<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2"> As filed with the Securities and Exchange
Commission on May&nbsp;13, 2004</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<P align="center">
<B><FONT size="4">UNITED STATES SECURITIES AND EXCHANGE
COMMISSION</FONT></B>

<DIV align="center">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="5">Form&nbsp;S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="6">Eyetech Pharmaceuticals,&nbsp;Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact name of registrant as specified in its
charter)</FONT></I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">2834</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">13-4104684</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or other jurisdiction<BR>
    of incorporation or organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification Number)</FONT></I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">3&nbsp;Times Square, 12th&nbsp;Floor</FONT></B>

<DIV align="center">
<B><FONT size="2">New&nbsp;York, New&nbsp;York 10036</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;824-3100</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, including zip code, and telephone
number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">including area code, of registrant&#146;s
principal executive offices)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">David R. Guyer,&nbsp;M.D.</FONT></B>

<DIV align="center">
<B><FONT size="2">Chief Executive Officer</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Eyetech Pharmaceuticals,&nbsp;Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">3&nbsp;Times Square, 12th&nbsp;Floor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New&nbsp;York, New&nbsp;York 10036</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;824-3100</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, address, including zip code and
telephone number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">including area code, of agent for
service)</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><I><FONT size="2">Copies to:</FONT></I></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">James R. Tanenbaum,&nbsp;Esq.<BR>
    Morrison&nbsp;&#38; Foerster LLP<BR>
    1290&nbsp;Avenue of the Americas<BR>
    New&nbsp;York, New&nbsp;York 10104<BR>
    (212)&nbsp;468-8000</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Douglas H. Altschuler,&nbsp;Esq.<BR>
    Eyetech Pharmaceuticals,&nbsp;Inc.<BR>
    3&nbsp;Times Square, 12th&nbsp;Floor<BR>
    New&nbsp;York, New&nbsp;York 10036<BR>
    (212)&nbsp;824-3100</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Patrick O&#146;Brien,&nbsp;Esq.<BR>
    Ropes&nbsp;&#38; Gray LLP<BR>
    One International Place<BR>
    Boston, Massachusetts 02110<BR>
    (617)&nbsp;951-7000</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximate
date of commencement of proposed sale to the
public:</FONT></B><FONT size="2"> As soon as practicable after
this Registration Statement is declared effective.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are offered
on a delayed or continuous basis pursuant to Rule&nbsp;415 under
the Securities Act of 1933, as amended (the &#147;Securities
Act&#148;) please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount to</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Offering Price</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Aggregate Offering</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Per Share(2)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Price(2)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Fee</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock, $0.01&nbsp;par value per share(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">4,600,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$36.01
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$165,646,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$20,987.35
    </FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">All the shares of common stock will be sold by
    selling stockholders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of computing the
    registration fee, based on the average of the high and low sales
    prices of the common stock as reported by the Nasdaq National
    Market on May&nbsp;11, 2004 in accordance with Rule&nbsp;457
    under the Securities Act of 1933.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until Registrant shall file a further amendment
which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to Section&nbsp;8(a), may determine.</FONT></B>

<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D">The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the
offer or sale is not permitted.</FONT><FONT size="2"> <BR>
</FONT>
</TD></TR></TABLE>

<P align="left">
<B><FONT size="2">PROSPECTUS (Subject to Completion)</FONT></B>

<DIV align="left">
<B><FONT size="2">Issued May&nbsp;13, 2004</FONT></B>
</DIV>

<P align="center">
<B><FONT size="5">4,000,000&nbsp;Shares</FONT></B>

<P align="center">
<IMG src="y97374y9737405.gif" alt="(EYE TECH PHARMACEUTICALS LOGO)">

<P align="center">
<B><FONT size="5">Common Stock</FONT></B>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selling stockholders named in this prospectus
are offering 4,000,000&nbsp;shares of Eyetech
Pharmaceuticals,&nbsp;Inc. common stock. We will not receive any
of the proceeds from the sale of common stock in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares of our common stock are quoted on the
Nasdaq National Market under the symbol &#147;EYET.&#148; On
May&nbsp;11, 2004, the last sale price of the common stock as
reported on the Nasdaq National Market was $35.95&nbsp;per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in the common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;7.</B>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B>PRICE
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
SHARE</B>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underwriting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Discounts and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to Selling</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price to Public</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commissions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selling stockholders have granted the
underwriters the right to purchase up to an additional
600,000&nbsp;shares to cover overallotments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters expect to deliver the shares to
purchasers
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="4">Merrill Lynch&nbsp;&#38; Co.</FONT></B></TD>
    <TD align="right"><B><FONT size="4">Morgan Stanley</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="4">Bear, Stearns&nbsp;&#38; Co. Inc.</FONT></B>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV align="left">

</DIV>

<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#101'>Prospectus Summary</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#102'>Risk Factors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#103'>Special Note Regarding
    Forward-Looking Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#104'>Notices to Investors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#105'>Use of Proceeds</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#106'>Price Range of Common
    Stock</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#107'>Dividend Policy</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#108'>Capitalization</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#109'>Selected Financial
    Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#110'>Management&#146;s Discussion
    and Analysis of Financial Condition and Results of Operations</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#111'>Business</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#112'>Management</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#113'>Certain Relationships and
    Related Party Transactions</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#114'>Principal and Selling
    Stockholders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#115'>Description of Capital
    Stock</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#116'>Underwriters</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#117'>Legal Matters</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#118'>Experts</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#119'>Where You Can Find More
    Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#120'>Index to Consolidated
    Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y97374exv23w1.htm">CONSENT OF ERNST & YOUNG LLP</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left">
<!-- /TOC -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary does not contain all of the
information you should consider before buying shares of our
common stock. You should read the entire prospectus carefully,
especially the &#147;Risk Factors&#148; section and our
consolidated financial statements and the related notes
appearing at the end of this prospectus, before deciding to
invest in shares of our common stock.</FONT></I>

<P align="center">
<B><FONT size="2">Eyetech Pharmaceuticals,&nbsp;Inc.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our most advanced product candidate is
Macugen<SUP>TM</SUP>(pegaptanib sodium injection), which we are
developing for the treatment of the wet form of age-related
macular degeneration, known as AMD, and for the treatment of
diabetic macular edema, known as DME. Both AMD and DME are
serious diseases of the retina that can lead to severe vision
loss and blindness. We have entered into a collaboration with
Pfizer Inc. to develop and commercialize Macugen for the
prevention and treatment of diseases of the eye. Based on the
results from the first year of our two Phase&nbsp;2/3 pivotal
clinical trials of Macugen, we and Pfizer are in the process of
filing a new drug application, or NDA, with the United States
Food and Drug Administration, or FDA, seeking marketing approval
for the 0.3&nbsp;mg dose of Macugen for the treatment of all
subtypes of wet AMD. We plan to complete the filing in the third
quarter of 2004. The FDA has given &#147;fast track&#148;
designation to Macugen for the treatment of both wet AMD and
DME. If approved by the FDA, Macugen would be our only
commercially available product. In the near term, we anticipate
that our ability to generate product revenues will depend solely
on the successful development and commercialization of Macugen
for the treatment of wet AMD.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. In the United States, we estimate that there are more
than 1.6&nbsp;million cases of wet AMD, with approximately
200,000 new cases arising each year. Because AMD generally
affects adults over 50&nbsp;years of age, we expect the
incidence of AMD to increase significantly as the baby boom
generation ages and overall life expectancy increases. Diabetic
retinopathy is the leading cause of blindness in working age
adults and a leading cause of vision loss in diabetics. DME is a
common complication of diabetic retinopathy and often results in
severe vision loss and blindness. In the United States, there
are approximately 500,000 people suffering from DME, with
approximately 75,000 new cases each year. We expect the
incidence of DME to increase as the number of people with
diabetes increases. Because the existing treatments for both wet
AMD and DME have significant limitations, there is a significant
unmet medical need for a new therapy for these diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Macugen.</FONT></I></B><FONT size="2"> We
believe that Macugen may provide considerable benefits over the
existing therapies for wet AMD and DME because it addresses the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
Abnormal blood vessel growth and blood vessel leakage are
associated with elevated levels of a protein known as vascular
endothelial growth factor, or VEGF, in the eye. The active
ingredient in Macugen is a chemically synthesized aptamer, which
is a single strand of oligonucleotide that binds with
specificity to a particular target. Based on animal tests that
we conducted, we believe that Macugen binds with high
specificity to VEGF and prevents VEGF from binding to its
natural receptor, thereby inhibiting abnormal blood vessel
growth and blood vessel leakage. The FDA has not approved
Macugen for marketing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Clinical
Trials.</FONT></I></B><FONT size="2"> We are conducting one of
our two Phase&nbsp;2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD in North America with 578
enrolled patients and one primarily outside North America with
612&nbsp;enrolled patients. We also are conducting and recently
announced positive preliminary data from our Phase&nbsp;2
clinical trial for the use of Macugen in the treatment of DME.
</FONT>
</DIV>

<P align="center"><FONT size="2">1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Wet AMD.</FONT></I><FONT size="2"> For the
first year of our Phase&nbsp;2/3 pivotal clinical trials for the
use of Macugen in the treatment of wet AMD, we randomly divided
the participants into four groups. Three groups were treated
with Macugen. The fourth group served as the control group. The
three treated groups received different doses of Macugen via an
injection to the back of the eye known as an intravitreal
injection. The dose levels were 0.3&nbsp;mg per injection,
1&nbsp;mg per injection or 3&nbsp;mg per injection. The control
group received a sham injection designed to mimic an
intravitreal injection. Patients received a treatment every six
weeks during the first year. The primary efficacy endpoint in
these trials was the proportion of patients losing less than
15&nbsp;letters of visual acuity from baseline after
54&nbsp;weeks. On the eye chart used in these clinical trials,
15&nbsp;letters equates to three lines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the primary
efficacy endpoint data from the combined patient populations of
both trials, and indicates that this endpoint was met with
statistical significance for all three doses of Macugen. For
purposes of our analysis of the combined patient data, a p-value
of 0.05 or less represents statistical significance.
</FONT>

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Patients Losing Less</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Than 15 Letters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Dose</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Individuals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">0.3&nbsp;mg
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206/294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1&nbsp;mg
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213/300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3&nbsp;mg
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193/296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Control
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164/296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the data from the combined patient
populations of both trials, the 0.3&nbsp;mg dose of Macugen was
the lowest effective dose of the three doses tested. In
addition, based on our preliminary analysis of the safety data
from these trials, each of the three dose levels tested in the
trials appears to have a favorable safety profile. To address
statistical and other regulatory requirements, we plan to seek
approval for the 0.3&nbsp;mg dose of Macugen in our NDA for wet
AMD. For the 0.3&nbsp;mg Macugen dose, the primary clinical
endpoint was achieved with statistical significance in both the
North American and international trials using a more stringent
statistical methodology required for regulatory purposes for
clinical trials in which multiple doses of a drug are tested
against a single control group.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are three subtypes of wet AMD that are
characterized by the pattern of the abnormal blood vessels
associated with this disease. These subtypes are known as
predominantly classic, minimally classic and occult. The
combined data from the two trials demonstrate that the treatment
effect of Macugen is consistent across the three subtypes of wet
AMD. Accordingly, in our NDA filing, we intend to seek approval
for the use of the 0.3&nbsp;mg dose of Macugen in the treatment
of patients with all three subtypes of wet AMD.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the results of the first year of our
Phase&nbsp;2/3 pivotal clinical trials, we and Pfizer are filing
our NDA with the FDA for the use of Macugen in the treatment of
all subtypes of wet AMD as a rolling submission. The FDA has
accepted for review the preclinical and clinical study report
sections of our NDA filing. We plan to complete our NDA filing
in the third quarter of 2004. Upon acceptance, the FDA will then
review our NDA to determine whether Macugen is safe and
effective for the treatment of wet AMD. In connection with its
review, the FDA may request additional information from us,
including data from additional clinical trials, and, ultimately,
may not grant marketing approval for Macugen. We will not be
able to begin marketing and sales of Macugen unless the product
is approved by the FDA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">DME.</FONT></I><FONT size="2"> In July 2003,
we completed enrollment of our second Phase&nbsp;2 clinical
trial for the use of Macugen in the treatment of DME. The
169&nbsp;patients enrolled in this study were required to have
been eligible for laser therapy for DME. In this randomized,
double-masked, placebo-controlled trial, patients treated with
Macugen receive 0.3&nbsp;mg, 1&nbsp;mg or 3&nbsp;mg doses via
intravitreal injection every six weeks for at least
12&nbsp;weeks and then up to 30&nbsp;weeks at the discretion of
the investigators. The control group receives a sham injection
designed to mimic an intravitreal injection.
</FONT>
</DIV>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recently announced preliminary results from
this Phase&nbsp;2 clinical trial. Based on the preliminary
results, the lowest effective dose of Macugen of the three doses
tested was 0.3&nbsp;mg, which is the same as the lowest
effective dose observed in our Phase&nbsp;2/3 pivotal clinical
trials for the use of Macugen in the treatment of wet AMD and
the dose for which we plan to seek approval in our NDA for wet
AMD. The following table summarizes the results through
36&nbsp;weeks for patients treated with the 0.3&nbsp;mg dose of
Macugen and patients in the control group.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Proportion of Patients</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Macugen 0.3&nbsp;mg</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Control</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance of or gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#62;0 line vision gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#62;1 line vision gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#62;2 line vision gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#62;3 line vision gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The results shown in the table with respect to
the proportion of patients gaining 0 or greater, 1 or greater
and 2 or greater lines of vision at 36&nbsp;weeks were
statistically significant using the Hochberg statistical
methodology. As shown in the table, the proportion of patients
gaining 3 or greater lines of vision was higher for the group
receiving 0.3&nbsp;mg of Macugen than for the control group, but
the number of patients was not sufficient to demonstrate
statistical significance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Collaboration with
Pfizer.</FONT></I></B><FONT size="2"> In December 2002, we
entered into our collaboration with Pfizer. In February 2003,
Pfizer paid us $100&nbsp;million, consisting of a
$75&nbsp;million up-front license fee and a $25&nbsp;million
equity investment. Concurrently with the closing of our initial
public offering in February 2004, Pfizer made an additional
equity investment of $10&nbsp;million. Pfizer&#146;s future
financial obligations to us include equity investments of up to
an additional $15&nbsp;million, funding of a majority of the
ongoing development costs for Macugen, payments of up to
$195.5&nbsp;million based on regulatory milestones and payments
of up to $450&nbsp;million based on sales milestones. We and
Pfizer have agreed to co-promote Macugen in the United States
and to share in profits and losses. We have granted Pfizer the
exclusive right to develop and commercialize Macugen outside the
United States pursuant to a royalty-bearing license. Under the
collaboration, we are entitled to participate in the United
States in selling activities, or detailing, of Pfizer&#146;s
product Xalatan&#174; for the treatment of glaucoma.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Business
Strategy.</FONT></I></B><FONT size="2"> Our mission is to
develop and commercialize novel therapeutics to treat diseases
of the eye, with an initial focus on diseases of the back of the
eye. The key elements of our strategy are to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Maximize Commercial Potential of
    Macugen.</FONT></I><FONT size="2"> We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product
    for the treatment of wet AMD. We are also exploring the
    application of Macugen to a range of additional ophthalmic
    indications, including DME and retinal vein occlusion.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.</FONT></I><FONT size="2"> We are in the
    process of establishing focused domestic sales and marketing
    capabilities that will primarily target the approximately 1,400
    retinal specialists in the United States who perform most of the
    medical procedures involving back of the eye diseases.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Develop Alternative Drug Delivery
    Technologies.</FONT></I><FONT size="2"> We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye that could
    facilitate the use of Macugen and other drugs as chronic or even
    preventative treatments for various back of the eye diseases.
    </FONT></TD>
</TR>

</TABLE>
</DIV>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Identify New Ophthalmic
    Products.</FONT></I><FONT size="2"> We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease. For example, in April&nbsp;2004, we announced an
    agreement with Archemix Corp. to collaborate on the research and
    development of aptamers for ophthalmic indications.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Explore Additional Non-Ophthalmic Indications
    for Macugen.</FONT></I><FONT size="2"> We are using our
    preclinical research expertise to evaluate whether the anti-VEGF
    characteristics of Macugen may make it an attractive local
    treatment for cancer, psoriasis and other diseases.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to realize these objectives, we must,
among other things, obtain marketing approval for Macugen from
the FDA and similar foreign regulatory authorities, recruit our
domestic sales force and internally develop, license or
otherwise acquire alternative drug delivery technologies and new
therapies for the treatment of ophthalmic disease.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Management
Team.</FONT></I></B><FONT size="2"> We are led by a team of
experienced pharmaceutical industry executives and recognized
experts in ophthalmology and vision research. We believe that
this team provides us with a significant complement of
capabilities in the discovery, development and commercialization
of novel therapeutics to treat diseases of the eye.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Early-Stage
Company.</FONT></I></B><FONT size="2"> We have a limited
operating history and have not yet commercialized any products.
To date, we have focused primarily on the development of
Macugen. We have not been profitable in any quarter since
inception. For the year ended December&nbsp;31, 2003 and the
quarter ended March&nbsp;31, 2004, our net loss was
$40.7&nbsp;million and $15.0&nbsp;million, respectively, and, as
of March&nbsp;31, 2004, we had an accumulated deficit of
$153.3&nbsp;million. We do not know whether or when we will
become profitable.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were incorporated under the laws of the State
of Delaware in February 2000. Our principal executive offices
are located at 3&nbsp;Times Square, 12th&nbsp;Floor,
New&nbsp;York, New&nbsp;York 10036, and our telephone number is
(212)&nbsp;824-3100. Our website address is
<I>www.eyetech.com.</I> The information on our website is not a
part of this prospectus. We have included our website address in
this document as an inactive textual reference only.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech<SUP>TM</SUP>, Eyetech
Pharmaceuticals<SUP>TM</SUP> and Macugen<SUP>TM</SUP> are our
trademarks. Each of the other trademarks, trade names or service
marks appearing in this prospectus belongs to its respective
holder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In this prospectus, unless otherwise stated or
the context otherwise requires, references to
&#147;Eyetech,&#148; &#147;we,&#148; &#147;us,&#148;
&#147;our&#148; and similar references refer to Eyetech
Pharmaceuticals,&nbsp;Inc.
</FONT>
</DIV>

<P align="center"><FONT size="2">4
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">THE OFFERING</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"></TD>
    <TD width="1%"></TD>
    <TD width="61%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by the selling stockholders
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;4,000,000&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Shares of common stock outstanding after the
    offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">40,337,109&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will not receive any of the proceeds from this
    sale of common stock by the selling stockholders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Risk factors
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">You should read the &#147;Risk Factors&#148;
    section of this prospectus for a discussion of factors to
    consider carefully before deciding to invest in shares of our
    common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Nasdaq National Market symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">EYET
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of our common stock to be
outstanding after this offering is based on
40,337,109&nbsp;shares outstanding as of March&nbsp;31, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock to be
outstanding after this offering does not take into account:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">5,729,664&nbsp;shares of common stock issuable
    upon the exercise of stock options outstanding as of
    March&nbsp;31, 2004 at a weighted average exercise price of
    $7.49&nbsp;per share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an aggregate of 3,833,839&nbsp;shares of common
    stock that are reserved for future issuance under our 2003 stock
    incentive plan and our 2003 employee stock purchase
    plan;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of 37,501&nbsp;shares of restricted
    common stock to our employees for cash proceeds of $375, which
    shares had not been issued as of March&nbsp;31, 2004.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise noted, the information in this
prospectus assumes that the underwriters do not exercise their
over-allotment option.
</FONT>
</DIV>

<P align="center"><FONT size="2">5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<P align="center">
<B><FONT size="2">SUMMARY FINANCIAL INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of our financial
information. You should read this information together with our
consolidated financial statements and the related notes
appearing at the end of this prospectus and the
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; section of this
prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The pro forma net loss attributable to common
stockholders per share information is computed using the
weighted average number of common shares outstanding, after
giving pro forma effect to the automatic conversion of all
outstanding shares of our convertible preferred stock into
shares of our common stock effective upon the completion of our
initial public offering in February 2004, as if the conversion
had occurred at the date of the original issuance. This pro
forma information for the year ended December&nbsp;31, 2003 does
not give effect to the exercise of then outstanding warrants and
options as their effect would be antidilutive.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February&nbsp;9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(In thousands, except share and per share information)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Statement of Operations Information:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration revenue:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&nbsp;&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,419</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,932</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,934</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(248</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,688</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,080</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,160</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,259</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,860</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,681</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,828</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,219,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,950,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,760,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,529,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.77</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,094,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,863,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,782,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of March&nbsp;31, 2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance Sheet Information:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(153,323</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
</DIV>

<P align="center"><FONT size="2">6
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This offering involves a high degree of risk.
You should consider carefully the risks and uncertainties
described below and the other information in this prospectus,
including the consolidated financial statements and the related
notes appearing at the end of this prospectus, before deciding
to invest in shares of our common stock. If any of the following
risks or uncertainties actually occurs, our business, prospects,
financial condition and operating results would likely suffer,
possibly materially. In that event, the market price of our
common stock could decline and you could lose all or part of
your investment.</FONT></I>

<P align="left">
<B><FONT size="2">Risks Relating to Our Business</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
depend heavily on the success of our lead product candidate,
Macugen, which is still under development and with respect to
which pivotal clinical trial data became available only
recently. If we are unable to commercialize Macugen, or
experience significant delays in doing so, our business will be
materially harmed.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have invested a significant portion of our
time and financial resources since our inception in the
development of Macugen. We anticipate that in the near term our
ability to generate revenues will depend solely on the
successful development and commercialization of Macugen. The
commercial success of Macugen will depend on several factors,
including the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">successful completion of clinical trials;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">producing batches of the active pharmaceutical
    ingredient used in Macugen as well as finished drug product in
    sufficient commercial quantities through a validated process;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">receipt of marketing approvals from the FDA and
    similar foreign regulatory authorities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">launching commercial sales of the product in
    collaboration with Pfizer;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">successfully building and sustaining
    manufacturing capacity to meet anticipated future market
    demand;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">acceptance of the product in the medical
    community and with third party payors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the results from the first year of our
ongoing Phase&nbsp;2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD, we and Pfizer are filing a
new drug application with the FDA as a rolling submission to
seek marketing approval for the 0.3&nbsp;mg dose of Macugen for
the treatment of all subtypes of wet AMD. The FDA has accepted
for review the preclinical and clinical study report sections of
our NDA. However, new information may arise from our continuing
analysis of the data that may be less favorable than currently
anticipated. Clinical data often is susceptible to varying
interpretations and many companies that have believed that their
products performed satisfactorily in clinical trials have
nonetheless failed to obtain FDA approval for their products. We
may not complete the filing of our NDA for the use of Macugen in
the treatment of wet AMD in the third quarter of 2004, our
anticipated time frame. Furthermore, even after we complete the
filing, the FDA may not accept our submission as complete, may
request additional information from us, including data from
additional clinical trials, and, ultimately, may not grant
marketing approval for Macugen. If we are not successful in
commercializing Macugen, or are significantly delayed in doing
so, our business will be materially harmed and we may need to
curtail or cease operations.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
success of Macugen depends heavily on our collaboration with
Pfizer, which was established in December 2002 and involves a
complex sharing of control over decisions, responsibilities and
costs and benefits. Any loss of Pfizer as a collaborator, or
adverse development in the collaboration, would materially harm
our business.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into our
collaboration with Pfizer to develop and commercialize Macugen
for the prevention and treatment of diseases of the eye. The
collaboration involves a complex sharing of control over
decisions, responsibilities and costs and benefits. For example,
with respect to the
</FONT>

