001 were $0.6 million,
compared with $1.1 million for the first quarter of 2000.&nbsp; The decrease resulted primarily from a lower
level of product development activities performed for partner companies other
than PathoGenesis Corporation (now a wholly-owned subsidiary of Chiron
Corporation).</font></p>

<PAGE>


<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <font size=2>Research
and development revenues can be expected to vary from period to period based on
the activities requested by partner companies in any particular period, and
therefore are not predictable.&nbsp; Based on
agreements we currently have in place, we expect research and development
revenues for 2001 to be lower than those for 2000.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Royalty,
fee and other revenues for the first quarter of 2001 were $0.1 million,
compared with none for the first quarter of 2000.&nbsp; The increase resulted primarily from minimum royalties from a
consumer products company.</font></p>

<p><b><font size=2>Research and development expenses</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research
and development expenses for the first quarter of 2001 were $5.0 million,
compared with $2.9 million for the first quarter of 2000.&nbsp; The increase reflects increased expenses
associated with the development of the Company&#146;s products, and is largely
attributable to increases in salary and benefit costs ($0.8&nbsp;million),
clinical trial costs ($0.6 million), costs incurred by our Irish subsidiary
($0.3 million including Irish payroll-related costs), and amortization of
deferred stock-based compensation ($0.2 million).</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research
and development expenses represent expenses related to our own research and
development projects, as well as the costs related to research and development
activities for our partners.&nbsp; Research
and development expenses for partner activities approximate our revenues from
those partners.&nbsp; Research and
development expenses include salaries and benefits for scientific and
development personnel, laboratory supplies, consulting services, clinical
expenses, and the expenses associated with the development of manufacturing
processes, including related overhead.&nbsp;
We expect research and development spending to increase significantly
over the next several years as we increase clinical trials, expand our research
and development activities to support our products and those which we develop
in our collaborations, and initiate commercial manufacturing.&nbsp; Future research and development and clinical
expenditures cannot be predicted reliably, as they depend in part upon our success
in continuing existing development collaborations, entering into new partnering
agreements, and the level of internally funded research and development
efforts.</font></p>

<p><b><font size=2>General and administrative expenses</font></b><font size=2>.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; General
and administrative expenses for the first quarter of 2001 were $1.5 million,
compared with $0.9 million for the first quarter of 2000.&nbsp; The increase was primarily due to increased
personnel costs&nbsp; associated with product
launch preparations ($0.3 million), other marketing costs ($0.2 million),
amortization of goodwill associated with the Irish acquisition ($0.1 million),
and additional costs associated with operating as a public company ($0.1
million), offset by decreases in certain other general and administrative
expenses.&nbsp; Aerogen expects that its
general and administrative expenses will increase as its business expands and
as the Company launches and sells its products.</font></p>

<p><b><font size=2>Interest income, net</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest
income, net for the first quarter of 2001 was $0.8 million, compared with $ 0.1
million for the first quarter of 2000.&nbsp;
The increase in interest income, net was primarily due to higher average
cash, cash equivalents&nbsp; and investment
balances resulting from the completion of equity placements of our common and
convertible preferred stock.&nbsp; We sold
convertible preferred stock in July, May and March of 2000 for total net
proceeds of approximately $21.3 million.&nbsp;
Sales of common stock in our initial public offering resulted in
approximately $44.5 million of net proceeds, including $6.0 million from
exercise of the underwriters&#146; over-allotment option.</font></p>

