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x

No fee required.

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Fee paid previously with preliminary materials.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)

Proposed maximum aggregate value of transaction:

(5)

Total fee paid:

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

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1.

To elect a board of directors;

2.

To reserve an additional 425,000 shares for issuance to employees, consultants and directors under our 1995 Stock Plan;

3.

To ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2002; and

4.

To act upon such other matters as may properly come before the meeting or any adjournment thereof.

By

Order of the Board of Directors

JO

HN P. FUNKHOUSER,

President and Chief Executive Officer

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*

Less than one percent.

(1)

As reported in the Schedule 13G dated February 11, 2002 filed with the Securities and Exchange Commission (“SEC”) by Davenport & Company LLC. Consists of shares held by individuals who are customers or representatives (or members of a representatives’ immediate family) of Davenport & Company LLC, which disclaims beneficial ownership.

(2)

As reported in the Schedule 13G dated January 30, 2002 filed with the SEC by Joseph H. Sherrill Jr. Includes 60,000 shares of common stock issuable to Mr. Sherrill upon conversion of shares of Series A Preferred Stock and a warrant to purchase 12,000 shares of Common Stock.

(3)

As reported in the Schedule 13G dated February 11, 2002 filed with the SEC by Salem Investment Counselors, Inc. Consists of shares held by individuals who are customers or representatives (or members of a representatives’ immediate family) of Salem Investment Counselors, Inc., which disclaims beneficial ownership.

(4)

Consists of three separate but affiliated limited partnerships or companies.

(5)

Consists of 250,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 50,000 shares of Common Stock issuable upon exercise of a warrant.

(6)

Consists of 100,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 20,000 shares of Common Stock issuable upon exercise of a warrant.

(7)

Consists of 200,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 40,000 shares of Common Stock issuable upon exercise of a warrant.

(8)

Consists of 65,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 13,000 shares of Common Stock issuable upon exercise of a warrant.

(9)

Includes 390,410 shares underlying options.

(10)

Includes 84,251 shares underlying options.

(11)

Includes 50,000 shares underlying options.

(12)

Includes 12,500 shares underlying options.

(13)

Includes 12,000 shares underlying options.

(14)

Includes 10,000 shares underlying options.

(15)

Includes shares referenced in footnotes (9) through (14).

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(1)

Consists of contributions to the Supplemental Executive Retirement Plan. Of this amount, $9,375 vested during 2001.

(2)

Consists of car allowance of $7,200 and $25,500 in contributions to the Supplemental Executive Retirement Plan. Of this contribution, $6,375 vested during 2001.

(3)

Consists of car allowance

(4)

Consists of apartment lease of $17,040, $1,125 in 401k matching contributions and $30,000 in contributions to the Supplemental Executive Retirement Plan. Of this contribution, $7,500 vested during 2001.

(5)

Consists of apartment lease

(6)

Mr. Triscott joined the Company in April 2001

(7)

Consists of 401k matching contributions

(8)

Mr. Timmons’ employment by the Company terminated in December 2001

(9)

Mr. Scott’s employment by the Company terminated in January 2002.

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(1)

The exercise price may be paid in cash, in shares of Common Stock with a market value as of the date of exercise equal to the option price or a combination of cash and shares of Common Stock.

(2)

The compounding assumes a 10-year exercise period for all option grants. These amounts represent certain assumed rates of appreciation only. Actual gains, if any, on stock option exercises are dependent on the future performance of the Common Stock, and overall stock market conditions. The amounts reflected in this table may not necessarily be achieved.

(3)

This grant was made in April 2001 and becomes exercisable over four years from the date of grant, based on continued employment with us. To the extent not already exercisable, the options become fully vested by their terms upon the consummation of a merger in which we are not the surviving corporation, a transfer of all our stock, a sale of substantially all of our assets or a dissolution or liquidation of the Company, unless the successor corporation assumes the outstanding options or substitutes substantially equivalent options.

(4)

This grant was made in December 2001 and becomes exercisable over four years from the date of grant, based on continued employment with us. To the extent not already exercisable, the options become fully vested by their terms upon the consummation of a merger in which we are not the surviving corporation, a transfer of all our stock, a sale of substantially all of our assets or a dissolution or liquidation of the Company, unless the successor corporation assumes the outstanding options or substitutes substantially equivalent options.

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(1)

Calculated by subtracting the exercise price from $7.25, the closing price of our Common Stock as reported by the Nasdaq National Market on December 31, 2001, the last business day of the fiscal year ended December 31, 2001, and multiplying the difference by the number of shares underlying each option.

(2)

The first number represents the number or value (as called for by the appropriate column) of exercisable options; the second number represents the number or value (as appropriate) of unexercisable options.

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Submitted by: THE COMPENSATION COMMITTEE

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Submitted by: THE AUDIT COMMITTEE

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(1)

Assumes $100 invested on January 1, 1997 in each of the Company’s Common Stock, the Nasdaq CRSP Total Market Return Index, and the Nasdaq Pharmaceutical Stocks Total Return Index (the “Pharmaceutical Index”). Total return assumes reinvestment of dividends.

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By

Order of the Board of Directors

JO

HN P. FUNKHOUSER,

Pre

sident and Chief Executive Officer

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•

To play a key role in monitoring the audit process;

•

To have independent communication and information flow between the Committee and external auditors;

•

To have candid discussions with management and the external auditors regarding issues involving judgment and impacting quality; and

•

To maintain diligent and knowledgeable Committee members

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•

The Audit Committee will be composed of not less than three nor more than five members of the Board of Directors.