<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">sharing of costs and benefits, Pfizer will
co-promote Macugen with us in the United States and will share
with us in profits and losses. Outside the United States, Pfizer
will commercialize Macugen pursuant to an exclusive license and
pay us a royalty on net sales. In addition, Pfizer generally is
required to fund a majority of ongoing development costs
incurred pursuant to an agreed upon development plan. With
respect to control over decisions and responsibilities, the
collaboration is governed by a joint operating committee,
consisting of an equal number of representatives of Pfizer and
us. There are also subcommittees with equal representation from
both parties that have responsibility over development,
regulatory, manufacturing and commercialization matters.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ultimate decision-making authority is vested in
us as to some matters and in Pfizer as to other matters. A third
category of decisions requires the approval of both Pfizer and
us. Outside the United States, ultimate decision-making
authority as to most matters is vested in Pfizer. Pfizer may
terminate the collaboration relationship without cause upon six
to twelve months&#146; prior notice, depending on when such
notice is given. Any loss of Pfizer as a collaborator in the
development or commercialization of Macugen, dispute over the
terms of, or decisions regarding, the collaboration or other
adverse development in our relationship with Pfizer would
materially harm our business and might accelerate our need for
additional capital.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our clinical trials are unsuccessful, or if we experience
significant delays in these trials, our ability to commercialize
Macugen and our future product candidates will be
impaired.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We must provide the FDA and similar foreign
regulatory authorities with preclinical and clinical data that
demonstrate that our product candidates are safe and effective
for each target indication before they can be approved for
commercial distribution. The preclinical testing and clinical
trials of any product candidates that we develop must comply
with regulations by numerous federal, state and local government
authorities in the United States, principally the FDA, and by
similar agencies in other countries. Clinical development is a
long, expensive and uncertain process and is subject to delays.
We may encounter delays or rejections based on our inability to
enroll enough patients to complete our clinical trials. Patient
enrollment depends on many factors, including the size of the
patient population, the nature of the trial protocol, the
proximity of patients to clinical sites and the eligibility
criteria for the study.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ongoing Phase&nbsp;2/3 pivotal clinical trial
for the use of Macugen in the treatment of wet AMD and
Phase&nbsp;2 clinical trial for use of Macugen in the treatment
of DME are currently fully enrolled. We expect to commence a
Phase&nbsp;2 clinical trial for the use of Macugen in the
treatment of retinal vein occlusion in the second quarter of
2004. We also may commence additional clinical trials in the
future. Although we have not to date experienced any significant
delays in enrolling clinical trial patients for our ongoing
clinical trials, delays in patient enrollment for future trials
may result in increased costs and delays, which could have a
harmful effect on our ability to develop products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">It may take several years to complete the testing
of a product, and failure can occur at any stage of testing. For
example:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">interim results of preclinical or clinical
    studies do not necessarily predict their final results, and
    acceptable results in early studies might not be seen in later
    studies, in large part because earlier phases of studies are
    often conducted on smaller groups of patients than later
    studies, and without the same trial design features, such as
    randomized controls and long-term patient follow-up and analysis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential products that appear promising at early
    stages of development may ultimately fail for a number of
    reasons, including the possibility that the products may be
    ineffective, less effective than products of our competitors or
    cause harmful side effects;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any preclinical or clinical test may fail to
    produce results satisfactory to the FDA or foreign regulatory
    authorities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">preclinical and clinical data can be interpreted
    in different ways, which could delay, limit or prevent
    regulatory approval;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">negative or inconclusive results from a
    preclinical study or clinical trial or adverse medical events
    during a clinical trial could cause a preclinical study or
    clinical trial to be repeated or a program to be terminated,
    even if other studies or trials relating to the program are
    successful;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the FDA can place a hold on a clinical trial if,
    among other reasons, it finds that patients enrolled in the
    trial are or would be exposed to an unreasonable and significant
    risk of illness or injury;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may encounter delays or rejections based on
    changes in regulatory agency policies during the period in which
    we develop a drug or the period required for review of any
    application for regulatory agency approval;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our clinical trials may not demonstrate the
    safety and efficacy needed for our products to receive
    regulatory approval.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have completed the first year of our
Phase&nbsp;2/3 pivotal clinical trials for the use of Macugen in
the treatment of wet AMD. Based on results from the first year
of these trials, we and Pfizer are filing sections of our NDA
with the FDA for the use of Macugen in the treatment of all
subtypes of wet AMD as a rolling submission. The FDA has
accepted for review the preclinical and clinical study report
sections of our NDA filing. We plan to complete our NDA filing
in the third quarter of 2004. We are currently conducting a
second year of these trials. We have also fully enrolled a
Phase&nbsp;2 clinical trial for the use of Macugen in the
treatment of DME. To obtain marketing approval, we may decide
to, or the FDA or other regulatory authorities may require us
to, pursue additional clinical trials or other studies of
Macugen. For example, in addition to our Phase&nbsp;2 clinical
trial for the use of Macugen in the treatment of DME, we
anticipate that we need to conduct Phase&nbsp;3 clinical trials
for DME before filing a new drug application or supplemental new
drug application, as the case may be, for this second indication.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, as part of the drug approval
process, we must conduct a comprehensive assessment of the
carcinogenic, or cancer causing, potential of our product
candidates. Our testing of Macugen to date indicates that the
product&#146;s carcinogenic potential is low. In one test for
carcinogenicity risk, two potential Macugen metabolites showed,
in one out of five bacterial strains tested, a small increase in
the number of altered bacteria, a potential indicator of
carcinogenicity risk. However, because this elevated proportion
of altered bacteria did not increase further as we increased the
dose of the metabolites, we do not believe the results from
these tests indicate carcinogenicity potential. Furthermore, no
other test, including animal studies, of Macugen and its
metabolites showed carcinogenic potential. We have requested
that the FDA grant us a waiver from the requirement to perform
full animal carcinogenicity studies for the treatment of wet AMD
based primarily on the unmet medical need presented by wet AMD,
low overall systemic exposure to Macugen and the fact that this
disease generally affects older populations. However, the FDA
may require us to conduct additional carcinogenicity testing of
Macugen. Based on our discussions with the FDA to date, if we
are required to conduct further carcinogenicity testing of
Macugen in connection with its use in the treatment of wet AMD,
we believe that the FDA will allow us to conduct any such
testing as a post-NDA approval study. However, we will not be
certain of this until the NDA review process of Macugen for this
indication is completed. We expect that the FDA may require us
to complete satisfactory carcinogenicity testing of Macugen
prior to any approval of the use of Macugen in the treatment of
DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we are required to conduct additional clinical
trials or other studies of Macugen beyond those that we
currently contemplate, if we are unable to successfully complete
our clinical trials or other studies or if the results of these
trials or studies are not positive or are only modestly
positive, we may be delayed in obtaining marketing approval for
Macugen, we may not be able to obtain marketing approval or we
may obtain approval for indications that are not as broad as
intended. Our product development costs will also increase if we
experience delays in testing or approvals. Significant clinical
trial delays could allow our competitors to bring products to
market before we do and impair our ability to commercialize our
products or potential products. If any of this occurs, our
business will be materially harmed.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
face substantial competition, which may result in others
discovering, developing or commercializing products before or
more successfully than we do.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The development and commercialization of new
drugs is highly competitive. We will face competition with
respect to Macugen and any products we may develop or
commercialize in the future from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide. Our competitors may develop products or other novel
technologies that are more effective, safer or less costly than
any that we are developing. Our competitors may also obtain FDA
or other regulatory approval for their products more rapidly
than we may obtain approval for ours.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The two therapies currently available for the
treatment of wet AMD are photodynamic therapy, which was
developed by QLT,&nbsp;Inc. and is marketed by Novartis&nbsp;AG,
and thermal laser treatment. In the United States, photodynamic
therapy is FDA-approved only for the predominantly classic
subtype of wet AMD. In the European Union, there is an approved
therapy only for the predominantly classic and occult subtypes.
In the United States, however, the Centers for
Medicare&nbsp;&#38; Medicaid Services implemented a decision in
April 2004 to provide coverage for photodynamic therapy to
patients with wet AMD who have occult and minimally classic
lesions that are four disc areas or less in size and show
evidence of recent disease progression even though the FDA has
not approved photodynamic therapy for such treatment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The current therapies for the treatment of DME
are thermal laser treatment and steroid treatment administered
by physicians on an off-label basis. Unless additional therapies
are approved, these existing therapies will represent the
principal competition for Macugen if Macugen is approved for
marketing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additional treatments for AMD and DME are in
various stages of preclinical or clinical testing. If approved,
these treatments would also compete with Macugen. Potential
treatments in late stage clinical trials include drugs sponsored
by a collaboration of Genentech,&nbsp;Inc. and Novartis,
Alcon,&nbsp;Inc., Allergan,&nbsp;Inc. through its recent
acquisition of Oculex Pharmaceuticals,&nbsp;Inc., Eli Lilly
and&nbsp;Co., Bausch&nbsp;&#38; Lomb Incorporated, a
collaboration of Regeneron Pharmaceuticals,&nbsp;Inc. and
Aventis&nbsp;S.A., Miravant Medical Technologies, and Genaera
Corporation. Some of the sponsors of these potential products
have recently announced favorable results from Phase&nbsp;1 or
Phase&nbsp;2 clinical trials. The Genentech/Novartis
collaboration is developing an anti-VEGF humanized antibody
fragment for intravitreal injection. This product candidate may
be viewed as particularly competitive with Macugen because of
the similarity of its mechanism of action. In addition, Alcon
expects to announce results of its Phase&nbsp;3 clinical trial
of anecortave acetate, an angiostatic steroid, for the treatment
of wet AMD patients, that features a less invasive injectable
delivery that requires less frequent administration (every six
months), in the fourth quarter of 2004 and to file an NDA
thereafter for the predominantly classic subtype of wet AMD.
Further, Alcon is enrolling patients in two Phase&nbsp;3
clinical trials, one in South America and one in Europe,
comparing the safety and efficacy of Alcon&#146;s steroid
against placebo in patients with all subtypes of wet AMD. Other
laser, surgical or pharmaceutical treatments for AMD and DME may
also compete against Macugen. These competitive therapies may
result in pricing pressure if we receive marketing approval for
Macugen even if Macugen is otherwise viewed as a preferable
therapy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our competitors have substantially
greater financial, technical and human resources than we have.
Additional mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources being
concentrated by our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of technologies and greater availability of
capital for investment in these fields.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may not be successful in our efforts to
    expand our portfolio of products.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A key element of our strategy is to commercialize
a portfolio of new ophthalmic drugs in addition to Macugen. We
are seeking to do so through our internal research programs and
through licensing or otherwise acquiring the rights to potential
new drugs and drug targets for the treatment of ophthalmic
disease.
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A significant portion of the research that we are
conducting involves new and unproven technologies. Research
programs to identify new disease targets and product candidates
require substantial technical, financial and human resources
whether or not we ultimately identify any candidates. Our
research programs may initially show promise in identifying
potential product candidates, yet fail to yield product
candidates for clinical development for a number of reasons,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the research methodology used may not be
    successful in identifying potential product candidates;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential product candidates may on further study
    be shown to have harmful side effects or other characteristics
    that indicate they are unlikely to be effective drugs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may be unable to license or acquire suitable
product candidates or products from third parties for a number
of reasons. In particular, the licensing and acquisition of
pharmaceutical products is a competitive area. A number of more
established companies are also pursuing strategies to license or
acquire products in the ophthalmic field. These established
companies may have a competitive advantage over us due to their
size, cash resources and greater clinical development and
commercialization capabilities. Other factors that may prevent
us from licensing or otherwise acquiring suitable product
candidates include the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may be unable to license or acquire the
    relevant technology on terms that would allow us to make an
    appropriate return from the product;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">companies that perceive us to be their
    competitors may be unwilling to assign or license their product
    rights to us;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may be unable to identify suitable products or
    product candidates within our areas of expertise.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">If we are unable to develop suitable potential
product candidates through internal research programs or by
obtaining rights to novel therapeutics from third parties, our
business will suffer.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market
acceptance of Macugen and other products we develop in the
future that are based on new technologies may be
limited.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The commercial success of the products for which
we may obtain marketing approval from the FDA or other
regulatory authorities will depend upon the acceptance of these
products by the medical community and third party payors as
clinically useful, cost-effective and safe. Even if a potential
product displays a favorable efficacy and safety profile in
clinical trials, market acceptance of the product will not be
known until after it is commercially launched. We expect that
many of the products that we develop will be based upon new
technologies. For example, Macugen is an aptamer, which is a
type of nucleic acid. To date, no aptamer has been approved as a
pharmaceutical by the FDA. As a result, it may be more difficult
for us to achieve market acceptance of our products,
particularly the first products that we introduce to the market
based on new technologies. Our efforts to educate the medical
community about these potentially unique approaches may require
greater resources than would be typically required for products
based on conventional technologies. The safety, efficacy,
convenience and cost-effectiveness of our products as compared
to competitive products will also affect market acceptance.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are in the process of establishing our
    sales and marketing capabilities. We will need to successfully
    recruit sales personnel and build a sales infrastructure to
    successfully commercialize Macugen and other products that we
    develop, acquire or license.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have limited experience in selling products
and are in the process of establishing our sales capabilities.
While we have personnel with significant marketing experience
and have been collaborating with our partner, Pfizer, we have
limited experience as a company marketing products. To achieve
commercial success for any approved product, we must develop an
effective sales and marketing organization. We are beginning to
recruit a specialty sales force to participate in detailing
Xalatan and, assuming regulatory approval, to market and sell
Macugen in the United States in collaboration with Pfizer. If we
are not successful in recruiting sales personnel or in building
a sales and marketing
</FONT>

<P align="center"><FONT size="2">11
</FONT>

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<DIV align="left">
<FONT size="2">infrastructure, our business will materially
suffer. Moreover, if the commercial launch of Macugen is delayed
as a result of FDA requirements or other reasons, we may
establish sales and marketing capabilities too early relative to
the launch of Macugen. This may be expensive, and our investment
would be lost if we cannot retain our sales and marketing
personnel.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect to depend on collaborations with third parties to develop
and commercialize our products.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business strategy includes entering into
collaborations with corporate and academic collaborators for the
research, development and commercialization of additional
product candidates, such as our collaboration with Pfizer. These
arrangements may not be scientifically or commercially
successful. The termination of any of these arrangements might
adversely affect our ability to develop, commercialize and
market our products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The success of our collaboration arrangements
will depend heavily on the efforts and activities of our
collaborators. Our collaborators will have significant
discretion in determining the efforts and resources that they
will apply to these collaborations. The risks that we face in
connection with these collaborations, including our
collaboration with Pfizer, include the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our collaboration agreements are, or are expected
    to be, for fixed terms and subject to termination under various
    circumstances, including, in many cases, on short notice without
    cause;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we expect to be required in our collaboration
    agreements not to conduct specified types of research and
    development in the field that is the subject of the
    collaboration. These agreements may have the effect of limiting
    the areas of research and development that we may pursue, either
    alone or in cooperation with third parties;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our collaborators may develop and commercialize,
    either alone or with others, products and services that are
    similar to or competitive with our products that are the subject
    of the collaboration with us;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our collaborators may change the focus of their
    development and commercialization efforts. Pharmaceutical and
    biotechnology companies historically have re-evaluated their
    priorities following mergers and consolidations, which have been
    common in recent years in these industries. The ability of our
    products to reach their potential could be limited if our
    collaborators decrease or fail to increase spending relating to
    such products.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Collaborations with pharmaceutical companies and
other third parties often are terminated or allowed to expire by
the other party. Such terminations or expirations can adversely
affect us financially as well as harm our business reputation.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may not be successful in establishing additional collaborations,
which could adversely affect our ability to develop and
commercialize products and services.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An important element of our business strategy is
entering into collaborations for the development and
commercialization of products when we believe that doing so will
maximize product value. If we are unable to reach agreements
with suitable collaborators, we may fail to meet our business
objectives for the affected product or program. We face
significant competition in seeking appropriate collaborators.
Moreover, these collaboration arrangements are complex to
negotiate and time consuming to document. We may not be
successful in our efforts to establish additional collaborations
or other alternative arrangements. The terms of any additional
collaborations or other arrangements that we establish may not
be favorable to us. Moreover, these collaborations or other
arrangements may not be successful.
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We have no manufacturing facilities and
    limited manufacturing personnel. We will depend on third parties
    to manufacture Macugen and future products. If these
    manufacturers fail to meet our requirements, our product
    development and commercialization efforts may be materially
    harmed.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have limited personnel with experience in, and
we do not own facilities for, manufacturing any products. We
will depend on third parties to manufacture Macugen and any
future products that we may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For our clinical trials of Macugen, we engaged a
third party manufacturer to produce the active pharmaceutical
ingredient used in Macugen. We have entered into an agreement
with an affiliate of this third party for commercial supply of
the active pharmaceutical ingredient. For our clinical trials of
Macugen, we also engaged a separate fill and finish manufacturer
for the finished drug product to formulate the active
pharmaceutical ingredient from a solid into a solution and to
fill the solution into syringes. We have entered into an
agreement with this manufacturer to provide these finished
product services for commercial supply. These manufacturers of
Macugen will be single source suppliers to us for a significant
period of time. We also expect to continue to rely on a single
source of supply for the PEGylation reagent used in the
manufacture of Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we currently have sufficient capacity
to supply the active pharmaceutical ingredient of Macugen to
meet anticipated demand for Macugen if the product is approved
based on a 0.3&nbsp;mg dose for approximately 24&nbsp;months
after approval. However, in order to sustain Macugen supply at
the quantities we believe will be necessary to meet anticipated
future market demand, we and our contract manufacturer will need
to increase the manufacturing capacity for the active
pharmaceutical ingredient. We initially intend to increase
manufacturing capacity for the active pharmaceutical ingredient
by duplicating a portion of our manufacturing lines at the
contract manufacturer&#146;s facility. We are also exploring
other alternatives for increasing manufacturing capacity. If we
are unable to increase our manufacturing capacity, or if the
cost of this increased capacity is uneconomic to us, we may not
be able to produce Macugen in a sufficient quantity to meet
future requirements to sustain supply of the product to meet
anticipated future demand. In addition, our revenues and gross
margins could be adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reliance on third party manufacturers entails
risks to which we would not be subject if we manufactured
products ourselves, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reliance on the third party for regulatory
    compliance and quality assurance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the possible breach of the manufacturing
    agreement by the third party because of factors beyond our
    control;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the possibility of termination or non-renewal of
    the agreement by the third party, based on its own business
    priorities, at a time that is costly or inconvenient for us.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may in the future elect to establish our own
manufacturing facilities to manufacture some of our products. We
would need to invest substantial additional funds and recruit
qualified personnel in order to build or lease and operate any
manufacturing facilities.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
manufacture and packaging of pharmaceutical products such as
Macugen are subject to the requirements of the FDA and similar
foreign regulatory bodies. If we or our third party
manufacturers fail to satisfy these requirements, our product
development and commercialization efforts may be materially
harmed.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The manufacture and packaging of pharmaceutical
products, such as Macugen and our future product candidates, are
regulated by the FDA and similar foreign regulatory bodies and
must be conducted in accordance with the FDA&#146;s current good
manufacturing practices and comparable requirements of foreign
regulatory bodies. There are a limited number of manufacturers
that operate under these current good manufacturing practices
regulations who are both capable of manufacturing Macugen and
willing to do so. Failure by us or our third party manufacturers
to comply with applicable regulations, requirements, or
guidelines could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure
</FONT>

<P align="center"><FONT size="2">13
</FONT>

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<DIV align="left">
<FONT size="2">of regulatory authorities to grant marketing
approval of our products, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Changes in the manufacturing process or
procedure, including a change in the location where the product
is manufactured or a change of a third party manufacturer, may
require prior FDA review and/or approval of the manufacturing
process and procedures in accordance with the FDA&#146;s current
good manufacturing practices. There are comparable foreign
requirements. This review may be costly and time consuming and
could delay or prevent the launch of a product. For example, our
third party contract manufacturer changed the site used to
manufacture the active pharmaceutical ingredient of Macugen. We
have completed the transfer of the relevant manufacturing
technology to the new site, have used the new site to supply the
active pharmaceutical ingredient of Macugen for use in our
clinical trials and plan to continue to use this site to produce
commercial quantities of the active pharmaceutical ingredient of
Macugen. We are performing analytical tests to demonstrate
comparability of our active pharmaceutical ingredient following
the site change. If we cannot establish that the products
manufactured at the new site are comparable to the satisfaction
of the FDA, we may not obtain or may be delayed in obtaining
approval to launch Macugen. In addition, if we elect to
manufacture products in our own facility or at the facility of
another third party, we would need to ensure that the new
facility and the manufacturing process are in substantial
compliance with current good manufacturing practices. Any such
new facility would be subject to a pre-approval inspection by
FDA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, in order to obtain approval of our
products, including Macugen, by the FDA and foreign regulatory
agencies, we need to complete testing on both the active
pharmaceutical ingredient and on the finished product in the
packaging we propose for commercial sales. This includes testing
of stability, identification of impurities and testing of other
product specifications by validated test methods. In addition,
we will be required to consistently produce the active
pharmaceutical ingredient in commercial quantities and of
specified quality on a repeated basis and document our ability
to do so. This requirement is referred to as process validation.
With respect to Macugen, although we have manufactured Macugen
at commercial scale, we have started, but not yet completed,
this process validation requirement. If the required testing or
process validation is delayed or produces unfavorable results,
we may not obtain approval to launch the product or approval may
be delayed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FDA and similar foreign regulatory bodies may
also implement new standards, or change their interpretation and
enforcement of existing standards and requirements, for
manufacture, packaging, or testing of products at any time. If
we are unable to comply, we may be subject to regulatory, civil
actions or penalties which could significantly and adversely
affect our business.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Macugen
and our other potential products may not be commercially viable
if we fail to obtain an adequate level of reimbursement for
these products by Medicare and other third party payors. The
markets for our products may also be limited by the indications
for which their use may be reimbursed or the frequency in which
they may be administered.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The availability and levels of reimbursement by
governmental and other third party payors affect the market for
products such as Macugen and others that we may develop. These
third party payors continually attempt to contain or reduce the
costs of healthcare by challenging the prices charged for
medical products and services. In some foreign countries,
particularly Canada and the countries of the European Union, the
pricing of prescription pharmaceuticals is subject to
governmental control. In these countries, pricing negotiations
with governmental authorities can take six to twelve months or
longer after the receipt of regulatory marketing approval for a
product. To obtain reimbursement or pricing approval in some
countries, we may be required to conduct a clinical trial that
compares the cost-effectiveness of our products, including
Macugen, to other available therapies. If reimbursement for our
products is unavailable or limited in scope or amount or if
pricing is set at unsatisfactory levels, our business could be
materially harmed.
</FONT>