<PAGE>


<p><b><font size=2>Liquidity and Capital Resources</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Since
inception, we have financed our operations primarily through equity financings,
research and development revenues and the interest earned on these funds.&nbsp; We have received approximately
$97.5&nbsp;million aggregate net proceeds from sales of our common and
preferred stock through March&nbsp;31, 2001, including approximately $44.5
million of net proceeds from our initial public offering.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
of&nbsp; March&nbsp;31, 2001, we had cash,
cash equivalents and available&ndash;for&ndash;sale securities of approximately
$57.0&nbsp;million.&nbsp; Net cash used in
operating activities of $3.7 million during the three months ended March 31,
2001 resulted primarily from the net loss for the period, partially offset by
non-cash related charges of approximately $0.7 million and an increase in
accrued liabilities of $0.8 million.&nbsp;
Net cash used in operating activities of $1.7 million during the three
months ended March 31, 2000 resulted primarily from the net loss for the
period, partially offset by increases in liabilities of approximately $0.8
million and non-cash charges of approximately $0.2 million.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
cash used in investing activities of $4.0 million for the three months ended
March 31, 2001 consisted primarily of purchases of investments, net of
maturities of investments.&nbsp; Net cash
used in investing activities of $0.3 million for the three months ended March
31, 2000 consisted primarily of acquisitions of property and equipment.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net
cash provided by financing activities of&nbsp;
$2.4 million for the three months ended March 31, 2000 primarily
consisted of proceeds from the sale of convertible preferred stock.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
development of our technology and products will require a commitment of
substantial funds to conduct the costly and time-consuming product development
and clinical trials required to develop and refine our technology and products
and to bring any such products to market.&nbsp;
Our future capital requirements and operating expenses will depend on
many factors including, but not limited to, research and development activities,
the timing, cost, extent and results of clinical trials, our success in
licensing drugs for use in our products, regulatory approvals, the status of
competitive products, manufacturing and marketing costs associated with
commercialization of products, costs involved in obtaining and maintaining
patents, and our ability to enter into collaborative agreements.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Based
upon our current plans, we believe that our cash, cash equivalents and
available&ndash;for&ndash;sale securities will be sufficient to meet our capital
requirements through calendar year 2002.&nbsp;
Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward&ndash;looking statement
that involves risks and uncertainties, and actual results could vary
materially.&nbsp; The factors described
above, as well as the risk factors discussed in the Form 10-K, will impact our
future capital requirements and the adequacy of our available funds.</font></p>

<p><b><font size=2>Recent Accounting Pronouncement</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effective
January 1, 2001 the Company adopted No.&nbsp;133 (&#147;SFAS No.&nbsp;133&#148;),
&#147;Accounting for Derivative Instruments and Hedging Activities.&#148;&nbsp; SFAS No. 133 requires that all derivatives
be recognized at fair value in the statement of financial position, and that
the corresponding gains or losses be reported either in the statement of
operations or as a component of comprehensive income, depending on the type of
relationship that exists.&nbsp; We do not
currently hold derivative instruments or engage in hedging activities and do
not believe that the adoption of SFAS No.&nbsp;133 will have any significant
impact on our financial position or results of operations.</font></p>

<PAGE>


<p><a name="Item_3__Quantitative_and_Qualitative_Dis"><b><font size=2>Item&nbsp; 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Quantitative
and Qualitative Disclosure About Market Risk</font></b></a></p>

<p><b><font size=2>Interest rate risk</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest
rate risk represents the risk of loss that may impact our financial position,
operating results, or cash flows due to changes in interest rates.&nbsp; This exposure is directly related to our
normal operating activities.&nbsp; Our cash,
cash equivalents, and short-term investments are invested with high quality issuers
and are generally of a short-term nature.&nbsp;
As a result, we do not believe that near-term changes in interest rates
will have a material effect on our future results of operations.&nbsp; As of March 31, 2001 there had been no
material change in the Company&#146;s interest rate exposure from that described in
the Company&#146;s Annual Report on Form 10-K for the year ended December 31, 2000.</font></p>

<p><b><font size=2>Exchange rate risk</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due
to our Irish operations, we have market risk exposure to adverse changes in
foreign exchange rates.&nbsp; The revenues
and expenses of our subsidiary, Aerogen (Ireland) Limited, are denominated in
Irish currency.&nbsp; At the end of each
quarter, the revenues and expenses of our subsidiary are translated into U.S.
dollars using the average currency exchange rate in effect for that quarter,
and assets and liabilities are translated into U.S. dollars using the exchange
rate in effect at the end of that quarter.&nbsp;
Fluctuations in exchange rates therefore impact our financial condition
and results of operations, as reported in U.S. dollars.&nbsp; To date, we have not experienced any
significant negative impact as a result of fluctuations in foreign currency
markets.&nbsp; As a policy, we do not engage
in speculative or leveraged transactions, nor do we hold financial instruments
for trading purposes.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We
plan to expand our overseas operations.&nbsp;
As a result, our operating results may become subject to more
significant fluctuations based on changes in exchange rates of foreign
currencies in relation to the U.S. dollar.&nbsp;
We will periodically analyze our exposure to currency fluctuations and
we may adjust our policies to allow for financial hedging techniques to
minimize exchange rate risk.</font></p>

<p><b><font size=2>Factors That May Affect Future Operating Results</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Risk
factors that may affect future operating results are described in Part I of our
Form 10-K for the year ended December 31, 2000 and have not changed materially
since such date.&nbsp; Please also see
&#147;Liquidity and Capital Resources&#148; above.</font></p>

<p><b><font size=2>Part&nbsp; II.</font></b><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Other Information</b></font></p>

<p><a name="Item_1__Legal_Proceedings"><font size=2>Item 1.&nbsp; Legal Proceedings</font></a><font size=2><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>