•

The Board of Directors will appoint Committee members annually for a term of one year.

•

The Board of Directors will appoint a chairperson.

•

Each Committee member shall be financially literate or become financially literate within a reasonable period of time after his or her appointment to the Audit Committee.

•

At least one member of the Audit Committee shall have accounting or related financial management expertise.

•

The Audit Committee shall be comprised solely of directors independent of management and free from any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgement as a Committee member.

•

A majority of the Committee members will constitute a quorum for meetings.

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•

The Committee will meet at least twice a year, or more frequently as required, and at such times and places as it deems advisable.

•

The Committee will maintain minutes and will report to the Board of Directors after each meeting of the committee.

•

The external and internal auditors will have the right to appear before and be heard by the Audit Committee.

•

The committee will have the right, for the purpose of the proper performance of its functions, to meet at any reasonable time with the external and internal auditors or any of the officers or employees of the Company.

•

Evaluate whether management is appropriately communicating the importance of internal controls.

•

Focus on the extent to which internal and external auditors examine computer systems and applications, the security of such systems and contingency plans for processing financial information in the event of a systems breakdown.

•

Determine whether internal control recommendations made by internal and external auditors are responded to by management in a timely fashion.

•

Ensure that the external auditors have access to the Audit Committee with regard to issues of fraud, deficiencies in internal controls and related matters.

•

Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on the financial statements.

•

Discuss with management and the internal and external auditors significant risks and exposures and the plans to minimize such risks.

•

Consider the annual financial statements and determine whether they are consistent with the information known to committee members. This would include an analysis of the effect of alternative GAAP methods on the Company’s financial statements and a description of any transactions as to which management obtained Statement on Auditing Standards No. 50 letters.

•

Discuss judgmental areas such as those involving valuation of assets and liabilities, including, for example, the accounting for and disclosure of revenue recognition and reserves.

•

Review with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.

•

Meet with management and the external auditors together and separately to discuss the financial statements and the results of the audit.

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Discuss with the external auditors accounting and reporting issues on which it consulted its national office including matters of audit quality and consistency. If necessary, discuss these issues with the national office directly.

•

Review the annual report before its release and consider whether the information contained therein is consistent with members’ knowledge about the Company and its operations.

•

Obligate the external auditors to communicate certain required matters to the committee.

•

Be briefed on how management develops and summarizes quarterly financial information, and the extent to which the external auditors review quarterly financial information.

•

Meet with management and, if a pre-issuance review was completed, with the external auditors, either telephonically or in person, to discuss the interim financial statements and the results of the review (this may be done by the committee chairperson or the entire committee).

•

Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) on any fraudulent acts or accounting irregularities.

•

Periodically obtain updates from management regarding compliance.

•

Review the findings of any examinations by regulatory agencies such as the Securities and Exchange Commission.

•

Review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company’s financial statements or accounting policies.

•

Ensure that a code of conduct is formalized in writing and obligate management to communicate it to all employees.

•

Evaluate whether management is appropriately communicating the importance of the code of conduct and the guidelines for acceptable business practices.

•

Review the program for monitoring compliance with the code of conduct.

•

Periodically obtain updates from management regarding compliance.

•

Periodically assess, in conjunction with management, whether an internal audit department would benefit the Company.

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Instruct the external auditors that the Board of Directors and the Audit Committee, as the shareholders’ representative, is the external auditors’ client.

•

Review the external auditors’ proposed audit scope, approach and staff.

•

Review the performance of the external auditors and recommend to the Board of Directors the appointment, retention or discharge of the external auditors. This includes review of the experience and qualifications of the senior members of the independent auditor team and the quality control procedures of the independent auditor. Evaluate whether it is appropriate to adopt a policy of rotating independent auditors on a regular basis.

•

Approve the retention of the independent auditor for any non-audit service and the fee for such service.

•

Obtain from the external auditors a formal written statement delineating all relationships between the external auditors and the Company, consistent with Independence Standard No. 1, and actively engage in a dialogue with the external auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditors.

•

Discuss with the external auditors items required to be communicated to audit committees in accordance with SAS 61.

•

Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company’s response to that letter. Such review should include:

(a)

Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, and any disagreements with management.

(b)

Any changes required in the planned scope of the internal audit.

•

Meet with the external auditors and management in separate executive sessions to discuss any matters that the Committee or these groups believe should be discussed privately.

•

Ensure that significant findings and recommendations made by the internal and external auditors are dealt with in a timely fashion.

•

Review with Company counsel any legal matters that could have a significant impact on the Company’s financial statements.

•

If necessary, institute special investigations and, if appropriate, hire special counsel or experts to assist.

•

Perform other oversight functions as requested by the Board of Directors.

•

Review and update the charter of the Committee and receive approval of changes from the Board of Directors.

•

Annually prepare a report to shareholders, as required by the SEC, to be included in the Company’s annual proxy statement.

•

Periodically perform self-assessment of Audit Committee performance.

•

Regularly update the Board of Directors about Committee activities and recommendations.

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(1)

Election of Directors:

(2)

To reserve an additional 425,000 shares for issuance to employees, consultants and directors under our 1995 Stock Plan

(3)

To ratify the selection of PricewaterhouseCoopers LLP as our auditors for the fiscal year ending December 31, 2002.

(4)

In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the meeting.

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