<P align="center"><FONT size="2">14
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because most persons suffering from wet AMD are
elderly, we expect that coverage for Macugen in the United
States will be primarily through the Medicare program. Although
drugs that are not usually self-administered are ordinarily
covered by Medicare, the Medicare program has taken the position
that it can decide not to cover particular drugs if it
determines that they are not &#147;reasonable and
necessary&#148; for Medicare beneficiaries. Limitations on
coverage could also be imposed at the local Medicare carrier
level or by fiscal intermediaries. Our business could be
materially adversely affected if the Medicare program, local
Medicare carriers or fiscal intermediaries were to make such a
determination and deny or limit the reimbursement of Macugen.
Our business also could be adversely affected if physicians are
not reimbursed by Medicare for the cost of the procedure in
which they administer Macugen on a basis satisfactory to the
administering physicians. If the local contractors that
administer the Medicare program are slow to reimburse physicians
for Macugen, the physicians may pay us more slowly, which would
adversely affect our working capital requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also will need to obtain approvals for payment
for Macugen from private insurers, including managed care
organizations. We expect that private insurers will consider the
efficacy, cost-effectiveness and safety of Macugen in
determining whether to approve reimbursement for Macugen therapy
and at what level. Obtaining these approvals can be a time
consuming and expensive process. Our business would be
materially adversely affected if we do not receive approval for
reimbursement of Macugen from private insurers on a satisfactory
basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business could also be adversely affected if
the Medicare program or other reimbursing bodies or payors limit
the indications for which Macugen will be reimbursed to a
smaller set than we believe it is effective in treating or
establish a limitation on the frequency with which Macugen may
be administered that is less often than we believe would be
effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to experience pricing pressures in
connection with the sale of Macugen and our future products due
to the trend toward programs aimed at reducing healthcare costs,
the increasing influence of health maintenance organizations and
additional legislative proposals.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
recent Medicare prescription drug coverage legislation and
future legislative or regulatory reform of the healthcare system
may affect our ability to sell our products
profitably.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In both the United States and some non-U.S.
jurisdictions, there have been a number of legislative and
regulatory proposals to change the healthcare system in ways
that could affect our ability to sell our products profitably.
In the United States, new legislation has been proposed at the
federal and state levels that would result in significant
changes to the healthcare system, either nationally or at the
state level. In particular, in December 2003, President Bush
signed into law new Medicare prescription drug coverage
legislation. Effective January 2004, the legislation changed the
methodology used to calculate reimbursement for drugs such as
Macugen that are administered in physicians&#146; offices in a
manner intended to reduce the amount that is subject to
reimbursement. In addition, beginning in January 2006, the
legislation directs the Secretary of Health and Human Services
to contract with procurement organizations to purchase
physician-administered drugs from the manufacturers and provides
physicians with the option to obtain drugs through these
organizations as an alternative to purchasing from the
manufacturers, which some physicians may find advantageous.
These changes may also cause private insurers to reduce the
amounts that they will pay for physician-administered drugs. In
addition, the Centers for Medicare&nbsp;&#38; Medicaid Services,
or CMS, the agency within the Department of Health and Human
Services that administers Medicare and will be responsible for
reimbursement of the cost of Macugen, has asserted the authority
of Medicare not to cover particular drugs if it determines that
they are not &#147;reasonable and necessary&#148; for Medicare
beneficiaries or to cover them at a lesser rate, comparable to
that for drugs already reimbursed that CMS considers to be
therapeutically comparable. Further federal and state proposals
and healthcare reforms are likely. Our results of operations
could be materially adversely affected by the Medicare
prescription drug coverage legislation, by the possible effect
of this legislation on amounts that private insurers will pay
and by other healthcare reforms that may be enacted or adopted
in the future.
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<DIV>&nbsp;</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We face the risk of product liability
    claims and may not be able to obtain insurance.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business exposes us to the risk of product
liability claims that is inherent in the manufacturing, testing
and marketing of drugs and related products. If the use of one
or more of our products harms people, we may be subject to
costly and damaging product liability claims. We have product
liability insurance that covers our clinical trials up to a
$10&nbsp;million annual aggregate limit. We intend to expand our
insurance coverage to include the sale of commercial products if
we obtain marketing approval for any of the products that we may
develop. Insurance coverage is increasingly expensive. We may
not be able to obtain or maintain adequate protection against
potential liabilities. If we are unable to obtain insurance at
acceptable cost or otherwise protect against potential product
liability claims, we will be exposed to significant liabilities,
which may materially and adversely affect our business and
financial position. These liabilities could prevent or interfere
with our product development and commercialization efforts.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
depend on our key personnel. If we are not able to retain them
or recruit additional technical personnel, our business will
suffer.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are highly dependent on the principal members
of our management and scientific staff, particularly
Dr.&nbsp;David R. Guyer, our co-founder and Chief Executive
Officer, and Dr.&nbsp;Anthony P. Adamis, our scientific pioneer,
Chief Scientific Officer and Senior Vice President, Research.
Our employment agreements with these and our other executive
officers are terminable on short or no notice. We do not carry
key man life insurance on any of our key personnel. The loss of
service of any of our key employees could harm our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our growth will require us to hire a
significant number of qualified technical, commercial and
administrative personnel. There is intense competition from
other companies and research and academic institutions for
qualified personnel in the areas of our activities. If we cannot
continue to attract and retain, on acceptable terms, the
qualified personnel necessary for the continued development of
our business, we may not be able to sustain our operations or
grow.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
depend on third parties in the conduct of our clinical trials
for Macugen and any failure of those parties to fulfill their
obligations could adversely affect our development and
commercialization plans.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We depend on independent clinical investigators,
contract research organizations and other third party service
providers in the conduct of our clinical trials for Macugen and
expect to do so with respect to other product candidates. We
rely heavily on these parties for successful execution of our
clinical trials, but do not control many aspects of their
activities. For example, the investigators are not our
employees. However, we are responsible for ensuring that each of
our clinical trials is conducted in accordance with the general
investigational plan and protocols for the trial. Third parties
may not complete activities on schedule, or may not conduct our
clinical trials in accordance with regulatory requirements or
our stated protocols. The failure of these third parties to
carry out their obligations could delay or prevent the
development, approval and commercialization of Macugen and
future product candidates.
</FONT>

<P align="left">
<B><FONT size="2">Regulatory Risks</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may not be able to obtain marketing approval for any of the
products resulting from our development efforts, including
Macugen. Failure to obtain these approvals could materially harm
our business.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we may not require additional research
and development for the approval of Macugen for the treatment of
wet AMD, the use of Macugen for the treatment of other
indications and other products that we are developing or may
develop in the future will require additional research and
development. The research and development work that we must
perform will include extensive preclinical studies and clinical
trials. We will be required to obtain an investigational new
drug application, or IND, prior to initiating human clinical
trials in the United States and must obtain regulatory approval
prior to any commercial distribution. This process is expensive,
uncertain and lengthy, often taking a number of years until a
product is approved for commercial distribution. We have only
one product, Macugen, that has advanced
</FONT>

<P align="center"><FONT size="2">16
</FONT>

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<DIV align="left">
<FONT size="2">to clinical trials. We have not received
regulatory approval to market Macugen in any jurisdiction.
Failure to obtain required regulatory approvals could materially
harm our business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may need to successfully address a number of
technological challenges in order to complete the development of
Macugen or any of our future products. For example, to obtain
marketing approval for Macugen, we will be required to
consistently produce the active pharmaceutical ingredient in
commercial quantities and of specified quality on a repeated
basis and document our ability to do so. We have not yet
completed this process validation requirement and, if we are
unable to do so, our business will be materially adversely
affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, administration of a drug via
intravitreal injection is a new method for the potentially
long-term treatment of chronic eye disease. As a result, the FDA
and other regulatory agencies may apply new standards for
safety, manufacturing, packaging and distribution of drugs using
this mode of administration, including Macugen. We are working
with the FDA in connection with its development of appropriate
standards for drugs using this mode of administration. As part
of this process, we also support efforts by the United States
Pharmacopoeia, which works with the FDA to establish standards,
to devise a particulate limit and a standard to measure
particulate matter appropriate for ophthalmologic treatments
administered as ultra low-volume injectables. It may be time
consuming or expensive for us to comply with these standards.
This could result in delays in our obtaining marketing approval
for Macugen, or possibly preclude us from obtaining such
approval. This could also increase our commercialization costs,
possibly materially.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, Macugen and any of our future
products may not be effective, may be only moderately effective
or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may preclude our
obtaining regulatory approval or prevent or limit commercial
use, which could have a material adverse effect on our business.
The FDA and other regulatory authorities may not approve any
product that we develop.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The &#147;fast track&#148; designation for
    development of Macugen may not actually lead to a faster
    development or regulatory review or approval
    process.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a drug is intended for the treatment of a
serious or life-threatening condition and the drug demonstrates
the potential to address unmet medical needs for this condition,
the drug sponsor may apply for FDA &#147;fast track&#148;
designation. The fast track classification does not apply to the
product alone, but applies to the combination of the product and
the specific indication or indications for which it is being
studied. The FDA&#146;s fast track programs are designed to
facilitate the clinical development and evaluation of the
drug&#146;s safety and efficacy for the fast track indication or
indications. Marketing applications filed by sponsors of
products in fast track development may qualify for expedited
review under policies or procedures offered by the FDA, but the
fast track designation does not assure such qualification.
Although we have obtained a fast track designation from the FDA
for Macugen for the treatment of both wet AMD and DME, we may
not experience a faster development process, review or approval
compared to conventional FDA procedures. Our fast track
designation may be withdrawn by the FDA if it believes that the
designation is no longer supported by data from our clinical
development program. Our fast track designation does not
guarantee that we will qualify for or be able to take advantage
of the expedited review procedures.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
products could be subject to restrictions or withdrawal from the
market and we may be subject to penalties if we fail to comply
with regulatory requirements, or if we experience unanticipated
problems with our products, when and if any of them are
approved.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any product for which we obtain marketing
approval, along with the manufacturing processes, post-approval
clinical data, advertising and promotional activities for such
product, will be subject to continual requirements, review and
periodic inspections by the FDA and other regulatory bodies.
Even if regulatory approval of a product is granted, the
approval may be subject to limitations on the indicated uses for
which the product may be marketed or to the conditions of
approval, or contain requirements for costly
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<DIV align="left">
<FONT size="2">post-marketing testing and surveillance to
monitor the safety or efficacy of the product. Later discovery
of previously unknown problems with our products, manufacturer
or manufacturing processes, or failure to comply with regulatory
requirements, may result in:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on such products or manufacturing
    processes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">withdrawal of the products from the market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">voluntary or mandatory recall;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fines;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">suspension of regulatory approvals;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">product seizure;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">injunctions or the imposition of civil or
    criminal penalties.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may be slow to adapt, or we may never adapt,
to changes in existing regulatory requirements or adoption of
new regulatory requirements or policies.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure
to obtain regulatory approval in foreign jurisdictions would
prevent us from marketing our products abroad.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to have our products marketed outside
the United States. In order to market our products in the
European Union and many other non-U.S. jurisdictions, we must
obtain separate regulatory approvals and comply with numerous
and varying regulatory requirements. In the case of Macugen,
Pfizer has responsibility to obtain regulatory approvals outside
the United States, and we will depend on Pfizer to obtain these
approvals. The approval procedure varies among countries and can
involve additional testing. The time required to obtain approval
may differ from that required to obtain FDA approval. The
foreign regulatory approval process may include all of the risks
associated with obtaining FDA approval. We may not obtain
foreign regulatory approvals on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory
authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory
authorities in other foreign countries or by the FDA. We and our
collaborators may not be able to file for regulatory approvals
and may not receive necessary approvals to commercialize our
products in any market. The failure to obtain these approvals
could materially adversely affect our business, financial
condition and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have only limited experience in regulatory affairs, and some of
our products may be based on new technologies. These factors may
affect our ability or the time we require to obtain necessary
regulatory approvals.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have only limited experience as a company in
filing and prosecuting the applications necessary to gain
regulatory approvals. Moreover, some of the products that are
likely to result from our product development, licensing and
acquisition programs may be based on new technologies that have
not been extensively tested in humans. The regulatory
requirements governing these types of products may be less well
defined or more rigorous than for conventional products. As a
result, we may experience a longer regulatory review in
connection with obtaining regulatory approvals of any products
that we develop, license or acquire.
</FONT>

<P align="left">
<B><FONT size="2">Risks Relating to Intellectual
Property</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to obtain and maintain protection for the
intellectual property incorporated into our products, the value
of our technology and products will be adversely
affected.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success will depend in large part on our
ability or the ability of our licensors to obtain and maintain
protection in the United States and other countries for the
intellectual property incorporated into our products. The patent
situation in the field of biotechnology and pharmaceuticals
generally is highly uncertain and involves complex legal and
scientific questions. Neither we nor our licensors may be able to
</FONT>

<P align="center"><FONT size="2">18
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<DIV align="left">
<FONT size="2">obtain additional issued patents relating to our
technology. Even if issued, patents may be challenged, narrowed,
invalidated, or circumvented, which could limit our ability to
stop competitors from marketing similar products or limit the
length of term of patent protection we may have for our
products. In addition, our patents and our licensors&#146;
patents also may not afford us protection against competitors
with similar technology. Because patent applications in the
United States and many foreign jurisdictions are typically not
published until 18&nbsp;months after filing, or in some cases
not at all, and because publications of discoveries in the
scientific literature often lag behind actual discoveries,
neither we nor our licensors can be certain that we or they were
the first to make the inventions claimed in issued patents or
pending patent applications, or that we or they were the first
to file for protection of the inventions set forth in these
patent applications.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we fail to comply with our obligations in the agreements under
which we license development or commercialization rights to
products or technology from third parties, we could lose license
rights that are important to our business.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a party to a number of technology licenses
that are important to our business and expect to enter into
additional licenses in the future. For example, we hold licenses
from Gilead, Nektar Therapeutics and Isis Pharmaceuticals under
patents relating to Macugen. These licenses impose various
commercialization, milestone payment, royalty, insurance, and
other obligations on us. If we fail to comply with these
obligations, the licensor may have the right to terminate the
license, in which event we would not be able to market products,
such as Macugen, that may be covered by the license.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we are unable to protect the
    confidentiality of our proprietary information and know-how, the
    value of our technology and products could be adversely
    affected.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to patented technology, we rely upon
unpatented proprietary technology, processes, and know-how. We
seek to protect this information in part by confidentiality
agreements with our employees, consultants and third parties.
These agreements may be breached, and we may not have adequate
remedies for any such breach. In addition, our trade secrets may
otherwise become known or be independently developed by
competitors.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
parties may own or control patents or patent applications that
would be infringed by our technologies, drug targets or
potential products. This could cause us to become involved in
expensive patent litigation or other proceedings, which could
result in our incurring substantial costs and expenses and
liability for damages. This could also require us to seek
licenses, which could increase our development and
commercialization costs. In either case, this could require us
to stop some of our development and commercialization
efforts.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not have rights under some patents or
patent applications that would be infringed by technologies that
we use in our research, drug targets that we select or product
candidates that we seek to develop and commercialize. Third
parties may own or control these patents and patent applications
in the United States and abroad. These third parties could bring
claims against us or our collaborators that would cause us to
incur substantial expenses and, if successful against us, could
cause us to pay substantial damages. Further, if a patent
infringement suit were brought against us or our collaborators,
we or they could be forced to stop or delay research,
development, manufacturing or sales of the product or product
candidate that is the subject of the suit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of patent infringement claims, or in
order to avoid potential claims, we or our collaborators may
choose to seek, or be required to seek, a license from the third
party and would most likely be required to pay license fees or
royalties or both. These licenses may not be available on
acceptable terms, or at all. Even if we or our collaborators
were able to obtain a license, the rights may be nonexclusive,
which would give our competitors access to the same intellectual
property. Ultimately, we could be prevented from commercializing
a product, or be forced to cease some aspect of our business
operations if, as a result of actual or threatened patent
infringement claims, we or our collaborators are unable to enter
into licenses on acceptable terms. This could harm our business
significantly.
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There has been substantial litigation and other
proceedings regarding the patent and other intellectual property
rights in the pharmaceutical and biotechnology industries. In
addition to infringement claims against us, we may become a
party to other patent litigation and other proceedings,
including interference proceedings declared by the United States
Patent and Trademark Office and opposition proceedings in the
European Patent Office, regarding intellectual property rights
with respect to our products and technology. The cost to us of
any patent litigation or other proceeding, even if resolved in
our favor, could be substantial. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater
financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the
marketplace. Patent litigation and other proceedings may also
absorb significant management time.
</FONT>

<P align="left">
<B><FONT size="2">Risks Relating to Our Financial Results and
Need for Financing</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a limited operating history and have incurred losses since
inception. If we do not generate significant revenues, we will
not be able to achieve profitability.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have no current source of product revenue. We
have a limited operating history and have not yet commercialized
any products. To date, we have focused primarily on the
development of Macugen. We began operations in 2000, and we have
not been profitable in any quarter since inception. As of
March&nbsp;31, 2004, we had an accumulated deficit of
approximately $153.3&nbsp;million. We expect to increase our
spending significantly as we continue to expand our
infrastructure, development programs and commercialization
activities. As a result, we will need to generate significant
revenues to pay these costs and achieve profitability. We do not
know whether or when we will become profitable because of the
significant uncertainties with respect to our ability to
generate revenues from the sale of our products and from our
existing and potential future collaborations.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may need additional financing, which may be difficult to obtain.
Our failure to obtain necessary financing or doing so on
unattractive terms could adversely affect our development
programs and other operations.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will require substantial funds to conduct
development, including preclinical testing and clinical trials,
of our potential products. We will also require substantial
funds to meet our obligations to our licensors and maximize the
prospective benefits to us from our licensors, and manufacture
and market products that are approved for commercial sale in the
future, including Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently believe that our available cash,
cash equivalents and marketable securities, expected milestone
payments and reimbursements from Pfizer under our collaboration
and interest income will be sufficient to fund our anticipated
levels of operations through at least the end of 2005. However,
our future capital requirements will depend on many factors,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our collaboration with Pfizer to
    develop and commercialize Macugen;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the scope and results of our clinical trials;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">advancement of other product candidates into
    development;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential acquisition or in-licensing of other
    products or technologies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the timing of, and the costs involved in,
    obtaining regulatory approvals;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of manufacturing activities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of commercialization activities,
    including product marketing, sales and distribution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">20
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to establish and maintain additional
    collaborative arrangements;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our detailing agreement with
    Pfizer relating to Xalatan.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additional financing may not be available to us
when we need it or it may not be available on favorable terms.
If we are unable to obtain adequate financing on a timely basis,
we may be required to significantly curtail one or more of our
development, licensing or acquisition programs. We could be
required to seek funds through arrangements with collaborators
or others that may require us to relinquish rights to some of
our technologies, product candidates or products that we would
otherwise pursue on our own. If we raise additional funds by
issuing equity securities, our then-existing stockholders will
experience dilution and the terms of any new equity securities
may have preferences over our common stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">After this offering, our executive
    officers, directors and major stockholders will maintain the
    ability to control all matters submitted to stockholders for
    approval.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When this offering is completed, our executive
officers, directors and stockholders who own more than 5% of our
outstanding common stock, will, in the aggregate, beneficially
own shares representing
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our capital
stock. As a result, if these stockholders were to choose to act
together, they would be able to control all matters submitted to
our stockholders for approval, as well as our management and
affairs. For example, these persons, if they choose to act
together, will control the election of directors and approval of
any merger, consolidation or sale of all or substantially all of
our assets. This concentration of voting power could delay or
prevent an acquisition of our company on terms that other
stockholders may desire.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Provisions in our charter documents and
    under Delaware law may prevent or frustrate attempts by our
    stockholders to change our management and hinder efforts to
    acquire a controlling interest in us.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions of our corporate charter and bylaws
may discourage, delay or prevent a merger, acquisition or other
change in control that stockholders may consider favorable,
including transactions in which you might otherwise receive a
premium for your shares. These provisions may also prevent or
frustrate attempts by our stockholders to replace or remove our
management. These provisions include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a classified board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limitations on the removal of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">advance notice requirements for stockholder
    proposals and nominations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the inability of stockholders to act by written
    consent or to call special meetings;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability of our board of directors to
    designate the terms of and issue new series of preferred stock
    without stockholder approval.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The affirmative vote of the holders of at least
75% of our shares of capital stock entitled to vote is necessary
to amend or repeal the above provisions of our certificate of
incorporation. In addition, absent approval of our board of
directors, our bylaws may only be amended or repealed by the
affirmative vote of the holders of at least 75% of our shares of
capital stock entitled to vote.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Section&nbsp;203 of the Delaware
General Corporation Law prohibits a publicly held Delaware
corporation from engaging in a business combination with an
interested stockholder, generally a person which together with
its affiliates owns or within the last three years has owned 15%
of our voting stock, for a period of three years after the date
of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a
prescribed manner. Accordingly, Section&nbsp;203 may discourage,
delay or prevent a change in control of our company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If our stock price is volatile, purchasers
    of our common stock could incur substantial
    losses.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our stock price has been, and is likely to
continue to be, volatile. The stock market in general and the
market for biotechnology companies in particular have
experienced extreme volatility that has often been
</FONT>

<P align="center"><FONT size="2">21
</FONT>

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<DIV align="left">
<FONT size="2">unrelated to the operating performance of
particular companies. As a result of this volatility, investors
may not be able to sell their common stock at or above the
public offering price. The market price for our common stock may
be influenced by many factors, including:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">results of our clinical trials or those of our
    competitors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the regulatory status of Macugen and our other
    potential products;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure of any of our product candidates, if
    approved, to achieve commercial success;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">developments concerning our collaborators,
    including Pfizer;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory developments in, and outside of, the
    United States;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">developments or disputes concerning patents or
    other proprietary rights;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to manufacture products to commercial
    standards;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">public concern over our drugs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">litigation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the departure of key personnel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">future sales of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">variations in our financial results or those of
    companies that are perceived to be similar to us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in the structure of healthcare payment
    systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">investors&#146; perceptions of us;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">general economic, industry and market conditions.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If there are substantial sales of our
    common stock, our stock price could decline.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our existing stockholders sell a large number
of shares of our common stock or the public market perceives
that existing stockholders might sell shares of common stock,
the market price of our common stock could decline
significantly. All of the shares sold in our initial public
offering were, and the shares sold in this offering will be,
freely tradable without restriction or further registration
under the federal securities laws, unless purchased by our
&#147;affiliates&#148; as that term is defined in Rule&nbsp;144
under the Securities Act.
Approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will be eligible for sale pursuant to Rule&nbsp;144 upon the
expiration of 180-day lock-up agreements on July&nbsp;28, 2004,
and
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares will be eligible for sale pursuant to Rule&nbsp;144 upon
the expiration of lock-up agreements expiring 90&nbsp;days after
the date of this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, holders of an
aggregate of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares (or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares, if the underwriters exercise their overallotment option
in full) of common stock will have rights with respect to the
registration of their shares of common stock with the Securities
and Exchange Commission. If we register their shares of common
stock following the expiration of the applicable lock-up
agreements, they can sell those shares in the public market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have registered approximately
9,543,000&nbsp;shares of common stock that are authorized for
issuance under our stock plans. As of March&nbsp;31, 2004,
5,729,664&nbsp;shares were subject to outstanding options,
4,701,004 of which were immediately exercisable, but with
respect to which we had the right to repurchase at the initial
exercise price all but 2,014,929 of the shares issuable upon
exercise of these options. Because they are registered, the
shares authorized for issuance under our stock plans can be
freely sold in the public market upon issuance, subject to our
repurchase rights, the lock-up agreements referred to above and
the restrictions imposed on our affiliates under Rule&nbsp;144.
</FONT>

<P align="center"><FONT size="2">22
</FONT>
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<DIV align="left">
<A name='103'></A>
</DIV>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">SPECIAL NOTE&nbsp;REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included
in this prospectus regarding our strategy, future operations,
future financial position, future revenues, projected costs,
prospects, plans and objectives of management are
forward-looking statements. The words &#147;anticipates,&#148;
&#147;believes,&#148; &#147;estimates,&#148;
&#147;expects,&#148; &#147;intends,&#148; &#147;may,&#148;
&#147;plans,&#148; &#147;projects,&#148; &#147;will,&#148;
&#147;would&#148; and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We
may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the
cautionary statements included in this prospectus, particularly
in the &#147;Risk Factors&#148; section, that we believe could
cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or
investments we may make. We do not assume any obligation to
update any forward-looking statements.
</FONT>

<DIV align="left">
<A name='104'></A>
</DIV>

<!-- link1 "NOTICES TO INVESTORS" -->

<P align="center">
<B><FONT size="2">NOTICES TO INVESTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For investors outside the United States: Neither
we nor any of the underwriters have done anything that would
permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. You are required to
inform yourselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus.
</FONT>

<P align="center"><FONT size="2">23
</FONT>

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<DIV align="left">
<A name='105'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selling stockholders are offering all
4,000,000&nbsp;shares to be sold in this offering, along with an
additional 600,000&nbsp;shares to be sold if the underwriters
exercise their overallotment option in full. We will not receive
any proceeds from the sale of shares in this offering.
</FONT>