<p><a name="Item_2__Changes_in_Securities_and_Use_of"><font size=2>Item
2.&nbsp; Changes in Securities and Use of
Proceeds</font></a><font size=2><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No change in securities</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
November 2000, the Securities Exchange Commission declared our Registration
Statement on Form S-1 effective. We completed our initial public offering,
including exercise of the underwriters&#146; over-allotment option, of 4,140,000
shares at an initial public offering price of $12.00 per share, for aggregate
cash proceeds of approximately $49.7 million.&nbsp;
The managing underwriters of the offering were Chase Securities Inc.,
CIBC World Markets Corp., and SG Cowen Securities Corporation.</font></p>

<PAGE>


<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <font size=2>In
connection with the offering, we paid a total of approximately $3.5 million in
underwriting discounts and commissions and $1.7 million in other offering costs
and expenses. After deducting the underwriting discounts and commissions and
the offering costs and expenses, our net proceeds from the offering, including
the over-allotment option were approximately $44.5 million.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; From
January 1, 2001 through March 31, 2001 the proceeds from the offering were used
for research and development and clinical activities, manufacturing and
marketing expenditures for existing and future products, capital expenditures,
and general corporate purposes.&nbsp; In the
future we intend to use the net proceeds in a similar manner.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As
of March 31, 2001 $40.5 million of the proceeds remained available and were
primarily invested in cash equivalents and short-term available-for-sale
securities.</font></p>

<p><a name="Item_3__Defaults_Upon_Senior_Securities"><font size=2>Item
3.&nbsp; Defaults Upon Senior Securities</font></a><font size=2><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>

<p><a name="Item_4__Submission_of_Matters_to_a_Vote_"><font size=2>Item
4.&nbsp; Submission of Matters to a Vote of
Security Holders</font></a><font size=2><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>

<p><a name="Item_5__Other_Information"><font size=2>Item 5.&nbsp; Other Information</font></a><font size=2><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>

<p><a name="Item_6__Exhibits_and_Reports_on_Form_8K"><font size=2>Item
6.&nbsp; Exhibits and Reports on Form 8-K</font></a></p>

<dir>
<p><font size=2>a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>
</dir>

<dir>
<p><font size=2>b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reports
on Form 8-K<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; None</font></p>
</dir>

<PAGE>


<p align=center><a name=Signatures><b><u><font size=2>Signatures</font></u></b></a></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, (the &#147;Exchange Act&#148;) the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="60%" valign=top>&nbsp;</td>
  <td width="39%" colspan=2 valign=top><b><font size=2>Aerogen, Inc.</font></b></td>
 </tr>
 <tr>
  <td width="60%" valign=top>&nbsp;</td>
  <td width="39%" colspan=2 valign=top><font size=2>(Registrant)</font></td>
 </tr>
 <tr height=47>
  <td width="60%" height=47 valign=top>&nbsp;</td>
  <td width="7%" height=47 valign=top>&nbsp;</td>
  <td width="32%" height=47 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" valign=top><font size=2>Dated:&nbsp;
  May&nbsp; _____&nbsp; , 2001</font></td>
  <td width="7%" valign=top><font size=2>By:</font></td>
  <td width="32%" valign=top><font size=2>/s/&nbsp;
  JANE E. SHAW</font>
<hr size=1 width="95%" noshade color=black align=left></td>
 </tr>
 <tr>
  <td width="60%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Jane E. Shaw, Phd.</font></td>
 </tr>
 <tr>
  <td width="60%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><i><font size=2>Chairman and Chief Executive Officer</font></i></td>
 </tr>
 <tr height=41>
  <td width="60%" height=41 valign=top>&nbsp;</td>
  <td width="7%" height=41 valign=top>&nbsp;</td>
  <td width="32%" height=41 valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="60%" valign=top><font size=2>Dated:&nbsp;
  May&nbsp; _____&nbsp; , 2001</font></td>
  <td width="7%" valign=top><font size=2>By:</font></td>
  <td width="32%" valign=top><font size=2>/s/&nbsp;
  DEBORAH K. KARLSON</font>
<hr size=1 width="95%" noshade color=black align=left></td>
 </tr>
 <tr>
  <td width="60%" valign=top>&nbsp;</td>
  <td width="7%" valign=top>&nbsp;</td>
  <td width="32%" valign=top><font size=2>Deborah K. Karlson</font></td>
 </tr>
 <tr height=20>
  <td width="60%" height=20 valign=top>&nbsp;</td>
  <td width="7%" height=20 valign=top>&nbsp;</td>
  <td width="32%" height=20 valign=top><i><font size=2>Vice President, Finance and Chief Financial Officer</font></i></td>
 </tr>
</TABLE>

<p><font size=2>&nbsp;</font></p>

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