<DIV align="left">
<A name='106'></A>
</DIV>

<!-- link1 "PRICE RANGE OF COMMON STOCK" -->

<P align="center">
<B><FONT size="2">PRICE RANGE OF COMMON STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares of our common stock have traded on the
Nasdaq National Market under the symbol &#147;EYET.&#148; The
following table sets forth the range of the high and low sales
prices as reported by the Nasdaq National Market for shares of
our common stock since inception of trading on January&nbsp;30,
2004.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Price Range</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">High</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Low</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Year Ending December&nbsp;31, 2004</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">January&nbsp;30 through March&nbsp;31
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Second Quarter (through May&nbsp;11, 2004)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, there were 269
registered holders of record of shares of our common stock.
</FONT>

<DIV align="left">
<A name='107'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have never declared or paid cash dividends on
either our common stock or preferred stock. We currently intend
to retain all of our future earnings to finance the growth and
development of our business. We do not intend to pay cash
dividends to our stockholders in the foreseeable future.
</FONT>

<P align="center"><FONT size="2">24
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='108'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our capitalization
as of March&nbsp;31, 2004. You should read this table together
with our consolidated financial statements and the related notes
appearing at the end of this prospectus and the
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; section of this
prospectus.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of March&nbsp;31, 2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligations, net of
    current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock, par value $0.01&nbsp;per share;
    5,000,000&nbsp;shares authorized, none issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $0.01&nbsp;per share;
    125,000,000&nbsp;shares authorized; 40,762,109 issued and
    40,337,109 outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(431</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,841</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock, 425,000&nbsp;shares, at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(153,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The above share data exclude the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">5,729,664&nbsp;shares of common stock issuable
    upon the exercise of stock options outstanding as of
    March&nbsp;31, 2004 at a weighted average exercise price of
    $7.49&nbsp;per share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an aggregate of 3,833,839&nbsp;shares of common
    stock reserved for future issuance under our 2003 stock
    incentive plan and our 2003 employee stock purchase
    plan;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of 37,501&nbsp;shares of restricted
    common stock to our employees for cash proceeds of $375, which
    shares had not been issued as of March&nbsp;31, 2004.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "SELECTED FINANCIAL INFORMATION" -->

<P align="center">
<B><FONT size="2">SELECTED FINANCIAL INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the following selected financial
information together with our consolidated financial statements
and the related notes appearing at the end of this prospectus
and the &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; section of
this prospectus. We have derived the statement of operations
information for the years ended December&nbsp;31, 2001, 2002 and
2003 and the balance sheet information as of December&nbsp;31,
2001, 2002 and 2003 from our audited consolidated financial
statements that are included in this prospectus. We have derived
the statement of operations information for the period from our
inception to December&nbsp;31, 2000, and the balance sheet
information as of December&nbsp;31, 2000 and 2001 from our
audited consolidated financial statements that are not included
in this prospectus. We have derived the statement of operations
information for the three months ended March&nbsp;31, 2003 and
2004 and the balance sheet information as of March&nbsp;31, 2004
from our unaudited condensed consolidated financial statements
that are included in this prospectus. Our unaudited condensed
consolidated financial statements include, in the opinion of our
management, all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of those
statements. Our historical results for any prior or interim
period are not necessarily indicative of results to be expected
for a full fiscal year or for any future period. The pro forma
net loss attributable to common stockholders per share
information is computed using the weighted average number of
common shares outstanding, after giving pro forma effect to the
automatic conversion of all outstanding shares of our
convertible preferred stock into shares of our common stock
effective upon the completion of our initial public offering in
February 2004, as if the conversion had occurred at the date of
the original issuance. This pro forma information does not give
effect to the exercise of then outstanding warrants and options
as their effect would be antidilutive.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period from</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">February&nbsp;9, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Inception) to</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(In thousands, except share and per share information)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Statement of Operations Information:</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Collaboration revenue:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&nbsp;&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,583</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">833</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,250</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">36,836</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,476</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,463</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">41,419</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,309</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,713</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Operating expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,879</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22,157</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">39,663</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">70,932</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,617</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21,931</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,599</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">568</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,799</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,413</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,338</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,319</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,822</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,103</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,643</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,292</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">26,495</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">44,982</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">82,353</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,288</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,373</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(12,292</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(26,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(44,982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(40,934</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(15,660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,181</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,815</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,809</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,171</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">618</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">695</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(248</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(39,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(15,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Provision for income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,688</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(24,680</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(43,173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(40,699</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(15,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,080</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5,096</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,160</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2,259</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(12,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(27,174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(48,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(49,860</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7,681</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(15,828</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(5.49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(12.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Weighted average shares outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,219,178</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,659,422</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,697,192</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,950,481</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,760,796</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">27,529,863</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1.77</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(0.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Unaudited pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">28,094,165</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">26,863,202</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">35,782,390</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance Sheet Information:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term capital lease obligations and
    redeemable convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,433</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(88,458</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(145,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(186,545</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,365</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137,495</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(153,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; (deficit)&nbsp;equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(123,006</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">26
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='110'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">You should read the following discussion and
analysis of our financial condition and results of operations
together with our consolidated financial statements and the
related notes appearing at the end of this prospectus. Some of
the information contained in this discussion and analysis are
set forth elsewhere in this prospectus, including information
with respect to our plans and strategy for our business and
related financing and includes forward-looking statements that
involve risks and uncertainties. You should review the
&#147;Risk Factors&#148; section of this prospectus for a
discussion of important factors that could cause actual results
to differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.</FONT></I>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a biotechnology company with our first
product candidate, Macugen, currently in two Phase&nbsp;2/3
pivotal clinical trials for use in the treatment of wet AMD. We
are also conducting a Phase&nbsp;2 clinical trial for the use of
Macugen in the treatment of DME, from which we recently released
preliminary positive clinical results. Our revenue for the year
ended December&nbsp;31, 2003 and the quarter ended
March&nbsp;31, 2004 was $41.4&nbsp;million and
$11.7&nbsp;million, respectively, consisting of amortization of
the initial non-refundable, up-front, license payment that we
received from Pfizer under our collaboration with Pfizer and
reimbursement to us by Pfizer of a portion of the ongoing
development costs for Macugen. As a result of our collaboration
with Pfizer, we ceased to be a development-stage company in
February 2003. We have had no other income since inception other
than interest on short-term investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We commenced operations in April 2000. Since our
inception, we have generated significant losses. As of
March&nbsp;31, 2004, we had an accumulated deficit of
$153.3&nbsp;million. We expect to continue to spend significant
amounts on the development of Macugen and our other programs. We
expect to incur significantly greater commercialization costs as
we are beginning to recruit a domestic ophthalmic sales force.
We expect to begin to participate in detailing Pfizer&#146;s
product, Xalatan, for the treatment of glaucoma together with
Pfizer three to six months prior to our planned commercial
launch of Macugen. We also plan to continue to invest in
research for additional applications of Macugen and to develop
new drugs and drug delivery technologies. Additionally, we plan
to continue to evaluate possible acquisitions or licenses of
rights to potential new drugs, drug targets and drug delivery
technologies that would fit within our growth strategy.
Accordingly, we will need to generate significant revenues to
achieve and then maintain profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our expenditures to date have been for
research and development activities and general and
administrative expenses. Research and development expenses
represent costs incurred for product acquisition, clinical
trials and activities relating to regulatory filings and
manufacturing development efforts. We outsource our foreign
clinical trials and our global manufacturing development
activities to third parties to maximize efficiency and minimize
our internal overhead. We expense our research and development
costs as they are incurred.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our research and development expenses incurred
through March&nbsp;31, 2004 were expenses related primarily to
the development of Macugen. We expect to incur additional
research and development expenses of approximately
$17&nbsp;million to $27&nbsp;million relating to Macugen prior
to its commercial launch in the United States for use in the
treatment of wet AMD. These additional expenses are subject to
the risks and uncertainties associated with clinical trials and
the FDA and foreign regulatory review and approval process. As a
result, these additional expenses could exceed our estimated
amounts, possibly materially. Under our agreements with Pfizer,
Pfizer is obligated to fund specified percentages of the ongoing
development costs incurred pursuant to an agreed upon
development plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales and marketing and general and
administrative expenses consist primarily of salaries and
related expenses, general corporate activities and costs
associated with building a commercial infrastructure to market
and sell Macugen and to detail Xalatan. We anticipate that
general and administrative expenses will increase as a result of
the expected expansion of our operations, facilities and other
activities
</FONT>

<P align="center"><FONT size="2">27
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">associated with the planned expansion of our
business, together with the additional costs associated with
operating as a public company. In particular, we have recently
entered into a lease for new corporate headquarters space that
will increase our facilities expenses, which we allocate among
general and administrative, research and development and sales
and marketing expenses, by $3.2&nbsp;million per year. We expect
sales and marketing expenses to increase as we build our sales
force and marketing capabilities to support detailing Xalatan
and, subject to receiving required regulatory approvals, selling
Macugen.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2003,
license fees paid to us by Pfizer resulted in current taxable
income to us. Net operating losses available to offset future
taxable income for federal income tax purposes were
approximately $43.3&nbsp;million as of December&nbsp;31, 2003.
If not utilized, federal net operating loss carryforwards will
begin to expire in 2020. To date, we have not recognized the
potential tax benefit of our net operating losses on our balance
sheets or statements of operations. The future utilization of
our net operating loss carryforwards may be limited based upon
changes in ownership pursuant to regulations promulgated under
the Internal Revenue Code.
</FONT>

<P align="left">
<B><FONT size="2">Critical Accounting Policies and Significant
Judgments and Estimates</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our management&#146;s discussion and analysis of
our financial condition and results of operations are based on
our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in
the United States of America. 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 related to revenue
recognition. We base our estimates on historical experience and
on various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While our significant accounting policies are
more fully described in Note&nbsp;2 to our consolidated
financial statements appearing at the end of this prospectus, we
believe that the following accounting policies relating to
revenue recognition and stock-based compensation charges are
most critical to aid you in fully understanding and evaluating
our reported financial results.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our collaboration with Pfizer,
we recognize revenue from non-refundable, up-front, license and
milestone payments not specifically tied to a separate earnings
process ratably over the term of the collaboration, license and
related agreements. When the period of deferral cannot be
specifically identified from the agreement, our management
estimates the period based upon other critical factors contained
within the agreement. We continually review these estimates,
which could result in a change in the deferral period and which
might impact the timing and the amount of revenue recognized.
When payments are specifically tied to a separate earnings
process, we will recognize revenue when the specific performance
obligation associated with the payment is completed. Performance
obligations typically consist of significant milestones in the
development life cycle of the related technology, such as
initiation of clinical trials, filing for approval with
regulatory agencies and receipt of approvals by regulatory
agencies. To date, we have received $75&nbsp;million as an
initial license fee from Pfizer. We will amortize this initial
license fee over 15&nbsp;years, the effective life of the
agreement. In addition, under the terms of our agreement with
Pfizer, Pfizer has agreed to pay a portion of the costs
associated with the purchase of certain equipment. At
March&nbsp;31, 2004, we have recorded a receivable for equipment
that we have purchased for which Pfizer will reimburse us. We
have also recorded deferred revenue in connection with this
equipment. We will amortize the deferred revenue related to this
equipment over its expected life. During the year ended
December&nbsp;31, 2003 and the quarter ended March&nbsp;31,
2004, we recognized $4.6&nbsp;million and $1.3&nbsp;million,
respectively, of license fee revenue. At March&nbsp;31, 2004, we
had $5.2&nbsp;million of deferred
</FONT>

<P align="center"><FONT size="2">28
</FONT>

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<DIV align="left">
<FONT size="2">revenue related to licenses and equipment as
current and the balance of $65.5&nbsp;million as long-term on
our balance sheet.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We report our revenues on a gross reporting
basis, which includes reimbursement to us from Pfizer of
Pfizer&#146;s share of our cost of development of Macugen for
the period. We have determined that our responsibilities under
our contracts with Pfizer to manage and assume responsibilities
for obtaining FDA approvals for Macugen, including our separate
contractual relationships and responsibilities to our clinical
development contractors and our interaction with monitors and
patients qualify us as principal under the criteria set forth in
Emerging Issues Task Force, or EITF, Issue&nbsp;99-19,
&#147;Reporting Gross Revenue as a Principal&nbsp;vs. Net as an
Agent.&#148; Additionally, under EITF Issue&nbsp;01-14,
&#147;Income Statement Characterization of Reimbursements
Received for &#147;Out-of-Pocket&#148; Expenses Incurred,&#148;
in those cases where we have a primary obligation to conduct
clinical studies and bear risk for selection of and payment to
vendors, among other conditions, we recognize reimbursements of
those costs to us by Pfizer as revenue, instead of as an offset
to the expense incurred. We record as expenses costs incurred by
Pfizer for which we are contractually liable. In future periods
we may be liable for costs incurred where we do not meet the
criteria to be considered as the principal. We would record
these costs as expenses, and we may be required to reimburse
Pfizer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-based Compensation
    Charges</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stock-based compensation charges represent the
difference between the exercise price of options granted to
employees and directors and the fair value of our common stock
on the date of grant for financial statement purposes in
accordance with Accounting Principles Board Opinion No.&nbsp;25
and its related interpretations. We recognize this compensation
charge over the vesting periods of the shares purchasable upon
exercise of options or the lapsing of restrictions on restricted
shares granted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recorded deferred stock-based compensation
related to stock options and restricted stock awards granted to
employees and directors through March&nbsp;31, 2004 of
$14.8&nbsp;million, net of related amortization expense of
$1.1&nbsp;million for the quarter ended March&nbsp;31, 2004. We
expect to amortize deferred stock-based compensation with
respect to stock options and restricted stock awards granted
through March&nbsp;31, 2004 in future periods, including
$3.5&nbsp;million during the remainder of 2004,
$4.6&nbsp;million during 2005, $4.4&nbsp;million during 2006,
$2.2&nbsp;million during 2007 and $0.1&nbsp;million during 2008.
</FONT>

<P align="left">
<B><FONT size="2">Accounting Pronouncements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;146,
&#147;Accounting for Costs Associated with Exit or Disposal
Activities.&#148; This standard addresses financial accounting
and reporting for costs associated with an exit or disposal
activities and requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan.
This standard nullifies EITF Issue&nbsp;94-3, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).&#148; This standard is effective for exit or
disposal activities initiated after December&nbsp;31, 2002. Our
adoption of this statement did not have a material effect on our
results of operations, cash flows or financial position during
the quarter ended March&nbsp;31, 2004, but may result in losses
in future periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the year ended December&nbsp;31, 2003, the
FASB issued various accounting standards and interpretations,
including FASB Statement No.&nbsp;150, &#147;Accounting for
Certain Financial Instruments with Characteristics of both
Liability and Equity&#148; (&#147;SFAS&nbsp;150&#148;),
Interpretation No.&nbsp;46 (&#147;FIN&nbsp;46&#148;),
&#147;Consolidation of Variable Interest Entities, an
interpretation of ARB&nbsp;51,&#148; and Interpretation
No.&nbsp;46-R &#147;Consolidation of Variable Interest
Entities&#148; (&#147;FIN&nbsp;46-R&#148;). We believe that our
adoption of these standards and interpretations has not had a
material effect on our financial condition, results of
operations or liquidity. There have been no other accounting
pronouncements made through March&nbsp;31, 2004 that we expect
will have a material effect on our results of operations, cash
flows or financial position.
</FONT>

<P align="center"><FONT size="2">29
</FONT>

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<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Three Months Ended March&nbsp;31, 2004 and
    2003</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Revenue.</FONT></I><FONT size="2">
Collaboration revenue increased 60% from $7.3&nbsp;million for
the quarter ended March&nbsp;31, 2003 to $11.7&nbsp;million for
the quarter ended March&nbsp;31, 2004. Revenue from the
amortization of license fees increased by $0.4&nbsp;million and
revenue from reimbursement of development costs increased by
$4.0&nbsp;million. The increase in license fee amortization
represents an additional month of amortization in 2004 versus
2003. Increases in development costs resulted primarily from
increases in reimbursable costs related to manufacturing
activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses increased 88% from $11.6&nbsp;million for the quarter
ended March&nbsp;31, 2003 to $21.9&nbsp;million for the quarter
ended March&nbsp;31, 2004. The increase in research and
development expenses of $10.3&nbsp;million was attributable to a
$2.3&nbsp;million increase in ongoing expenditures during 2004
in connection with our Phase&nbsp;2/3 pivotal clinical trials
for the use of Macugen in the treatment of wet AMD and related
costs, an increase of $7.1&nbsp;million relating to the
continued development of manufacturing capabilities and related
costs and an increase of $1.6&nbsp;million relating to
additional hiring of research and development staff. These
increases in cost were offset by a $0.7&nbsp;million decrease
associated with the development of drug delivery technologies
and related costs. We anticipate that research and development
expenses will continue to increase as we further advance Macugen
to commercialization and begin to devote additional resources to
other research and development projects.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sales and Marketing
Expenses.</FONT></I><FONT size="2"> Sales and marketing expenses
increased 575% from $0.6&nbsp;million for the quarter ended
March&nbsp;31, 2003 to $3.8&nbsp;million for the quarter ended
March&nbsp;31, 2004. The increase in sales and marketing
expenses of $3.2&nbsp;million was primarily related to
$1.9&nbsp;million in higher personnel expenses, relating to the
hiring and training of sales and sales management personnel, and
$1.3&nbsp;million of costs related to the development of the
Macugen brand and the infrastructure necessary to prepare for
the commercial launch of Macugen and the detailing of Xalatan as
part of the Pfizer agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative
Expenses.</FONT></I><FONT size="2"> General and administrative
expenses increased 49% from $1.1&nbsp;million for the quarter
ended March&nbsp;31, 2003 to $1.6&nbsp;million for the quarter
ended March&nbsp;31, 2004. The increase of $0.5&nbsp;million
resulted from a $0.7&nbsp;million increase in expenses related
to facilities and infrastructure needed to support our growth
and our Pfizer collaboration, which was offset by a
$0.2&nbsp;million decrease in professional fees and related
costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Income.</FONT></I><FONT size="2">
Interest income increased from $0.6&nbsp;million in the quarter
ended March&nbsp;31, 2003 to $0.7&nbsp;million in the quarter
ended March&nbsp;31, 2004 as a result of higher levels of cash
and marketable securities available for investment during 2004
compared to 2003, which was partially offset by lower interest
rates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Years Ended December&nbsp;31, 2003 and
    2002</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Revenue.</FONT></I><FONT size="2"> We
recognized revenue of $41.4&nbsp;million during 2003, consisting
of $36.8&nbsp;million from reimbursement of development costs
and $4.6&nbsp;million from the amortization of the initial
non-refundable, up-front license payment that we received from
Pfizer in connection with our collaboration. 2003 was the first
year in which we generated revenue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses increased 79% from $39.7&nbsp;million for 2002 to
$70.9&nbsp;million for 2003. The increase in research and
development expenses of $31.2&nbsp;million was attributable to a
$14.9&nbsp;million increase from the expansion during 2003 of
our Phase&nbsp;2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD, which became fully enrolled
in August 2002 and related costs, an increase of
$10.2&nbsp;million relating to the continued development of
manufacturing capabilities and related costs, an increase of
$3.9&nbsp;million relating to the addition of 51 research and
development staff, an increase of $3.3&nbsp;million relating to
the opening of our laboratory facilities in Cedar Knolls, New
Jersey and Woburn, Massachusetts, and an increase of
$0.9&nbsp;million associated with the development of drug
delivery technologies and related costs. These increases in cost
</FONT>

<P align="center"><FONT size="2">30
</FONT>

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<DIV align="left">
<FONT size="2">were offset by a $2.0&nbsp;million decrease in
licensing fees and expenses related to development of drug
delivery and manufacturing technologies. We anticipate that
research and development expenses will continue to increase as
we further advance Macugen to commercialization and begin to
devote additional resources to other research and development
projects.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sales and Marketing
Expenses.</FONT></I><FONT size="2"> Sales and marketing expenses
were $4.6&nbsp;million for 2003. We had no sales and marketing
expenses in 2002 or 2001. The sales and marketing expenses in
2003 reflect market research expenses and personnel expenses
relating to Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative
Expenses.</FONT></I><FONT size="2"> General and administrative
expenses increased 29% from $5.3&nbsp;million for 2002 to
$6.8&nbsp;million for 2003. The increase resulted from increased
management and personnel expenses and increases in facilities
and infrastructure needed to support our Pfizer collaboration
and further development efforts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Income.</FONT></I><FONT size="2">
Interest income increased from $1.8&nbsp;million in 2002 to
$2.2&nbsp;million in 2003 as a result of a higher level of cash
and marketable securities available for investment during 2003
compared to 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Years Ended December&nbsp;31, 2002 and
    2001</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development
Expenses.</FONT></I><FONT size="2"> Research and development
expenses increased 79% from $22.2&nbsp;million in 2001 to
$39.7&nbsp;million in 2002. The $17.5&nbsp;million increase was
attributable principally to an increase of $10.7&nbsp;million
from the expansion in 2002 of our clinical development programs
relating to Macugen and related costs, primarily our
Phase&nbsp;2/3 pivotal clinical trials of Macugen as a treatment
for wet AMD, which became fully enrolled in August 2002, to an
increase of $5.4&nbsp;million relating to the opening of our
laboratory facilities in Cedar Knolls, New Jersey and Woburn,
Massachusetts and the addition of 34 research and development
staff and to an increase of $3.9&nbsp;million associated with
the development of manufacturing capabilities, drug delivery
technology and related costs, which were partially offset by a
$2.5&nbsp;million decrease in technology license fees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative
Expenses.</FONT></I><FONT size="2"> General and administrative
expenses increased 23% from $4.3&nbsp;million in 2001 to
$5.3&nbsp;million in 2002. The increase of $1.0&nbsp;million
resulted principally from an increase in rent related to the
opening of our laboratory facilities in Cedar Knolls, New Jersey
and Woburn, Massachusetts and from an increase in professional
fees arising from the negotiation of the Pfizer collaboration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest Income.</FONT></I><FONT size="2">
Interest income remained constant at $1.8&nbsp;million for 2002
and 2001.
</FONT>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Sources of Liquidity</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have financed our
operations through public sales and private placements of our
capital stock, the initial up-front license fee that we received
from Pfizer as part of our Macugen collaboration, reimbursement
of development costs from Pfizer, and the receipt of interest
income. Through March&nbsp;31, 2004, we have received net
proceeds of $332.4&nbsp;million from the issuance of shares of
common stock, convertible preferred stock and warrants. We have
also received net proceeds from capital
</FONT>

<P align="center"><FONT size="2">31
</FONT>

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<DIV align="left">
<FONT size="2">equipment financing of $2.4&nbsp;million. The
table below summarizes our initial issuances of convertible
preferred stock and warrants.
</FONT>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Approximate</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross Proceeds</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">A</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">March 2000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">B</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 2000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,766,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,142,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">B</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">January 2001
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">C-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">July&nbsp;&#151; August 2001
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,964,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,592,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">C-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">August 2002
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,521,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,504,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">D</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">February 2003
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;4, 2004, we successfully
completed an initial public offering of our common stock. Our
initial public offering consisted of the sale of
6,500,000&nbsp;shares of common stock at a price of
$21.00&nbsp;per share. As part of the offering, we granted to
the underwriters an option to purchase an additional
975,000&nbsp;shares within 30&nbsp;days of the initial public
offering to cover over-allotments. This option was exercised in
full in February 2004. Net proceeds from our initial public
offering after deducting underwriters&#146; discounts and
expenses were $142.9&nbsp;million. In addition,
476,190&nbsp;shares of common stock were purchased concurrently
with the initial public offering by Pfizer for $10&nbsp;million
as part of its commitment under our collaboration with Pfizer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We issued 5,073,435 warrants in connection with
original issuances of preferred stock from April 2000 to August
2002 and the in-licensing of Macugen in April 2000. Prior to the
closing of our initial public offering, 1,511,381&nbsp;shares of
preferred stock were issued in connection with warrant exercises
providing $10.4&nbsp;million in aggregate proceeds. An
additional 1,867,124&nbsp;shares of preferred stock were issued
on a cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333&nbsp;shares
of series B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March&nbsp;31, 2004 on a
cashless basis, resulting in the issuance of 680,509&nbsp;shares
of common stock in exchange for the surrender of warrants to
purchase 152,824&nbsp;shares of common stock. No warrants remain
outstanding at March&nbsp;31, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our collaboration with Pfizer,
we received the $25.0&nbsp;million series D investment reflected
in the above table and a $75.0&nbsp;million up-front license fee
and Pfizer has agreed generally to fund a majority of the
ongoing development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. Pfizer purchased an additional $10&nbsp;million of
our common stock at the closing of our initial public offering
in February 2004 and is obligated to purchase up to an
additional $15&nbsp;million of our common stock in specified
circumstances. These obligations of Pfizer are currently our
only committed external source of funds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, we had
$266.9&nbsp;million in cash, cash equivalents and marketable
securities. Also as of that date, we had pledged
$5.6&nbsp;million of restricted cash as collateral for letters
of credit for certain of our leased facilities. We believe that
our available cash, cash equivalents and marketable securities,
together with expected milestone payments and reimbursements
from Pfizer under our collaboration and interest income will be
sufficient to fund anticipated levels of operations through at
least the end of 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We had no material capital expenditures during
2003 or the quarter ended March&nbsp;31, 2004, and expect to
have no material capital expenditures during the remainder of
2004.
</FONT>

<P align="center"><FONT size="2">32
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had net
operating loss carryforwards for federal income taxes of
$43.3&nbsp;million. Our utilization of the net operating loss
and tax credit carryforwards may be subject to annual
limitations pursuant to Section&nbsp;382 of the Internal Revenue
Code, and similar state provisions, as a result of changes in
our ownership structure. The annual limitations may result in
the expiration of net operating losses and credits prior to
utilization.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2003, we had deferred tax
assets representing the benefit of net operating loss
carryforwards and certain start up costs capitalized for tax
purposes. We did not record a benefit for the deferred tax asset
because realization of the benefit was uncertain and,
accordingly, a valuation allowance is provided to offset the
deferred tax asset.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the year ended December&nbsp;31, 2003, the
$75&nbsp;million license fee paid by Pfizer resulted in current
taxable income to us. Although we have generated net operating
losses in prior years, we may be liable for payment of
alternative minimum tax in 2003. Accordingly, we have provided
$1.7&nbsp;million for federal alternative minimum tax and state
income taxes for the year ended December&nbsp;31, 2003. We have
not recorded any provision for taxes during the quarter ended
March&nbsp;31, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash Flows</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the quarter ended March&nbsp;31, 2004, we
used net cash of $19.3&nbsp;million in operating activities.
This consisted primarily of a net loss for the period of
$15.0&nbsp;million, and a reduction in accounts payable and
accrued expenses of $4.2&nbsp;million. We used
$32.5&nbsp;million for investing activities for the quarter
ended March&nbsp;31, 2004, which consisted primarily of net
purchases of marketable securities. We received net cash of
$155.5&nbsp;million from financing activities during the quarter
ended March&nbsp;31, 2004, principally relating to the issuance
of common stock in our initial public offering and other
issuances of common stock, resulting in net proceeds, after
transaction costs, of $153&nbsp;million and the issuance of
convertible preferred stock upon the exercise of warrants for
net proceeds of $2.6&nbsp;million, offset by the repayment of
capital leases of $0.1&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2003, our
operating activities generated net cash inflows of
$39.4&nbsp;million. This consisted of a net loss for the period
of $40.7&nbsp;million and an increase in amounts due from Pfizer
of $2.6&nbsp;million, offset by the receipt of deferred revenue
in connection with the Pfizer collaboration of
$75.0&nbsp;million, $4.6&nbsp;million of which was recorded as
revenue in the year ended December&nbsp;31, 2003, and an
increase in accounts payable and accrued expenses of
$6.9&nbsp;million. We used $51.9&nbsp;million for investing
activities for the year ended December&nbsp;31, 2003, which
consisted primarily of net purchases of marketable securities.
We received $31.7&nbsp;million from financing activities during
the year ended December&nbsp;31, 2003, principally relating to
the issuance of convertible preferred stock to Pfizer for net
proceeds, after transaction costs, of $24.7&nbsp;million and the
issuance of convertible preferred stock upon the exercise of
warrants for net proceeds of $7.3&nbsp;million, offset by the
repayment of capital leases of $0.6&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Funding Requirements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to devote substantial resources to
continue our research and development efforts and to expand our
sales, marketing and manufacturing programs associated with the
commercialization and launch of Macugen and our future products.
Our funding requirements will depend on numerous factors,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our collaborative arrangement with
    Pfizer for the development and commercialization of Macugen;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the scope and results of our clinical trials;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">advancement of other product candidates into
    development;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential acquisition or in-licensing of other
    products or technologies;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the timing of, and the costs involved in,
    obtaining regulatory approvals;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of manufacturing activities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the cost of commercialization activities,
    including product marketing, sales and distribution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to establish and maintain additional
    collaborative arrangements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not expect to generate significant
additional funds, other than payments that we receive from our
collaboration with Pfizer, until we successfully obtain
marketing approval for, and begin selling, Macugen. We believe
that the key factors that will affect our internal and external
sources of cash are:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to successfully obtain marketing
    approval for and to commercially launch Macugen;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the success of our other preclinical and clinical
    development programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the receptivity of the capital markets to
    financings by biotechnology companies;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to enter into additional strategic
    collaborations with corporate and academic collaborators and the
    success of such collaborations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If our existing resources are insufficient to
satisfy our liquidity requirements or if we acquire or license
rights to additional product candidates, we may need to raise
additional external funds through the sale of additional equity
or debt securities. The sale of additional equity securities may
result in additional dilution to our stockholders. Additional
financing may not be available in amounts or on terms acceptable
to us or at all. If we are unable to obtain additional
financing, we may be required to reduce the scope of, delay or
eliminate some or all of our planned research, development and
commercialization activities, which could harm our financial
condition and operating results.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Contractual Obligations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our major outstanding contractual obligations
relate to our capital leases from equipment financings,
facilities leases and obligations under a number of our
collaboration and alliance agreements to pay milestone payments
and royalties to the other parties to these agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have summarized in the table below our fixed
contractual cash obligations as of March&nbsp;31, 2004.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Payments Due by Period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less Than</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Four to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Contractual Obligations</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">One Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Three Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Five Years</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, including interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,507,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">633,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">873,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,296,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,221,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,761,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,896,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,416,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total contractual cash obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,804,302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,855,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,635,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,896,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,416,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under our agreements with Gilead
Sciences,&nbsp;Inc., Nektar Therapeutics, and Isis
Pharmaceuticals,&nbsp;Inc. we are obligated to make payments
aggregating up to $36.3&nbsp;million upon achieving specified
milestones relating to the development and regulatory approval
of Macugen and to pay royalties based on net sales of Macugen.
The events that trigger the milestone payments include filing of
an NDA with the FDA, making similar filings with foreign
regulatory authorities, receiving marketing approval for Macugen
by the FDA or similar foreign regulatory authorities and the
first commercial sale of Macugen in various countries. These
contingent milestone and royalty payment obligations are not
included in the above table. The above table also excludes
minimum monthly payments of approximately $0.6&nbsp;million that
we are required to pay to one of our contract manufacturers
pending the validation of the manufacturing process for Macugen.
</FONT>

<P align="center"><FONT size="2">34
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2004, we entered into a sub-sublease
arrangement for new corporate headquarters, clinical, safety and
regulatory space in New&nbsp;York City. Our rent under the lease
is expected to be $3.2&nbsp;million for financial statement
purposes in 2004. However, due to rent abatements, we expect
cash expenditures for this property in 2004 to be
$0.1&nbsp;million. As security for the sublease, we have named
the sub-landlord as beneficiary under a secured bank letter of
credit in the amount of $3.0&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we are not successful in locating a tenant to
assume our sub-lease at 500 Seventh Avenue, New&nbsp;York,
New&nbsp;York, we will be required under generally accepted
accounting principles to assess the recoverability of the
carrying value of our lease. If it is determined that the
amounts due under the lease will not be recoverable, we will
record a loss in connection with this lease. The loss could be
up to approximately $2.4&nbsp;million and will be recorded in
the second quarter of 2004. In connection with our cessation of
use of this facility, we have accelerated the recognition of
amortization and depreciation expenses in connection with
certain leasehold improvements and furniture and fixtures used
at this facility. This resulted in an increase of
$0.3&nbsp;million to amortization and depreciation expense
during the quarter ended March&nbsp;31, 2004, which fully
expensed these assets.
</FONT>

<P align="left">
<B><FONT size="2">Disclosure About Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our exposure to market risk is confined to our
cash, cash equivalents and marketable securities. We invest in
high-quality financial instruments, primarily money market
funds, federal agency notes, asset backed securities, corporate
debt securities and United States treasury notes, with the
effective duration of the portfolio less than nine months and no
security with an effective duration in excess of two years,
which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. Due to the
short-term nature of our investments, we do not believe that we
have any material exposure to interest rate risk arising from
our investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of our transactions are conducted in United
States dollars, although we do have some development and
commercialization agreements with vendors located outside the
United States. Transactions under certain of these agreements
are conducted in United States dollars, subject to adjustment
based on significant fluctuations in currency exchange rates.
Transactions under certain other of these agreements are
conducted in the local foreign currency. If the applicable
exchange rates undergo a change of 10%, we do not believe that
such change would have a material impact on our results of
operations or cash flows.
</FONT>

<P align="center"><FONT size="2">35
</FONT>

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<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<P align="center">
<B><FONT size="2">BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology. Our most advanced product
candidate is Macugen, which we are developing for the treatment
of wet AMD and DME. Both AMD and DME are serious diseases of the
retina that can lead to severe vision loss and blindness. In the
second half of 2001, we initiated two Phase&nbsp;2/3 pivotal
clinical trials of Macugen for the treatment of wet AMD. In
December 2002, we entered into a collaboration with Pfizer to
develop and commercialize Macugen for the prevention and
treatment of diseases of the eye. Based on the results from the
first year of Phase&nbsp;2/3 pivotal clinical trials for wet
AMD, we and Pfizer are filing our NDA with the FDA as a rolling
submission seeking marketing approval for the 0.3&nbsp;mg dose
of Macugen for the treatment of all subtypes of wet AMD. The FDA
has accepted for review the preclinical and clinical study
report sections of our NDA filing. We plan to complete this NDA
filing in the third quarter of 2004. We also recently announced
preliminary data from our Phase&nbsp;2 clinical trial for the
use of Macugen in the treatment of DME, showing positive visual
and anatomical outcomes. The FDA has given &#147;fast
track&#148; designation to Macugen for the treatment of both wet
AMD and DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Wet AMD and DME are two of the leading causes of
severe vision loss and blindness in the adult population. In the
United States, we estimate that as many as 15&nbsp;million
people suffer from some form of AMD and that there are more than
1.6&nbsp;million cases of wet AMD. Approximately 200,000 new
cases of wet AMD arise each year in the United States. Although
wet AMD represents approximately 10% of all AMD cases, it is
responsible for up to 90% of the severe vision loss associated
with AMD, with a majority of wet AMD patients experiencing
severe vision loss in the affected eye within months to two
years after diagnosis of the disease. Because AMD generally
affects adults over 50&nbsp;years of age, we expect the
incidence of AMD to increase significantly as the baby boom
generation ages and overall life expectancy increases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Diabetic retinopathy is the leading cause of
blindness in people less than 50&nbsp;years of age in developed
countries. DME is the leading cause of vision loss in diabetic
retinopathy. In the United States, there are approximately
500,000 people suffering from DME, with approximately 75,000 new
cases each year. We expect the incidence of DME in the United
States to increase as the number of people with diabetes
increases. We believe that the prevalence and incidence of AMD
and DME in the European Union are similar to those in the United
States. Because the existing treatments for both wet AMD and DME
have significant limitations, there is a significant unmet
medical need for a new therapy for these diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that Macugen may provide considerable
benefits over the existing therapies for wet AMD and DME because
it addresses the abnormal blood vessel growth and blood vessel
leakage associated with wet AMD and the blood vessel leakage
associated with DME. Significant scientific evidence suggests
that the presence in the eye of elevated levels of a protein
known as vascular endothelial growth factor, or VEGF, plays an
important role in causing this abnormal blood vessel growth and
blood vessel leakage. Based on animal tests that we conducted,
we believe that Macugen prevents VEGF from binding to its
natural receptor, thereby inhibiting such abnormal blood vessel
growth and blood vessel leakage.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into our
collaboration with Pfizer under which we and Pfizer are jointly
completing the development of Macugen and have agreed to
co-promote Macugen in the United States. We have granted Pfizer
the exclusive right to develop and commercialize Macugen outside
the United States pursuant to a royalty-bearing license. Under
the collaboration, we are entitled to participate in the United
States in detailing Pfizer&#146;s product Xalatan for the
treatment of glaucoma.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are led by a team of experienced
pharmaceutical industry executives and recognized experts in
ophthalmology and vision research. We believe that this team
provides us with a significant complement of
</FONT>

<P align="center"><FONT size="2">36
</FONT>

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<DIV align="left">
<FONT size="2">capabilities in the discovery, development and
commercialization of novel therapies to treat diseases of the
eye.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Our Business Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our mission is to develop and commercialize novel
therapeutics to treat diseases of the eye, with an initial focus
on diseases of the back of the eye. The key elements of our
strategy in support of this mission are to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Maximize Commercial Potential of
    Macugen.</FONT></I><FONT size="2"> We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product.
    Based on the results of the first year of our Phase&nbsp;2/3
    pivotal clinical trials, we and Pfizer are in the process of
    filing an NDA as a rolling submission with the FDA covering
    Macugen for the treatment of all subtypes of wet AMD. The FDA
    has accepted for filing the preclinical and clinical study
    report sections of our NDA filing. We plan to complete our NDA
    filing in the third quarter of 2004. We recently disclosed
    preliminary data from our Phase&nbsp;2 clinical trial for the
    use of Macugen in the treatment of DME, which showed positive
    visual and anatomical outcomes. We are also exploring the
    application of Macugen to a range of additional ophthalmic
    indications, including retinal vein occlusion.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.</FONT></I><FONT size="2"> We are in the
    process of establishing focused domestic sales and marketing
    capabilities for Macugen, Xalatan and other ophthalmic products
    that we may develop or acquire. Based on our examination of the
    membership lists of three prominent organizations for retinal
    specialists, The Macula Society, The American Society of Retina
    Specialists and the Retina Society, we estimate that there are
    approximately 1,400 retinal specialists in the United States who
    perform most of the medical procedures involving back of the eye
    diseases. We plan to target most of our sales and marketing
    efforts at these specialists. In selling and marketing Macugen
    in the United States, our personnel will collaborate with
    Pfizer, which has substantial sales and marketing capabilities
    and will have primary responsibility for promoting this product
    in the domestic market to general ophthalmologists.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Develop Alternative Drug Delivery
    Technologies.</FONT></I><FONT size="2"> We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye. We believe that
    these new drug delivery technologies could facilitate the use of
    Macugen and other drugs as chronic or even preventative
    treatments for various back of the eye diseases.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Identify New Ophthalmic
    Products.</FONT></I><FONT size="2"> We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease. For example, in April 2004, we signed a research and
    collaboration agreement with Archemix that allows us to develop
    the current pipeline of Archemix in the field of ophthalmology.
    This agreement also provides us with the ability to have
    Archemix select new aptamers against our targets included in the
    research program for further development by us in ophthalmology.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Explore Additional Non-Ophthalmic Indications
    for Macugen.</FONT></I><FONT size="2"> Third party preclinical
    and clinical research suggests that VEGF plays a key role in
    some non-ophthalmic diseases, particularly some types of cancer
    and psoriasis. We are using our preclinical research expertise
    to evaluate whether the anti-VEGF characteristics of Macugen may
    make it a suitable local treatment for these and other diseases.
    For indications outside of ophthalmology, we may seek
    collaborators or licensees for drug development and
    commercialization.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Eye Disease</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The human eye possesses focusing elements in the
front, the cornea and lens, and a light-sensing element in the
back, the retina. Light falls on the photoreceptors that are
part of the retina, called rods
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<DIV align="left">
<FONT size="2">and cones, and is converted into electrical
energy, which travels via the optic nerve to the brain. The
central most portion of the retina is the macula, which is the
region responsible for seeing color and the acute central vision
necessary for activities such as reading, face recognition,
watching television and driving. The brain processes the complex
signals sent from the retina into vision. The following diagram
illustrates the principal elements of the anatomy of a healthy
eye, including a detailed cross-section of the back of the eye.
</FONT>
</DIV>

<P align="left">
<IMG src="y97374y9737400.gif" alt="(ANATOMY OF THE EYE GRAPHIC)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eye disease can be caused by many factors and can
affect both the front and back of the eye. In its most extreme
cases, eye disease can result in either partial or total
blindness. In the developed world, the major diseases that
result in blindness are those affecting the retina, including
AMD, diabetic retinopathy, of which DME is a manifestation, and
glaucoma. These diseases deny patients of their sight, and, as a
result, their ability to live independently and perform daily
activities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Age-Related Macular
    Degeneration</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMD is a chronic, progressive disease of the
macula that results in the loss of central vision. The most
common symptoms are a central blurred or blank spot, distortion
of objects or simply blurred vision. Peripheral vision usually
remains intact. The disease typically affects patients initially
in one eye, with a high likelihood of it occurring in the second
eye over time. Because AMD is strongly correlated with aging, we
believe that it is likely for the disease to recur,
notwithstanding treatment, as the aging process continues. Thus,
patients who have been administered the existing therapies for
AMD frequently have required retreatment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. According to the Macula Vision Research Foundation, as
many as 15&nbsp;million people in the United States suffer from
some form of AMD, with more than 1.6&nbsp;million experiencing
the active blood vessel growth and blood vessel leakage
associated with wet AMD. In addition, AMD Alliance International
reports that approximately 200,000 new cases of wet AMD arise
each year in the United States. According to the Centers for
Disease Control and Prevention, or CDC, the rate of AMD
increases sharply with age, from 18% among people
70-74&nbsp;years of age to 47% among people 85&nbsp;years and
older. According to the U.S.&nbsp;census bureau, the number of
people in the United States aged 50 or older is approximately
80&nbsp;million and is expected to increase by approximately 40%
over the next two decades. We expect that this increase in the
number of elderly people will result in a significant increase
in the number of cases of AMD in the United States.
</FONT>

<P align="center"><FONT size="2">38
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are two forms of AMD, &#147;dry&#148; AMD
and &#147;wet&#148; AMD.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Dry AMD.</FONT></I><FONT size="2"> Dry AMD is
    the most common form, representing approximately 90% of all AMD
    cases. However, dry AMD accounts for only 10% of the severe
    vision loss associated with AMD. Dry AMD is characterized by the
    development of yellow-white deposits under the retina, known as
    drusen, and sometimes the deterioration of the retina, although
    without abnormal blood vessel growth and bleeding. There is no
    generally accepted treatment for dry AMD, although vitamins,
    antioxidants and zinc supplements may slow its progression. Over
    time, dry AMD cases often develop into wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Wet AMD.</FONT></I><FONT size="2"> Wet AMD
    represents approximately 10% of all cases of AMD, but is
    responsible for up to 90% of the severe vision loss associated
    with the disease. Wet AMD occurs when new blood vessels from the
    tissue layer in the eye just beneath the retina, called the
    choroid, invade into the retinal layers through a membrane known
    as Bruch&#146;s membrane. This abnormal blood vessel growth
    generally is known as angiogenesis and, in the context of wet
    AMD, is called choroidal neovascularization. These new blood
    vessels tend to be fragile and often bleed and leak fluid into
    the macula, resulting in loss of vision. Untreated, this blood
    vessel growth and leakage can lead to scarring and, eventually,
    to the destruction of the macula. The majority of patients with
    wet AMD experience severe vision loss in the affected eye within
    months to two years after diagnosis of the disease.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following diagram is a detailed cross-section
of the back of the eye as affected by wet AMD.
</FONT>

<P align="center">
<IMG src="y97374y9737404.gif" alt="(WET AGE-RELATED MACULAR DEGENERATION GRAPHIC)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The abnormal blood vessel growth of wet AMD can
be located either directly under the area at the center of the
macula, known as the fovea, or away from the fovea. Wet AMD that
occurs directly under the fovea is known as subfoveal wet AMD.
Wet AMD that occurs elsewhere in the macula is known as either
extrafoveal or juxtafoveal wet AMD. The fovea is responsible for
the ability to see fine detail and color. More than 90% of wet
AMD cases are subfoveal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subfoveal wet AMD is divided into three principal
subtypes based on the pattern of the abnormal blood vessels, or
lesions, as seen in the retina through an imaging procedure
known as angiography. The classic pattern consists of
well-defined abnormal blood vessels with distinct edges. In the
occult pattern,
</FONT>

<P align="center"><FONT size="2">39
</FONT>

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<DIV align="left">
<FONT size="2">the edges of the abnormal blood vessels are more
poorly demarcated and diffuse. The principal subtypes of
subfoveal wet AMD, based on the patterns of the abnormal blood
vessels, are the following:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Predominantly
    Classic.</FONT></I><FONT size="2"> In the predominantly classic
    subtype, more than 50% of the patient&#146;s abnormal blood
    vessels are of the classic pattern. We estimate that this
    subtype accounts for approximately 25% of the cases of subfoveal
    wet AMD and generally has the most aggressive disease pathology,
    leading to more rapid vision loss than the other subtypes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Minimally Classic.</FONT></I><FONT size="2">
    In the minimally classic subtype, fewer than 50% of the
    patient&#146;s abnormal blood vessels are of the classic
    pattern. We estimate that this subtype accounts for
    approximately 35% of the cases of subfoveal wet AMD and
    generally has a less rapid rate of vision loss than the
    predominantly classic subtype, but a more rapid rate than the
    occult subtype.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Occult.</FONT></I><FONT size="2"> In the
    occult subtype, all of the patient&#146;s abnormal blood vessels
    are of the occult pattern. We estimate that this subtype
    accounts for approximately 40% of the cases of subfoveal wet AMD
    and generally has a less rapid rate of vision loss.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">We based the foregoing estimates of the
percentages of patients suffering from each subtype on a survey
of ophthalmologists that we conducted. This estimate is also
supported by the enrollment data from our Phase&nbsp;2/3 pivotal
clinical trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, there is an FDA-approved
therapy only for the predominantly classic subtype of wet AMD.
In the European Union, there is an approved therapy for only the
predominantly classic and occult subtypes. As a result, we
estimate that the approved therapy is only indicated for
approximately 25% of United States patients and 65% of European
patients, thus leaving a significant unmet medical need for the
balance.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Diabetic Macular Edema</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">DME is a complication of diabetic retinopathy, a
disease affecting the blood vessels of the retina. Diabetic
retinopathy results in multiple abnormalities in the retina,
including retinal thickening and edema, hemorrhages, impeded
blood flow, excessive leakage of fluid from blood vessels and,
in the final stages, abnormal blood vessel growth. This blood
vessel growth can lead to large hemorrhages and severe retinal
damage. When the blood vessel leakage of diabetic retinopathy
causes swelling in the macula, it is referred to as DME. The
principal symptom of DME is a loss of central vision. Risk
factors associated with DME include poorly controlled blood
glucose levels, high blood pressure, abnormal kidney function
causing fluid retention, high cholesterol levels and other
general systemic factors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to the World Health Organization,
diabetic retinopathy is the leading cause of blindness in
working age adults and a leading cause of vision loss in
diabetics. The American Diabetes Association reports that there
are approximately 18&nbsp;million diabetics in the United States
and approximately 1.3&nbsp;million newly diagnosed cases of
diabetes in the United States each year. Prevent Blindness
America and the National Eye Institute estimate that in the
United States there are over 5.3&nbsp;million people aged 18 or
older with diabetic retinopathy, including approximately 500,000
with DME. The CDC estimates that there are approximately 75,000
new cases of DME in the United States each year.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations of Currently Available
    Therapies for Wet AMD</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The two therapies currently available for the
treatment of wet AMD are photodynamic therapy and thermal laser
treatment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Photodynamic
Therapy.</FONT></I><FONT size="2"> Photodynamic therapy involves
the use of a light-activated drug, or photosensitizer, named
Visudyne&#174; to treat wet AMD. The therapy involves a two-step
process in which the drug is administered systemically by
intravenous infusion and then a dose of low energy light is
delivered to the target site to activate the photosensitizer and
destroy the newly grown abnormal blood vessels. Worldwide sales
of Visudyne in 2003 were approximately $357&nbsp;million.
</FONT>

<P align="center"><FONT size="2">40
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Visudyne therapy has an important therapeutic
indication limitation in that it is approved in the United
States only for the treatment of the predominantly classic
subtype of subfoveal wet AMD and in the European Union only for
the treatment of the predominantly classic and occult subtypes
of subfoveal wet AMD. However, in April&nbsp;2004, the Centers
for Medicare&nbsp;&#38; Medicaid Services implemented its
decision to expand reimbursement for Visudyne therapy to include
coverage for its use in the treatment of the minimally classic
and occult subtypes, but only for patients in which the lesions
are small and when there is evidence of progression within the
three months prior to initial treatment. For this purpose, small
lesions are those of less than four disc areas.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Visudyne therapy also has a number of clinical
shortcomings, including side effects such as photosensitivity
and back pain. In the pivotal clinical trial of Visudyne,
approximately 91% of the patients who received Visudyne for the
treatment of wet AMD experienced a recurrence of the condition
within three months of treatment, necessitating retreatment.
Furthermore, the method of administering this therapy requires
the physician to invest in expensive laser equipment and retain
paramedical personnel to assist in the intravenous infusion of
the photosensitizer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Thermal Laser
Treatment.</FONT></I><FONT size="2"> Thermal laser treatment,
also known as photocoagulation, for the treatment of wet AMD
entails the use of a high-energy laser to destroy the abnormal
blood vessels that are growing and leaking in the macula. This
is a surgical procedure and is not subject to FDA approval.
Because the lasered portions of the retina are irreversibly
destroyed, thermal laser treatment generally is used only for
the minority of wet AMD patients with the extrafoveal and
juxtafoveal forms of the disease, in which the abnormal blood
vessel growth and vessel leakage occur away from the center of
the macula. Thermal laser treatment is generally not used for
subfoveal wet AMD because of the risk of immediate and permanent
vision loss resulting from the laser burns to the center of the
macula. Approximately 50% of the patients who receive thermal
laser therapy for the treatment of wet AMD experience recurrence
of the condition during the ensuing year as a result of regrowth
of the abnormal blood vessels. In addition, patients treated
with thermal laser therapy frequently experience blind spots,
known as scotomas, as a result of the destruction of the area of
the retina where the treatment is administered.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations of Currently Available
    Therapies for DME</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is no approved drug therapy for DME in the
United States or the European Union. The current therapies for
the treatment of DME are thermal laser treatment and steroid
treatment administered by physicians on an off-label basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Thermal Laser
Treatment.</FONT></I><FONT size="2"> Thermal laser treatment
does not result in an improvement in vision in most patients,
and some patients continue to lose vision. As discussed above,
thermal laser treatment results in focused, localized
destruction of portions of the retina. As a result, patients
treated with this procedure frequently experience scotomas.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Steroid Therapy.</FONT></I><FONT size="2">
Some physicians recently have begun to treat DME on an off-label
basis with injections of corticosteroids into the vitreous, the
jelly-like fluid that fills the back of the eye. This method of
administering drugs to the back of the eye is known as
intravitreal injection. The efficacy of steroid therapy for DME
is unknown. Based on the product labels for steroids and
numerous published studies, we believe that steroid therapy for
DME may have a number of significant side effects that can lead
to loss of vision, including worsening of cataracts and
steroid-induced glaucoma. The steroids typically used for this
treatment are off patent and inexpensive.
</FONT>

<P align="left">
<B><FONT size="2">Macugen</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are developing Macugen as a novel therapy for
the treatment of wet AMD and DME. Based on research regarding
the pathologies of wet AMD and DME, our knowledge of the
mechanism of action of Macugen and the molecular and clinical
attributes of this product candidate, we believe that Macugen
will overcome many of the limitations of the existing therapies
for wet AMD and DME.
</FONT>

<P align="center"><FONT size="2">41
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mechanism of Action.</FONT></I><FONT size="2">
The active pharmaceutical ingredient in Macugen is a chemically
synthesized aptamer that binds to and inhibits the function of
VEGF. An aptamer is a single strand of oligonucleotide that
binds with specificity to a particular target, such as VEGF.
VEGF is a protein that has been shown to play an important role
in the abnormal blood vessel growth and blood vessel leakage
associated with wet AMD and the blood vessel leakage associated
with DME. In multiple preclinical studies in animals, VEGF has
been shown to be associated with blood vessel growth and leakage
in the eye. In addition, in numerous animal species, anti-VEGF
agents have inhibited blood vessel formation and leakage in
multiple blood vessel layers of the eye, including the iris, the
retina and the choroid. In substantial human clinical research,
VEGF concentrations in eyes afflicted with wet AMD or DME were
found to correlate with the presence and severity of these
diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following diagram illustrates how we believe
VEGF is blocked from binding with its natural receptor after
Macugen binds with VEGF.
</FONT>

<P align="center">
<IMG src="y97374y9737401.gif" alt="(EXTRACELLULAR NEUTRALIZATION OF VEGF CHART)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Method of
Administration.</FONT></I><FONT size="2"> Macugen is currently
administered by intravitreal injection. Before a physician
administers the injection of Macugen, the patient receives a
pre-injection preparation consisting of a broad-spectrum
antibiotic and/or iodine-based topical anti-bacterial followed
by topical numbing drops and/or a superficial pre-injection of a
local anesthetic to numb the eye. This procedure can be
administered by a skilled clinician and can be completed in a
typical office visit or other outpatient setting. By injecting
this medication into the vitreous, the physician delivers
Macugen directly to the affected eye tissue. Intravitreal
injections are commonly used in many other therapies for eye
disorders, including antibiotic and steroid therapies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Specificity.</FONT></I><FONT size="2"> In
humans, there are at least five subtypes, or isoforms, of VEGF.
Based on preclinical <I>in&nbsp;vitro </I>and animal studies
that we have conducted, we believe that two of these VEGF
isoforms, isoforms&nbsp;165 and 121, are present in the eye in
meaningful levels. In these studies, elevated levels of the
animal counterpart of human isoform&nbsp;165 was required for
abnormal blood vessel growth in the retina. We believe that the
unique shape of the Macugen aptamer allows it to bind to VEGF
isoform&nbsp;165 with high specificity through a lock and key
type mechanism. In multiple animal models of pathological ocular
vessel growth and leakage, we found that the animal counterpart
of VEGF isoform&nbsp;165 was specifically increased in animals
with these conditions. In these tests, we also found that
Macugen binding with the animal counterpart of isoform&nbsp;165
was highly effective in inhibiting abnormal blood vessel growth
in the retina. Macugen did not bind with the animal counterpart
of isoform&nbsp;121 to any significant degree. In an animal
study conducted by us involving a direct comparison with a VEGF
inhibitor that blocks all isoforms, Macugen was as effective at
inhibiting abnormal blood vessel growth in the retina as the
other VEGF inhibitor. Conversely, in these tests, Macugen did
not affect the normal vessels of the retina, whereas the VEGF
inhibitor that inhibits all isoforms of VEGF altered their
growth and survival.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Anti-permeability.</FONT></I><FONT size="2">
VEGF is a very strong inducer of blood vessel permeability. For
example, in animal tests VEGF has been shown to be 50,000 times
more potent than histamine, the molecule
</FONT>

<P align="center"><FONT size="2">42
</FONT>
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<DIV align="left">
<FONT size="2">commonly associated with blood vessel leakage
related to allergies. Also in animal tests, it has been shown
that VEGF is required for the blood vessel permeability
associated with wet AMD and diabetic retinopathy. In addition to
its anti-angiogenic property of inhibiting abnormal blood vessel
growth, Macugen has been shown in animal tests to inhibit blood
vessels from leaking into the retina. By preventing blood vessel
leakage as well as abnormal blood vessel growth, Macugen offers
a potential two-pronged approach to the treatment of wet AMD. By
preventing blood vessel leakage, Macugen also offers a potential
treatment for DME. In animal models of diabetes-related blood
vessel leakage, the animal counterpart of isoform&nbsp;165 was
specifically increased in the retina. This is the isoform that
is selectively inhibited by Macugen in animal models.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">No Observed
Immunogenicity.</FONT></I><FONT size="2"> Aptamers in general
tend not to trigger adverse immune responses. To date, we have
not observed any meaningful clinical immunologic reactions to
Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stability and Attractive Pharmacokinetic
Profile.</FONT></I><FONT size="2"> Macugen is a PEGylated
molecule, which means that a molecule of polyethylene glycol is
attached to the strand of nucleic acid. This PEGylation
increases the half-life of the product, which in turn increases
the time that Macugen actively targets the disease site. This
may allow for less frequent dosing. The unPEGylated Macugen
aptamer also demonstrates high stability under various
temperature and pH levels, which suggests that the aptamer may
be suitable for administration via different delivery methods.
</FONT>

<P align="left">
<B><FONT size="2">Clinical Development of Macugen</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are conducting two Phase&nbsp;2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD and a Phase&nbsp;2 clinical trial of Macugen for the use of
Macugen in the treatment of DME. We are also conducting or
planning to conduct a number of additional trials of Macugen.
The following table summarizes our material ongoing and planned
clinical trials of Macugen.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="19%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">First Patient</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Enrollment</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Indication</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Trial Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Phase</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Objectives</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Geography</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Enrolled</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Patients</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Status</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMD
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2/3<BR>
    (Pivotal)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dose finding<BR>
    Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">International<BR>
    (including U.S.)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">October 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">612</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><FONT size="2">Year one<BR>complete;<BR>continuation<BR>study ongoing</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2/3 (Pivotal)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dose finding<BR>
    Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">August 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top"><FONT size="2">Year one complete; continuation study ongoing</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Pharmacokinetics Safety Efficacy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">January 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="23" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">DME
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Dose finding Safety<BR>
    Proof of concept
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">International (including U.S.)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">October 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Fully Enrolled</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="23" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">Retinal Vein Occlusion
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">EOP 1011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">2
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Safety<BR>
    Dose finding<BR>
    Proof of concept
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">North America
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Planned Q2 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">50-100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">Pending</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Clinical Trials for the Treatment of Wet
    AMD</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Phase&nbsp;2/3 Pivotal Clinical
    Trials</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Trial Design.</FONT></I><FONT size="2"> In the
second half of 2001, we initiated two Phase&nbsp;2/3 pivotal
clinical trials for the use of Macugen in the treatment of
subfoveal wet AMD. We are conducting one of these trials in
North America and one primarily outside North America. We have
enrolled 578&nbsp;patients in the North American trial and
612&nbsp;patients in the international trial. Retinal
specialists at 117&nbsp;leading medical centers are
participating in these two Phase&nbsp;2/3 clinical trials.
</FONT>

<P align="center"><FONT size="2">43
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We designed the enrollment criteria for the
trials to assess the treatment effect of Macugen in a broad
patient population. Both trials enrolled patients with subfoveal
wet AMD of all three lesion subtypes, with a wide range of
lesion sizes and with a variety of other lesion characteristics.
Patients who had previously received subfoveal thermal laser
therapy or who had significant subfoveal scarring or atrophy
were not eligible to participate in the trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to enrollment in the studies, we measured
each patient&#146;s visual acuity to establish a baseline.
Patients with a broad range of baseline visual acuity were
included in both trials. To qualify for enrollment, the visual
acuity in the patient&#146;s study eye had to be between 20/40
and 20/320. Visual acuity in the patient&#146;s other eye had to
be better than or equal to 20/800. In these trials, visual
acuity is measured as the number of letters that the patient can
read on the Early Treatment Diabetic Retinopathy Study, or
ETDRS, eye chart. This is the standard eye chart used in these
types of trials. Five letters on the ETDRS eye chart equates to
one line of visual acuity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To ensure that uniform criteria were applied in
characterizing patients&#146; lesions, we engaged the Wilmer
Technology Assessment Program, part of the Wilmer Eye Institute
at Johns Hopkins University School of Medicine, to review the
angiogram of each patient&#146;s affected eye. Through the use
of this centralized reading center, we were able to confirm
patient eligibility and properly classify patients by wet AMD
subtype before enrolling them in the study.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In these pivotal trials, we randomly assigned
patients to one of four groups. Three groups were treated with
an intravitreal injection of Macugen. The fourth group served as
the control group and received a sham injection. In the first
54&nbsp;weeks of the trials, the three treated groups received
different doses of Macugen: 0.3&nbsp;mg per injection, 1&nbsp;mg
per injection or 3&nbsp;mg per injection. To reduce potential
bias, both trials use a double-masked study design so that
neither the patient nor the investigational staff involved with
assessing the vision of the patient knows to which group each
patient belongs. The sham injection included all steps involved
in the intravitreal treatment injections with the exception that
patients in the control group had an empty syringe pressed
against their eye walls without a needle. This procedure mimics
an intravitreal injection and helps to maintain proper masking.
Patients received a treatment every six weeks during the first
54&nbsp;weeks. At the discretion of the treating physician,
patients with predominantly classic subfoveal wet AMD who were
eligible for photodynamic therapy could receive Visudyne
treatment before enrollment on up to one occasion between 8 and
13&nbsp;weeks prior to enrollment, at baseline and during the
trials. Thus, Macugen&#146;s safety and efficacy was tested
against a control group in which some patients received an
active therapy, photodynamic therapy using Visudyne. In
contrast, photodynamic therapy using Visudyne was tested against
a control group of patients receiving no active therapy in its
Phase&nbsp;3 trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In North America, we are conducting the trials
ourselves. We have engaged a clinical research organization to
conduct the clinical trials in Europe, South America, Australia
and Israel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">First-Year Clinical Trial
Results.</FONT></I><FONT size="2"> Of the 1,208&nbsp;patients
who were enrolled in these trials, the 1,186&nbsp;patients who
received at least one injection and were tested for changes in
visual acuity constituted the intent-to-treat population for
purposes of analysis of efficacy data. The two trials are
scheduled to continue for 154&nbsp;weeks. However, the primary
efficacy endpoint was based on this intent-to-treat patient
</FONT>

<P align="center"><FONT size="2">44
</FONT>
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<DIV align="left">
<FONT size="2">population at 54&nbsp;weeks. The following table
describes the combined safety patient populations from the two
trials.
</FONT>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Treated with</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Macugen</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Control</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Number of patients
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Male/ Female (%)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42/58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40/60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average age at baseline
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mean baseline visual acuity score (letters):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treated eye
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-treated eye
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Wet AMD subtype (%):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Predominantly classic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minimally classic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Occult
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Patient characteristics such as gender, age and
baseline vision were balanced across the treatment and control
groups. Patients also were randomized to establish balanced
representation of each subtype of subfoveal wet AMD across the
treatment and control groups.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There was a high compliance rate in the first
54&nbsp;weeks of these trials. For the patients who had at least
one study treatment, the combined average number of treatments
for trial participants was approximately 8.5 out of
9&nbsp;possible treatments. Further, the completion rate across
both trials was also high, with over 90% of all patients
remaining in the trials for the full 54&nbsp;weeks.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Primary Efficacy
Endpoint.</FONT></I><FONT size="2"> The primary efficacy
endpoint in these trials was the proportion of patients losing
less than 15 letters, or three lines, of visual acuity on the
ETDRS eye chart from baseline after 54&nbsp;weeks. This is the
same primary clinical endpoint that was used in the pivotal
clinical trials for Visudyne. We discussed our trial protocols
and statistical analysis plan with the FDA prior to unmasking
the data.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on our analysis of the data from the
combined patient populations of both trials, the primary
efficacy endpoint was met with statistical significance for all
three doses of Macugen. In connection with our analysis of the
combined patient data, we determined statistical significance
based on a widely used, conventional statistical method that
establishes the p-value of clinical results. Under this method,
a p-value of 0.05 or less represents statistical significance.
The following table summarizes the combined trial results.
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Patients Losing Less</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Than 15 Letters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Dose</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Individuals</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">0.3&nbsp;mg Macugen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206/294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1&nbsp;mg Macugen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213/300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3&nbsp;mg Macugen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193/296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Control
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164/296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the data from the combined patient
populations of both trials, the 0.3&nbsp;mg dose of Macugen was
the lowest effective dose of the three doses tested. On a
combined basis, 70% of the patients treated with the 0.3&nbsp;mg
dose of Macugen lost fewer than 15 letters of visual acuity at
54&nbsp;weeks compared to 55% of the patients in the control
group, resulting in a relative difference of 27% between the
treated and the control groups. This result had a p-value of
0.0001. In addition, based on our preliminary analysis of the
safety data from these trials, each of the three dose levels
tested in the trials appears to have a favorable safety profile.
To address statistical and other regulatory requirements, we
plan to seek approval for the 0.3&nbsp;mg dose of Macugen in our
NDA for wet AMD.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To qualify for FDA approval, a drug candidate
typically has to demonstrate a clinically relevant treatment
effect with statistical significance in replicate trials.
Moreover, when multiple doses of a drug are tested against a
single control group, a more stringent statistical method that
accounts for multiple
</FONT>

<P align="center"><FONT size="2">45
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">comparisons must be applied. For this purpose, we
used the Hochberg multiple comparison procedure. Under the
Hochberg procedure, in order to demonstrate statistical
significance for any particular dose, it is necessary to
establish a p-value that meets a stricter standard than the
conventional standard of a p-value of 0.05 or less. We designed
our two separate, but substantially identical, North American
and international clinical trials to meet these regulatory
requirements. For the 0.3&nbsp;mg Macugen dose, the primary
clinical endpoint was achieved with statistical significance in
both the North American and international trials using the more
stringent Hochberg statistical methodology. The p-value was
0.003 in the North American trial and 0.011 in the international
trial.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Efficacy Across All Wet AMD
Subtypes.</FONT></I><FONT size="2"> The combined data from the
two trials demonstrate that the treatment effect of Macugen is
consistent across all three subtypes of subfoveal wet AMD with
respect to both mean vision loss and prevention of three line
loss. To assess the consistency in treatment effect across
lesion subtypes, we performed an analysis known as the
Breslow-Day test. The analysis showed no evidence of interaction
between wet AMD subtypes and Macugen treatment effect,
demonstrating that the results for any single lesion subtype did
not disproportionately contribute to the overall efficacy
observed in the trials and that the treatment effect of Macugen
is consistent across all subtypes. Accordingly, in our NDA
filing, we and Pfizer have jointly agreed to seek approval for
the use of the 0.3&nbsp;mg dose of Macugen in the treatment of
patients with all three subtypes of subfoveal wet AMD. Moreover,
the following chart depicts for the combined patient populations
of both trials the mean change in visual acuity by subtype for
patients treated with the 0.3&nbsp;mg dose of Macugen and for
patients in the control group. The mean change in visual acuity
is expressed as the average number of letters lost by patients
with each wet AMD subtype.
</FONT>

<P align="center">
<IMG src="y97374y9737406.gif" alt="(BAR CHART)">

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Secondary Endpoints and Other Clinical
Observations.</FONT></I><FONT size="2"> In addition to the
primary endpoint data described above, we analyzed the results
from the combined populations of patients from both trials
treated with the 0.3&nbsp;mg dose of Macugen to assess the
degree, rate and sustainability of change in visual acuity
compared to the combined control group populations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To assess the degree of change in visual acuity,
one of the secondary endpoints measured the proportion of
patients whose visual acuity remained at baseline or improved
over the 54-week trial period, and a second measured the
proportion of patients whose visual acuity improved by 15 or
more letters, or three or more lines, over the 54-week trial
period. Although not prospectively specified in the trial
protocols as secondary endpoints, we also assessed the
proportion of patients who gained one or more lines of visual
acuity over the 54-week trial period, the proportion of patients
who gained two or more lines of visual acuity over the 54-week
trial period and the proportion of patients who experienced
severe loss of vision, defined as a loss of 30 or more letters,
or six or more lines, of visual acuity over the 54-week trial
</FONT>

<P align="center"><FONT size="2">46
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">period. The following table summarizes the
combined results from both trials as to these secondary
endpoints and additional analyses.
</FONT>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Proportion of Patients</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Macugen 0.3&nbsp;mg</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Control</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance of or gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>0 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>1 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>2 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>3 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Severe loss of vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>6 line vision
    loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All observations of the combined trial results
summarized in the above table were statistically significant
using the conventional p-value method, including the results
from the two pre-specified secondary endpoints.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additional secondary endpoints measured the rate
and sustainability of Macugen&#146;s clinical effect.
Specifically, these endpoints compared the mean change in visual
acuity after 6, 12 and 54&nbsp;weeks between the combined
populations from both trials receiving the 0.3&nbsp;mg dose of
Macugen and the combined populations from both trials in the
control group. The following table summarizes the data for these
secondary endpoints.
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Mean Change in Visual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Acuity (Letters)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Observation Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Macugen 0.3&nbsp;mg</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Control</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">6&nbsp;weeks
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0069</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">12&nbsp;weeks
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">54&nbsp;weeks
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These data suggest that the onset of clinical
benefit for patients with wet AMD may be observed as early as
six weeks after initial treatment. At 54&nbsp;weeks, the
combined population of patients from both trials receiving the
0.3&nbsp;mg dose of Macugen on average continued to lose fewer
letters of vision than patients in the combined control group.
Furthermore, in the combined analysis, after 54&nbsp;weeks, 62%
more patients in the control group deteriorated to 20/200 visual
acuity in the study eye than in the Macugen 0.3&nbsp;mg dose
group. A person is generally considered to be legally blind if
their visual acuity is 20/200 or worse using both eyes with the
benefit of corrective measures, such as eyeglasses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Analysis of the data suggests that the overall
efficacy is independent of lesion size and patient age.
Specifically, statistical interaction tests indicate that
efficacy is similar in small and large lesions as well as in
younger and older patients. For these tests, small lesions were
those of less than four disc areas, whereas large lesions were
those of four or more disc areas, and younger patients were
those less than 75&nbsp;years of age, whereas older patients
were those of 75&nbsp;years of age or more.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Visudyne Use During the
Trials.</FONT></I><FONT size="2"> We did not design the trials
to investigate the efficacy of Macugen treatment combined with
photodynamic therapy using Visudyne. However, patients with a
history of up to one prior administration of photodynamic
therapy using Visudyne between 8 and 13&nbsp;weeks before their
first study visit were eligible for enrollment in our trials.
Also, patients with predominantly classic subfoveal wet AMD at
baseline who were eligible for Visudyne treatment could receive
such treatment at baseline and during the studies at the
discretion of the treating physician. Only 26% of all enrolled
patients in the combined trials were eligible for Visudyne
treatment at the beginning of the study. Of the 26% eligible,
only 65% actually received Visudyne treatment at any time. In
addition, a small number of patients originally classified as
minimally classic or occult converted to the predominantly
classic subtype and received Visudyne. Overall, 75% of the
patients in the trials did not receive any Visudyne treatment.
</FONT>

<P align="center"><FONT size="2">47
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">Excluding those patients that received Visudyne
treatment prior to study enrollment, investigators administered
Visudyne treatment to approximately 50% more patients in the
control group than in the Macugen 0.3&nbsp;mg group. Overall,
24% more patients in the control group than in the Macugen
0.3&nbsp;mg group received photodynamic therapy at any time,
whether prior to, at or after baseline. The 0.3&nbsp;mg dose of
Macugen demonstrated a statistically significant, clinically
relevant treatment benefit relative to control despite this
higher rate of Visudyne usage in the control group. Therefore,
we believe that the results of treatment with the 0.3&nbsp;mg
dose of Macugen are independent of Visudyne usage.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Safety.</FONT></I><FONT size="2"> In the first
year of the trials, Macugen was well-tolerated at all three
doses. Our preliminary assessment of adverse event data
indicates that there is no apparent increased risk of systemic
adverse events to patients as a result of the use of Macugen.
Few patients in either the treated or control groups
discontinued their participation in the trials as a result of
adverse events. Injection-related serious adverse events were
low in number and included endophthalmitis, which is an
infection of the eye, retinal detachment and physician-induced,
or iatrogenic, traumatic cataract. During the first year of the
trial, there were 12 cases of endophthalmitis reported,
representing an incidence of 0.16%&nbsp;per injection or
1.3%&nbsp;per patient over the first year of treatment, five
cases of retinal detachment reported, representing an incidence
of 0.07%&nbsp;per injection or 0.6%&nbsp;per patient over the
first year of treatment, and five cases of traumatic cataract,
representing an incidence of 0.07%&nbsp;per injection or
0.6%&nbsp;per patient over the first year of treatment. Of the
five cases of retinal detachment, two were exudative in nature
and, we believe, attributable to the underlying disease and
three were due to a tear or hole in the retina, known as
rhegmatogenous, and may be attributable to the injection
procedure. Only four of the patients who developed
endophthalmitis experienced vision loss of 15 or more letters at
week 54 compared to their baseline vision. Only one patient who
developed endophthalmitis experienced severe vision loss of six
or more lines, which represents approximately 0.1% of the
patients treated with Macugen in the trials. The incidence of
these injection-related adverse events is well within what we
believe to be the tolerable limits for a drug that is
administered by intravitreal injection. There was no evidence of
drug-associated cataract or persistently elevated intraocular
pressure or glaucoma in patients in the trials. Furthermore, the
percentage of reported deaths was similar in the treated and
control groups. We believe that the observed death rates and the
serious adverse event profiles are consistent with those of the
general population of patients with demographic characteristics
similar to those of patients in the trials. Side effects from
clinical and preclinical trials of systemic VEGF inhibitors have
included hypertension, thromboembolic events, bleeding and
proteinuria. None of these side effects was noted to have been
observed with the use of Macugen, which is a non-systemic VEGF
inhibitor, in our trials.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Second and Third Year of the
Trials.</FONT></I><FONT size="2"> Because of the role of the
aging process in wet AMD, we believe that there is a significant
possibility that the disease will recur following the initial
one-year course of Macugen treatment and, therefore, that some
patients may require Macugen treatment for more than one year.
We are treating patients in a second year extension protocol of
our Phase&nbsp;2/3 pivotal clinical trials to determine, among
other things, whether continued therapy with Macugen provides
additional benefits and acceptable safety. We recently added a
third year of follow-up to the trials in order to better
characterize the long-term safety of Macugen.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Phase&nbsp;1 and 2 Trials</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We completed a Phase&nbsp;1 and two Phase&nbsp;2
clinical trials for the use of Macugen in the treatment of wet
AMD prior to June 2001. These trials included patients with all
three subtypes of subfoveal wet AMD. The primary purpose of
these trials was to test for product safety. In each of the
three trials, Macugen was well tolerated, and there were no
serious adverse events determined by the clinical trial
investigators as related to the drug. Although these trials were
conducted on a relatively small number of patients and there
were no randomized controls or long-term patient follow up, we
observed encouraging effects of the drug on trial participants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the Phase&nbsp;1 trial, 15&nbsp;patients
received escalating doses of Macugen one time via an
intravitreal injection in the affected eye. The patients were
distributed into five groups of three patients. Each group
received a different dose of Macugen. In this trial, 80% of the
patients showed stabilized or improved
</FONT>

<P align="center"><FONT size="2">48
</FONT>
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<DIV align="left">
<FONT size="2">vision at the end of the three-month period
following the injection. For purposes of this trial and our two
Phase&nbsp;2 trials described below, we defined stabilized
vision as no loss of, or an increase in, letters of visual
acuity on the ETDRS eye chart. Approximately 27% of the patients
in this trial showed the ability to read 15 or more additional
letters on the ETDRS eye chart at the end of the three-month
period.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the first Phase&nbsp;2 trial, 10&nbsp;patients
received Macugen via an intravitreal injection in the affected
eye once a month for three months. Eight of the treated patients
were tested at the end of the three-month period, with
approximately 88% of the tested group showing stabilized or
improved vision and 25% showing the ability to read 15 or more
additional letters on the ETDRS eye chart at the end of the
three-month period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the second Phase&nbsp;2 trial,
11&nbsp;patients received Macugen via intravitreal injection in
the affected eye once a month for three months. This trial
consisted solely of patients with the predominantly classic form
of subfoveal wet AMD who were also receiving photodynamic
therapy with Visudyne. Ten of the treated patients were tested
at the end of the three-month period, with 90% of the tested
group showing stabilized or improved vision and 60% showing the
ability to read 15 or more additional letters on the ETDRS eye
chart at the end of the three-month period.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Phase&nbsp;2 Pharmacokinetic Study</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, we began a Phase&nbsp;2 clinical
trial designed to obtain additional pharmacokinetic data from
the use of Macugen in the treatment of wet AMD. The
147&nbsp;patients enrolled in this trial each receive one year
of treatment. Treatment occurs every six weeks. Entry criteria
for this trial were similar to those for our Phase&nbsp;2/3
pivotal clinical trials. We conduct extensive blood sampling for
pharmacokinetic data for each patient on two occasions during
the trial. Safety endpoints are secondary endpoints of the trial.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Phase&nbsp;2 Clinical Trials for the
    Treatment of DME</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have completed one Phase&nbsp;2 clinical trial
for the use of Macugen in the treatment of DME. In this trial,
clinical centers enrolled 10&nbsp;patients with DME. Patients
were administered an intravitreal injection in the affected eye
once a month for three months. As in the wet AMD Phase&nbsp;1
and 2 studies, the therapy was well tolerated, and there were no
serious adverse events determined by the clinical trial
investigators as related to the drug or its administration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2003, we completed enrollment of a second
Phase&nbsp;2 clinical trial for the use of Macugen in the
treatment of DME. The 169&nbsp;patients enrolled in this study
were required to have been eligible for laser therapy for DME.
In this randomized, double-masked, placebo-controlled trial,
patients treated with Macugen receive 0.3&nbsp;mg, 1&nbsp;mg or
3&nbsp;mg doses via intravitreal injection every six weeks for
at least 12&nbsp;weeks and then up to 30&nbsp;weeks at the
discretion of the investigators. The control group receives a
sham injection designed to mimic an intravitreal injection.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recently announced preliminary results from
this Phase&nbsp;2 clinical trial. Based on the preliminary
results, the lowest effective dose of Macugen of the three doses
tested was 0.3&nbsp;mg, which is the same as the lowest
effective dose observed in our Phase&nbsp;2/3 pivotal clinical
trials for the use of Macugen in the treatment of wet AMD and
the dose for which we plan to seek approval in our NDA for wet
AMD. The
</FONT>

<P align="center"><FONT size="2">49
</FONT>

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<DIV align="left">
<FONT size="2">following table summarizes the results through 36
weeks for patients treated with the 0.3&nbsp;mg dose of Macugen
and patients in the control group.
</FONT>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Proportion of Patients</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Macugen 0.3&nbsp;mg</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Control</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">p-value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance of or gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>0 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain in vision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>1 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.01&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>2 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="symbol">&#179;</FONT>3 line vision
    gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The results shown in the table with respect to
the proportion of patients gaining 0 or greater, 1 or greater
and 2 or greater lines of vision at 36 weeks were statistically
significant using the Hochberg statistical methodology. As shown
in the table, the proportion of patients gaining 3 or greater
lines of vision was higher for the group receiving 0.3&nbsp;mg
of Macugen than for the control group, but the number of
patients was not sufficient to demonstrate statistical
significance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Optical coherence tomography, an imaging
technique, that may anatomically quantify retinal thickness or
edema, showed a 300% relative reduction trend in retinal
thickness for the 0.3&nbsp;mg dose of Macugen compared to
controls (50.79&nbsp;microns vs. 12.68&nbsp;microns). In the
geometric center of the macula, that region directly responsible
for high acuity vision, the odds of a decrease in retinal
thickness of 75 mm or more is 4 times larger for 0.3&nbsp;mg
dose of Macugen group vs. controls (p-value=0.0078).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our preliminary review of the draft safety data
from the trial suggests that Macugen is well-tolerated in
patients with DME. Further detailed analysis of the safety data
is ongoing.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Planned Retinal Vein Occlusion
    Trial</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the second quarter of 2004, we plan to
commence a Phase&nbsp;2 clinical trial designed to test the
efficacy and safety of Macugen for the treatment of retinal vein
occlusion, a condition that is characterized by high VEGF
levels, abnormal blood vessel growth and blood vessel leakage.
Retinal vein occlusion occurs when the circulation of a retinal
vein becomes obstructed, causing blood vessel bleeding and
leakage in the retina. Laser therapy is sometimes used to treat
this condition, but with limited efficacy. We intend to enroll
between 50 and 100&nbsp;patients and plan to treat these
patients for at least 12 to 30&nbsp;weeks. We expect the
endpoints to include change in visual acuity and change in
retinal thickness.
</FONT>

<P align="left">
<B><FONT size="2">Collaboration with Pfizer</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Macugen</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, we entered into collaboration,
license and related agreements with Pfizer to develop,
manufacture and commercialize Macugen for the prevention and
treatment of diseases of the eye and related conditions. Under
the terms of the agreements:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Upon effectiveness of the collaboration
    arrangements in February 2003, Pfizer paid us $100&nbsp;million,
    consisting of a $75&nbsp;million initial license fee and a
    $25&nbsp;million equity investment;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer purchased an additional $10&nbsp;million
    of our common stock at the closing of our initial public
    offering in February 2004;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is obligated to purchase up to an
    additional $15&nbsp;million of our common stock in specified
    circumstances;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">50
</FONT>
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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will co-promote Macugen with us in the
    United States and will share with us in profits and losses from
    the commercialization of Macugen in the United States, with our
    having the right to book all United States product sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will commercialize Macugen outside the
    United States pursuant to an exclusive license and pay us a
    royalty on net sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer will fund a majority of the ongoing
    development costs incurred pursuant to an agreed upon
    development plan covering the development of Macugen for AMD,
    DME, retinal vein occlusion and other agreed upon ophthalmic
    indications;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is potentially obligated to pay us up to
    $195.5&nbsp;million in milestone payments based on the
    achievement of worldwide regulatory submissions and
    approvals;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pfizer is potentially obligated to pay us up to
    $450&nbsp;million in milestone payments based upon attainment of
    agreed upon sales levels of Macugen.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the agreements, the parties&#146; sharing
of profits and losses from the commercialization of Macugen in
the United States extends until the later of 15&nbsp;years after
commercial launch in the United States and the expiration of the
United States patent rights licensed to Pfizer. The payment of
royalties to us by Pfizer based on net sales of Macugen outside
the United States extends, on a country-by-country basis, until
the later of 15&nbsp;years after commercial launch and the
expiration of the patent rights licensed to Pfizer in each
particular country. The royalty rate on net sales of Macugen
outside the United States is reduced on a country-by-country
basis to the extent that the patent rights in a particular
country expire or a generic form of Macugen is marketed in that
country. The United States patent rights licensed by us to
Pfizer expire between 2010 and 2017. The corresponding foreign
rights include patents that expire between 2011 and 2017 and
patent applications which, if issued as patents, are expected to
expire between 2011 and 2020. Pfizer may terminate the
collaboration relationship without cause upon six to twelve
months&#146; prior notice, depending on when such notice is
given. Either party may terminate the collaboration relationship
based upon material uncured breaches by the other party. In
addition, we may terminate the collaboration relationship if,
during specified periods, net sales of Macugen do not reach
specified levels. If we elect to terminate the collaboration in
this situation, we would be required to pay royalties to Pfizer
based on net sales of Macugen following such termination.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The collaboration is governed by a joint
operating committee, consisting of an equal number of
representatives of us and Pfizer. There are also subcommittees
with equal representation from both parties that have
responsibility over development and regulatory, manufacturing
and commercialization matters. In the case of unresolved
disagreement, ultimate decision-making authority is vested in us
as to some matters and in Pfizer as to other matters. A third
category of decisions requires the approval of both us and
Pfizer. Outside the United States, ultimate decision-making
authority as to most matters is vested in Pfizer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Xalatan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Macugen collaboration, we
entered into an agreement with Pfizer under which our sales
force is entitled to participate in selling activities, or
detailing, Pfizer&#146;s Xalatan glaucoma product on a
nonexclusive basis in the United States. Xalatan is a once-a-day
prescription eye drop marketed by Pfizer as a primary, or first
line, therapy for glaucoma, an eye disease that is associated
with the degeneration of the retinal cells responsible for
transmitting images from the eye to the brain.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this agreement, Pfizer is obligated to pay
us a per detail fee for our details to general ophthalmologists
and a percentage of incremental net revenues that are above a
baseline threshold for our details to retinal specialists. We
expect that our sales activities will commence three to six
months prior to our planned commercial launch of Macugen and
will continue for a period of three years after we start
detailing Xalatan. The agreement automatically terminates upon a
termination of the Macugen collaboration or upon Pfizer&#146;s
sale, assignment, exclusive license or other disposition of the
Xalatan product. In addition, we may terminate the agreement
upon four months&#146; prior notice. Either party may terminate
the agreement based upon material uncured breaches by the other
party.
</FONT>

<P align="center"><FONT size="2">51
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">By participating in the detailing of Xalatan, we
expect that our domestic sales force will be able to access and
form relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen. We view
the Xalatan agreement as primarily a strategic arrangement and
anticipate only a modest economic impact.
</FONT>

<P align="left">
<B><FONT size="2">Pipeline Initiatives</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to expand our pipeline of products to
treat diseases of the eye with unmet medical need, we are
actively pursuing a strategy to develop new drugs internally and
to license or otherwise acquire rights to potential new drugs
from third parties. We are also seeking to develop internally
and acquire rights to alternative mechanisms for delivering
ophthalmic drugs to the back of the eye. For example, in
April&nbsp;2004, we signed a research and collaboration
agreement with Archemix that allows us to develop the current
pipeline of Archemix in the field of ophthalmology. This
agreement also provides us with the ability to have Archemix
select new aptamers against our targets included in the research
program for further development by us in ophthalmology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conduct our internal research and development
activities at our Eyetech Research Center located in Woburn,
Massachusetts. We had 42&nbsp;full-time employees at this
facility, including a total of 17&nbsp;employees who hold M.D.
or Ph.D. degrees as of March&nbsp;31, 2004. We are conducting
research into the causes of AMD and diabetic retinopathy as well
as novel methods of drug delivery to the back of the eye. We
also are investigating the use of Macugen for non-ophthalmic
indications. We have developed proprietary models that
accelerate the study of disease processes and the identification
and validation of attractive molecular targets for ophthalmic
drug development. We have also developed tools for studying the
basic disease processes involved in the degeneration of retinal
cells associated with glaucoma.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current pipeline initiatives include the
following:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Additional Ophthalmic Indications for
    Macugen</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to wet AMD, DME and retinal vein
occlusion, there are a number of ophthalmic conditions with
medical need for which the VEGF inhibition of Macugen may prove
beneficial. We are conducting preclinical animal tests to assess
the potential therapeutic benefit and/or drug delivery
applications of Macugen for the treatment of the following
indications:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">&#147;High risk&#148; dry
    AMD,</FONT></I><FONT size="2"> in which the patient is at risk
    of developing wet AMD more rapidly than other dry AMD patients.
    It is possible to identify this form of dry AMD through a
    routine eye examination. We believe that these high risk
    patients may benefit from treatment with Macugen to control the
    progression of high risk dry AMD to wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Proliferative diabetic
    retinopathy,</FONT></I><FONT size="2"> the most severe stage of
    diabetic retinopathy. The disease is characterized by
    angiogenesis and blood vessel leakage. The new vessels
    frequently bleed and damage the retina. Although laser therapy
    is effective at lowering the rate of blindness associated with
    the disease, the destruction of the retina resulting from the
    treatment leads to adverse side effects, including night
    blindness and visual field loss.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Uveitis,</FONT></I><FONT size="2"> an
    inflammatory condition of the eye that often leads to macular
    edema. The swelling is largely a function of increased blood
    vessel leakage. Steroids are effective in some cases as a
    treatment for this condition, although their use is often
    complicated by the formation of cataracts and glaucoma.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Cystoid macular edema
    </FONT></I><FONT size="2">following cataract surgery, a
    condition that results from the inflammation caused by surgery.
    Steroid treatment is effective in some patients, but carries the
    risk of cataracts and glaucoma.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Myopic macular degeneration,
    </FONT></I><FONT size="2">a condition in which a patient with a
    high degree of nearsightedness develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition closely mirrors that seen in wet AMD.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">52
</FONT>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Inflammatory macular
    degeneration,</FONT></I><FONT size="2"> a condition in which a
    patient with inflammation in the macular area from infections or
    other causes develops choroidal neovascularization. The blood
    vessel growth and leakage in this condition is similar to that
    seen in wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Iris
    neovascularization,</FONT></I><FONT size="2"> a serious
    complication of diabetic retinopathy or retinal vein occlusion
    involving new blood vessel growth on the surface of the colored
    part of the eye, or iris. This process leads to an intractable
    type of glaucoma that often leads to blindness. Animal testing
    has revealed that this process requires VEGF.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Alternate Delivery
    Technologies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that technologies for the long-term
administration of drugs to the back of the eye which are more
convenient for physicians and patients than existing methods may
expand the potential markets for Macugen and other ophthalmic
therapies. We are working to develop alternative, more
convenient long-term drug delivery technologies. In particular,
we are developing a number of alternative delivery methods and
are testing them in preclinical tests. The approaches that we
are exploring include alternative drug formulations that may
permit less frequent administration of Macugen.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Ophthalmic Drugs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through our research activities, we are seeking
to develop other novel drugs to treat other ophthalmic diseases,
including drugs that may enhance the efficacy of Macugen. We
have identified distinct molecular targets in addition to VEGF
that we believe are attractive sites for pharmaceutical
intervention to treat ophthalmic blood vessel disease. One of
these targets is involved in the formation of new blood vessels
through a process that is independent of the activity of VEGF. A
second target affects blood borne cells involved in the
formation of new vessels and abnormal vessel leakage. This
second target also plays a role in the development and
progression of diabetic retinopathy. In animal studies, the
second target was operative at all stages of diabetic
retinopathy and the inhibition of this target both prevented and
reversed diabetic retinopathy. Human correlative data also
support the role of this target in human diabetic retinopathy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April&nbsp;2004, we entered into an exclusive
agreement with Archemix to collaborate on the research and
development of aptamers for ophthalmic indications. Included in
the collaboration are optimized aptamers in the existing
Archemix pipeline portfolio directed at ophthalmology targets,
as well as new aptamers discovered through the use of
Archemix&#146;s proprietary SELEX process in the research
program. Archemix also has the option to propose future aptamers
discovered outside of this collaboration for inclusion in the
program for the treatment of ophthalmic indications. Through the
collaboration, we will gain access to a major proprietary
research platform for generating future optimized lead compounds
for development in ophthalmology. We will have the
responsibility for all clinical development activities, and will
have the right to commercialize all program aptamers for
ophthalmologic indications. Archemix received an initial payment
from us and will also receive payments for achievement of
certain research and development milestones, and royalties on
net sales of all products resulting from the collaboration. We
also will provide support for efforts carried out by Archemix in
support of the collaboration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are directing our research at developing drugs
against these and other targets that can be used either alone or
in combination with Macugen therapy for the treatment of eye
diseases. We are also seeking opportunities to license or
develop drug candidates that address these and other targets.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Additional Non-Ophthalmic Indications for
    Macugen</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">VEGF appears to play a pivotal role in several
non-ophthalmic diseases, including cancer and psoriasis. We are
using our preclinical expertise to research the potential
application of Macugen to these diseases. Because these diseases
are outside of our core expertise in ophthalmology and are not
part of our collaboration with Pfizer, we expect to pursue
collaboration or outlicensing opportunities if our research
suggests that Macugen is a promising therapy.
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cancer.</FONT></I><FONT size="2"> Solid tumors
and their metastases rely on new blood vessel growth for their
survival. VEGF has been extensively validated in numerous
preclinical trials as a drug target for the treatment of some
types of cancers. In addition, Genentech Inc. recently received
approval of its drug candidate Avastin<SUP>TM</SUP>, validating
VEGF as a drug target for renal cancer and colon cancer. In
light of the stability of the unPEGylated Macugen aptamer, we
believe that we may be able to formulate novel locally
administered, sustained release versions of Macugen for use in
the treatment of some types of solid tumors. We expect that
these formulations would be used at the time of cancer surgery
to provide therapy directly at the site of the disease. We
believe that these Macugen formulations might possess advantages
over intravenously administered drugs. For example, a locally
administered formulation of Macugen might be able to access some
types of brain tumors that are not accessible to anti-VEGF drugs
administered intravenously.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Psoriasis.</FONT></I><FONT size="2"> Psoriasis
is a chronic inflammatory skin condition that causes skin cells
to grow too quickly, resulting in thick white or red patches of
skin. It represents a significant underserved medical need.
Preclinical and clinical data suggest that VEGF-induced blood
vessel growth and blood vessel leakage play a role in the
development of this condition. We are researching novel topical
formulations of Macugen for the treatment of psoriasis. We
believe that the ability to treat psoriasis in this manner might
prove to be superior to or synergistic with medications that are
delivered intravenously.
</FONT>

<P align="left">
<B><FONT size="2">Sales and Marketing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have limited experience in selling products
and are in the process of establishing our sales capabilities.
While we have personnel with significant marketing experience
and have been collaborating with our partner, Pfizer, we have
limited experience as a company marketing products. We currently
have no distribution capabilities. We will rely on Pfizer for
distribution of Macugen if approved. We have recruited a Chief
Operating Officer, a Senior Vice President of Marketing and
Sales and other senior personnel with significant experience in
sales and marketing roles at large pharmaceutical companies. Our
plan is to develop our own specialized domestic sales and
marketing infrastructure to commercialize Macugen and other
ophthalmic products that we acquire or develop in the future and
to participate with Pfizer in selling Xalatan. We are recruiting
our domestic ophthalmic sales force and expect to begin
participating in detailing Xalatan three to six months prior to
our planned commercial launch of Macugen. By participating in
the detailing of Xalatan, we expect that our domestic sales
force will be able to access and form relationships with retinal
specialists and general ophthalmologists prior to commercial
launch of Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to focus our sales and marketing
efforts on retinal specialists. The ophthalmic medical community
in the United States is relatively small. We estimate that there
are approximately 1,400 retinal specialists in the United States
who perform most of the medical procedures involving back of the
eye diseases. Because of the small size of our target provider
audience in the United States, we believe that we can best serve
this market through a dedicated specialty sales force of
approximately 50 sales specialists. Under our United States
co-promotion arrangement with Pfizer for Macugen, our domestic
sales force will have primary responsibility for promoting and
detailing Macugen to retinal specialists, and Pfizer will have
primary responsibility for promoting Macugen to general
ophthalmologists.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Outside the United States, we currently plan to
market and sell our products that receive regulatory approval
through established industry participants. However, we may
determine to establish our own sales and marketing organization
in key markets, including the European Union. We have granted
Pfizer exclusive commercialization rights with respect to
Macugen outside the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to distribute Macugen in the United
States through Pfizer&#146;s distribution system. Under this
arrangement, the manufacturers of the drug product would ship
the product to Pfizer&#146;s distribution warehouses, and Pfizer
would perform order entry, customer service and accounts
receivable collection services on our behalf on a contract
basis. It is possible that we will develop the capabilities in
the future to perform these services on our own behalf.
</FONT>

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<P align="left">
<B><FONT size="2">Manufacturing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have limited experience in, and we
do not own facilities for, manufacturing any products. Although
we intend to rely on contract manufacturers to produce our
products, we have recruited personnel with manufacturing
experience to oversee the production of Macugen and future
products that we may develop.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The manufacturing process of the active
pharmaceutical ingredient of Macugen consists of chemical
synthesis of the oligonucleotide, purification, PEGylation,
further purification and finally freeze drying to form a powder.
Each of these steps involves a relatively common chemical
engineering process. The chemical synthesis uses conventional
synthetic techniques for this type of molecule. The components
of the active pharmaceutical ingredient are generally available
from a number of suppliers. However, we rely on a single source
of supply for the PEGylation reagent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to obtain marketing approval for
Macugen, we will be required to consistently produce the active
pharmaceutical ingredient used in Macugen in commercial
quantities and of specified quality on a repeated basis and
document our ability to do so. This is referred to as process
validation. We have started process validation, but have not yet
completed the process validation requirement. If we are
ultimately unable to satisfy the process validation requirement
or are significantly delayed in doing so, our business will be
materially adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For our clinical trials of Macugen, we engaged a
third party manufacturer to manufacture the active
pharmaceutical ingredient used in Macugen. In November 2003, we
entered into an agreement with a subsidiary of Degussa AG, for
the commercial manufacture and supply of the active
pharmaceutical ingredient. Degussa has manufactured our clinical
supply. Under the terms of our agreement with Degussa, we are
obligated to purchase all of our requirements for the active
pharmaceutical ingredient from Degussa through 2005 and to
purchase minimum specified percentages of our requirements for
the active pharmaceutical ingredient thereafter. We are required
to provide Degussa with binding forecasts of our orders for each
calendar quarter at least two months prior to the commencement
of the calendar quarter. Degussa is obligated to timely satisfy
our orders up to 100% of our binding forecasts and to use its
best efforts to satisfy our orders in excess of these binding
forecasts. We have agreed to pay Degussa a minimum monthly fee
of approximately $0.6&nbsp;million until the manufacturing
process is validated or our manufacturing relationship is
terminated. Following the validation of Degussa&#146;s
manufacturing process, the purchase price for the active
pharmaceutical ingredient will be calculated on a cost-based
formula that adjusts over time depending on a variety of
factors. We are also required to reimburse Degussa for royalties
payable to a third party for intellectual property related to
the manufacturing process. The initial term of the agreement is
five years. We have the right to extend the agreement, at our
option, for up to an additional six years. We have the right to
terminate the agreement if Degussa fails to supply at price
levels that are as low as those available to us from an
alternative supplier after December&nbsp;31, 2005, if we abandon
our efforts to commercialize Macugen, if validation of
Degussa&#146;s manufacturing process has not occurred on or
before January&nbsp;1, 2005, if Degussa is not able to meet
specified legal and regulatory requirements or if a change in
control of Degussa occurs. In addition, either party may
terminate the agreement if the other party materially breaches
the agreement and fails to cure the breach or in the event of
the bankruptcy, liquidation or insolvency of the other party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Degussa plans to produce commercial quantities of
Macugen at a different site than the site initially used to
manufacture the active pharmaceutical ingredient for clinical
trial use. We and Degussa have completed the relevant
manufacturing technology transfer to the new site, have used the
new site to supply the active pharmaceutical ingredient of
Macugen for use in our clinical trials and plan to continue to
use this site to produce commercial quantities of the active
pharmaceutical ingredient of Macugen. We are performing
analytical tests to demonstrate the comparability of our active
pharmaceutical ingredient following the site change. If we
cannot establish that the products are equivalent to the
satisfaction of the FDA, we may be delayed in obtaining, or may
by unable to obtain, approval to launch Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For our clinical supply of Macugen, we also
engaged Gilead as a separate fill and finish manufacturer to
formulate the active pharmaceutical ingredient from a solid into
a solution and to fill the solution into
</FONT>

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<DIV align="left">
<FONT size="2">syringes. In December 2003, we entered into an
agreement with Gilead to provide fill and finish services for
the commercial supply of Macugen. Under the terms of the
agreement, we are obligated to purchase all of our requirements
for these fill and finish services from Gilead through the first
anniversary of the commercial launch of Macugen in the United
States and to purchase minimum specified percentages of our
requirements through the third anniversary of the commercial
launch of Macugen in the United States. The purchase price for
the fill and finish services is based on fixed batch and
per-unit charges that vary depending on annual order volumes and
additional costs that depend on costs of materials procured from
third parties and Gilead&#146;s costs of providing specified
ancillary services not covered by the fixed batch and per-unit
charges. The term of the agreement runs through the third
anniversary of the commercial launch of Macugen in the United
States. We have the right to terminate the agreement if we
abandon our efforts to develop and commercialize Macugen, if
Gilead fails to achieve specified order fulfillment requirements
or is unable to manufacture in accordance with regulatory
requirements, if Gilead acquires, is acquired by or becomes an
affiliate of a company that is a manufacturer, supplier or
distributor of a product competitive with Macugen or in the
event of the bankruptcy or insolvency of, or appointment of a
receiver for, Gilead. In addition, either party may terminate
the agreement if the other party materially breaches the
agreement and fails to cure the breach or if either party is
prevented by a <I>force majeure </I>event from performing its
obligations under the agreement for more than three months.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we currently have sufficient capacity
to supply the active pharmaceutical ingredient of Macugen to
meet anticipated demand for Macugen if the product is approved
based on a 0.3&nbsp;mg dose for approximately 24&nbsp;months
after approval. In order to produce Macugen in the quantities
that we expect to be required to meet anticipated market demand,
we and Degussa will need to increase the manufacturing capacity
for the active pharmaceutical ingredient. We initially intend to
increase manufacturing capacity for the active pharmaceutical
ingredient by duplicating a portion of our manufacturing lines
at Degussa&#146;s facility. We are also exploring alternatives
for increasing manufacturing capacity, including developing
alternative manufacturing methods for the active pharmaceutical
ingredient.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the future, we plan to enter into commercial
supply arrangements with alternative active pharmaceutical
ingredient and fill and finish manufacturers. It is possible
that either we or Pfizer may perform these functions ourselves.
</FONT>

<P align="left">
<B><FONT size="2">License Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are parties to two license agreements that we
believe are material to our business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Gilead Sciences</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, we entered into an agreement with
Gilead and its wholly owned subsidiary NeXstar
Pharmaceuticals,&nbsp;Inc. for an exclusive worldwide license,
under the patents and know-how related to Macugen controlled by
Gilead and its affiliates, to develop, manufacture and
commercialize products containing Macugen. This license extends
to all therapeutic indications. Subject to a right of first
negotiation in favor of Gilead as to a limited set of
indications, we have the right to grant sublicenses under this
license.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In exchange for the rights licensed from Gilead,
we paid Gilead an up-front license fee of $7&nbsp;million and
issued Gilead a warrant to purchase 833,333&nbsp;shares of our
series B preferred stock at an exercise price of $6.00&nbsp;per
share. We also agreed to make payments to Gilead aggregating up
to $25&nbsp;million based on achieving specified development and
commercial launch milestones and to pay royalties to Gilead
based on net sales of Macugen by us or our affiliates or
sublicensees. Our royalty obligation extends on a
country-by-country basis until the later of ten years after
first commercial sale of Macugen or the expiration of the
last-to-expire patent licensed from Gilead in each particular
country. The United States patent rights relating to Macugen
licensed to us by Gilead expire between 2010 and 2017. The
corresponding foreign rights include patents that expire between
2011 and 2017 and patent applications which, if issued as
patents, are expected to expire between 2011 and 2019. Upon the
expiration of the last-to-expire royalty term, the agreement
expires and, at our option, our license from Gilead either
(1)&nbsp;survives and remains
</FONT>

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<DIV align="left">
<FONT size="2">exclusive, in which case we would be obligated to
continue paying Gilead a reduced royalty on product sales or
(2)&nbsp;survives and converts to nonexclusive, in which case
would not have any further royalty obligation to Gilead.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The agreement obligates us to use commercially
reasonable efforts to develop, obtain regulatory approvals for
and commercialize Macugen. Each party has the right to terminate
the agreement if the other party materially breaches the
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Gilead warrants, a portion of which was
previously assigned by Gilead to an unrelated entity, were
exercised in full during the quarter ended March&nbsp;31, 2004
on a cashless basis, resulting in the issuance of
680,509&nbsp;shares of common stock in exchange for the
surrender of 152,824 warrants to purchase 152,824&nbsp;shares of
common stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nektar Therapeutics</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, we entered into a license,
manufacturing and supply agreement with Nektar Therapeutics,
formerly Shearwater Corporation, relating to the PEGylation of
Macugen. Pursuant to that agreement, Nektar supplies us with the
reagent that we link to the aptamer to create the active
pharmaceutical ingredient. Under the terms of the agreement,
Nektar granted us various exclusive and nonexclusive worldwide
licenses, with the right to grant sublicenses, under patents and
know-how related to the reagent controlled by Nektar, to
develop, manufacture and commercialize Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In exchange for these rights, we paid Nektar an
up-front license fee of $1.5&nbsp;million, agreed to make
payments to Nektar aggregating up to $4.5&nbsp;million based on
achieving specified development milestones with respect to
Macugen and agreed to pay Nektar royalties based on net sales of
Macugen by us or our affiliates or sublicensees. We may credit a
portion of our potential future milestone payments to Nektar
against a portion of the royalty payments that we may be
required to make. We also agreed to purchase the PEGylation
reagent for Macugen exclusively from Nektar, subject to Nektar
meeting its supply obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless we and Nektar agree to extend the term,
the agreement expires upon the expiration of the last-to-expire
patent licensed by us from Nektar. The United States patent
rights licensed to us by Nektar expire between 2013 and 2016.
The corresponding foreign rights include a patent that expires
in 2015 and patent applications which, if issued as patents, are
expected to expire between 2015 and 2020. The agreement imposes
development and commercialization diligence requirements on us.
Each party has the right to terminate the agreement if the other
party materially breaches the agreement and upon the occurrence
of specified bankruptcy or insolvency events as to the other
party.
</FONT>

<P align="left">
<B><FONT size="2">Patents and Proprietary Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends in part on our ability to
obtain and maintain proprietary protection for our product
candidates, technology and know-how, to operate without
infringing on the proprietary rights of others and to prevent
others from infringing our proprietary rights. Our policy is to
seek to protect our proprietary position by, among other
methods, filing United States and foreign patent applications
related to our proprietary technology, inventions and
improvements that are important to the development of our
business. We also rely on trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We own or license a total of 27 United States
patents and 22 United States patent applications as well as
numerous foreign counterparts to many of these patents and
patent applications. Our patent portfolio includes patents and
patent applications with claims covering the composition of
matter and methods of manufacturing and use of Macugen, as well
as the composition of matter and method of manufacturing of both
modified and unmodified aptamers in general and modified and
unmodified VEGF aptamers in particular. In addition, we have
patent applications covering various aspects of ophthalmic drug
delivery.
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We license patent rights from other patent owners
from time to time, both on an exclusive basis and on a
nonexclusive basis. Examples of such patent licenses include the
patent rights that we have licensed from Gilead and Nektar and a
nonexclusive, royalty-bearing patent license that we entered
into with Isis Pharmaceuticals,&nbsp;Inc. in December 2001,
which grants us rights under patents owned or controlled by Isis
to make, have made, use and sell the Macugen compound worldwide.
In addition to the obligation to pay royalties to Isis, we paid
an initial license fee of $2&nbsp;million and we agreed to make
payments to Isis aggregating up to $4&nbsp;million based on
achieving specified regulatory milestones with respect to the
use of Macugen for the treatment of AMD and aggregating up to
$2.75&nbsp;million based on achieving specified regulatory
milestones with respect to the use of Macugen for other
therapeutic indications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">United States patents generally have a term of
20&nbsp;years from the date of filing. The patent rights
relating to Macugen owned and licensed to us by Gilead consist
of fifteen United States patents that expire between 2010 and
2017 and counterpart filings to these patents in a number of
other jurisdictions, including patents issued in several
jurisdictions and patent applications pending in a number of
other jurisdictions, including Europe and Japan. The patents
licensed to us by Nektar consist of ten United States patents
that expire between 2013 and 2016 and foreign counterpart
filings to these patents in a number of jurisdictions. The
patents licensed to us by Isis consist of two United States
patents that expire in 2010 and 2014 and foreign counterpart
filings to these patents in a number of jurisdictions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The patent positions of companies like ours are
generally uncertain and involve complex legal and factual
questions. Our ability to maintain and solidify our proprietary
position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once
granted. We do not know whether any of our patent applications
or those patent applications that we license will result in the
issuance of any patents. Our issued patents and those that may
issue in the future, or those licensed to us, may be challenged,
invalidated or circumvented, which could limit our ability to
stop competitors from marketing related products or the length
of term of patent protection that we may have for our products.
In addition, the rights granted under any issued patents may not
provide us with proprietary protection or competitive advantages
against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or
duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any
of our products can be commercialized, any related patent may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantage of the patent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may rely, in some circumstances, on trade
secrets to protect our technology. However, trade secrets are
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors and other
contractors. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently
discovered by competitors. To the extent that our employees,
consultants or contractors use intellectual property owned by
others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions.
</FONT>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The development and commercialization of new
drugs and drug delivery technologies is highly competitive. We
will face competition with respect to Macugen and any products
we may develop or commercialize in the future from major
pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Macugen receives marketing approval, it will
compete against the currently approved therapies for the
treatment of wet AMD and DME described above under the captions
&#147;&#151;&nbsp;Eye Disease&nbsp;&#151; Limitations of
Currently Available Therapies for Wet AMD&#148; and
&#147;&#151;&nbsp;Eye Disease&nbsp;&#151; Limitations of
Currently Available Therapies for DME.&#148; There are also a
number of companies working to develop new drugs and
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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<DIV align="left">
<FONT size="2">other therapies to treat wet AMD and DME. We
believe that the following product candidates are in
Phase&nbsp;2 or Phase&nbsp;3 clinical trials:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Genentech,&nbsp;Inc. and Novartis are
    collaborating to develop a humanized monoclonal antibody
    fragment, administered by intravitreal injection, that targets
    VEGF for the treatment of wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Alcon,&nbsp;Inc. is developing a steroid for the
    treatment and prevention of wet AMD. This drug candidate is
    injected behind the eye using a customized injector inserted
    around the eye. Alcon has announced that it expects to report
    the results of its Phase&nbsp;3 clinical trial of the steroid in
    the fourth quarter of 2004, with the filing an NDA for such use
    in the predominantly classic subtype of wet AMD in the fourth
    quarter of 2004. In addition, Alcon is enrolling patients in two
    Phase&nbsp;3 clinical trials, one in South America and one in
    Europe, comparing Alcon&#146;s steroid against placebo in
    patients with all subtypes of wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Allergan,&nbsp;Inc., which recently acquired
    Oculex Pharmaceuticals, is developing a bioerodable steroid
    implant for the treatment of persistent macular edema.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Eli Lilly&nbsp;&#38; Co. is developing an orally
    administered inhibitor of an enzyme named PKC beta for the
    treatment of diabetic retinopathy.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Bausch&nbsp;&#38; Lomb Incorporated and Control
    Delivery Systems,&nbsp;Inc. are developing a surgically placed
    non-erodable intraocular implant for the delivery of steroids to
    treat DME and swelling resulting from other causes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Regeneron Pharmaceuticals,&nbsp;Inc. and
    Aventis&nbsp;S.A. are collaborating to develop a receptor fusion
    protein that contains portions of the extracellular domains of
    two different VEGF receptors and announced the start of a
    Phase&nbsp;1 clinical trial in AMD in March 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Miravant Medical Technologies is developing a
    photodynamic therapy that is similar to Visudyne for the
    treatment of wet AMD.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Genaera Corporation is developing a small
    molecule derived from the Dogfish shark and has announced plans
    to initiate Phase&nbsp;2 clinical trials in the second quarter
    of 2004 and a Phase&nbsp;3 trial beginning in early 2005 for the
    treatment of wet AMD.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, there are a number of other
companies that are developing anti-VEGF technologies. Some of
these companies may seek to apply their technologies to AMD, DME
and other ophthalmic indications.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The key competitive factors affecting the success
of Macugen are likely to be its efficacy, safety profile, price
and method of administration. The efficacy and safety profile of
Macugen will depend upon the results of our clinical trials of
this product and experience with the product in the commercial
marketplace. Based on the results of our clinical trials to
date, we believe that Macugen will have an acceptable side
effect profile. We have not yet determined the price for Macugen
and do not expect to do so before commercial launch. The method
of administration of Macugen, intravitreal injection, is
commonly used to administer ophthalmic drugs and generally
accepted by patients facing the prospect of blindness and other
serious back of the eye complications such as DME. However, a
therapy that offers a less invasive method of administration may
have a competitive advantage over one administered by
intravitreal injection. Moreover, future competitive products
may have superior efficacy, improved safety and convenience or
reduced frequency of administration compared to Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The licensing and acquisition of pharmaceutical
products, which is part of our strategy, is a highly competitive
area. A number of more established companies also are pursuing
strategies to license or acquire products. These established
companies may have a competitive advantage over us due to their
size, cash flow and institutional experience.
</FONT>

<P align="left">
<B><FONT size="2">Government Regulation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Government authorities in the United States, at
the federal, state and local level, and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling,
</FONT>

<P align="center"><FONT size="2">59
</FONT>

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<DIV align="left">
<FONT size="2">promotion, advertising, distribution, marketing
and export and import of pharmaceutical products such as those
we are developing.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">United States Government
    Regulation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, the FDA regulates drugs and
biologics under the Federal Food, Drug, and Cosmetic Act, and,
in the case of biologics, also under the Public Health Service
Act, and implementing regulations. If we fail to comply with the
applicable United States requirements at any time during the
product development process, approval process or after approval,
we may become subject to administrative or judicial sanctions.
These sanctions could include the FDA&#146;s refusal to approve
pending applications, license suspension or revocation,
withdrawal of an approval, a clinical hold, warning letters,
product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil
penalties or criminal prosecution. Any agency enforcement action
could have a material adverse effect on us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The steps required before a drug or biologic may
be marketed in the United States include:
</FONT>
<P>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">preclinical laboratory tests, animal studies and
    formulation studies under FDA&#146;s good laboratory practices
    regulations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">submission to the FDA of an Investigational New
    Drug application, or IND, for human clinical testing, which must
    become effective before human clinical trials may begin;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">submission to the FDA of a New Drug Application,
    or NDA, or Biologics License Application, or BLA;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">satisfactory completion of an FDA inspection of
    the manufacturing facility or facilities at which the product is
    produced to assess compliance with current good manufacturing
    practice, or cGMP;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">FDA review and approval of the NDA or BLA.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preclinical tests include laboratory evaluations
of product chemistry, toxicity, and formulation, as well as
animal studies. An IND sponsor must submit the results of the
preclinical tests, together with manufacturing information and
analytical data, to the FDA as part of the IND. The IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30&nbsp;days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as
outlined in the IND. In that case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND may not result
in the FDA allowing clinical trials to commence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials involve the administration of the
investigational product to human subjects under the supervision
of qualified investigators. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the
study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Clinical trials typically are conducted in three
sequential phases, but the phases may overlap or be combined.
Each trial must be reviewed and approved by an independent
Institutional Review Board before it can begin. Phase&nbsp;1
trials usually involve the initial introduction of the
investigational drug into humans to evaluate the product&#146;s
safety, dosage tolerance and pharmacodynamics and, if possible,
to gain an early indication of its effectiveness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Phase&nbsp;2 trials usually involve controlled
trials in a limited patient population to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluate dosage tolerance and appropriate dosage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">identify possible adverse effects and safety
    risks;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">evaluate preliminarily the efficacy of the drug
    for specific indications.
    </FONT></TD>
</TR>

</TABLE>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Phase&nbsp;3 trials usually further evaluate
clinical efficacy and test further for safety in an expanded
patient population. Phase&nbsp;1, Phase&nbsp;2 and Phase&nbsp;3
testing may not be completed successfully within any specified
period, if at all. Furthermore, the FDA or we may suspend or
terminate clinical trials at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assuming successful completion of the required
clinical testing, the results of the preclinical studies and of
the clinical studies, together with other detailed information,
including information on the manufacture and composition of the
product, are submitted to the FDA in the form of an NDA or BLA
requesting approval to market the product for one or more
indications. The FDA reviews an NDA to determine, among other
things, whether a product is safe and effective for its intended
use. The FDA reviews a BLA to determine, among other things,
whether the product is safe, pure and potent and the facility in
which it is manufactured, processed, packed or held meets
standards designed to assure the product&#146;s continued
safety, purity and potency.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the drug approval process, we must
conduct a comprehensive assessment of the carcinogenic potential
of our product candidates. This often requires the completion of
several <I>in&nbsp;vitro </I>tests and tests in laboratory
animals designed to detect compounds that may induce cancer
directly or indirectly by various mechanisms. Based on our
testing of Macugen to date and our review of the carcinogenic
potential of Macugen with an independent advisory board engaged
by us, we believe that Macugen poses a low carcinogenicity risk.
In particular, in a test of Macugen and its metabolites in the
Syrian Hamster Embryo Assay, which we performed at the request
of the FDA, the results were negative for carcinogenic
potential. In one test for carcinogenicity risk, two potential
Macugen metabolites showed, in one out of five bacterial strains
tested, a small increase in the number of altered bacteria, a
potential indicator of carcinogenicity risk. However, because
this elevated proportion of altered bacteria did not increase
further as we increased the dose of the metabolites, we do not
believe the results from these tests indicate carcinogenicity
potential. Furthermore, no other test, including animal studies,
of Macugen and its metabolites showed carcinogenic potential. We
have requested that the FDA grant us a waiver from the
requirement to perform full animal carcinogenicity studies for
the treatment of wet AMD based primarily on the unmet medical
need presented by wet AMD, low overall systemic exposure to
Macugen and the fact that this disease generally affects older
populations. However, the FDA may require us to conduct
additional carcinogenicity testing of Macugen. Based on our
discussions with the FDA to date, if we are required to conduct
further carcinogenicity testing of Macugen in connection with
its use in the treatment of wet AMD, we believe that the FDA
will allow us to conduct any such testing as a post-NDA approval
study. However, we will not be certain of this until the NDA
review process of Macugen for the treatment of wet AMD is
completed. Because patients with DME tend to be younger than
those with wet AMD, it is likely that the FDA will require us to
complete satisfactory carcinogenicity testing of Macugen prior
to any approval of its use in the treatment of DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before approving an application, the FDA will
inspect the facility or the facilities at which the product is
manufactured. The FDA will not approve the product unless cGMP
compliance is satisfactory. The FDA will issue an approval
letter if it determines that the application, manufacturing
process and manufacturing facilities are acceptable. If the FDA
determines the application, manufacturing process or
manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria
for approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The testing and approval process requires
substantial time, effort and financial resources, and each may
take several years to complete. The FDA may not grant approval
on a timely basis, or at all. We may encounter difficulties or
unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from
marketing our products. The FDA may limit the indications for
use or place other conditions on any approvals that could
restrict the commercial application of the products. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
</FONT>

<P align="center"><FONT size="2">61
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After regulatory approval of a product is
obtained, we are required to comply with a number of
post-approval requirements. For example, as a condition of
approval of an application, the FDA may require post marketing
testing and surveillance to monitor the product&#146;s safety or
efficacy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, holders of an approved NDA or BLA
are required to report certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information and to comply with requirements concerning
advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to
conform to cGMP after approval. The FDA periodically inspects
manufacturing facilities to assess compliance with cGMP, which
imposes certain procedural and documentation requirements.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We use, and will continue to use in at least the
near term, third party manufacturers to produce our products in
clinical and commercial quantities. Future FDA inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of problems with a product or
the failure to comply with requirements may result in
restrictions on a product, manufacturer or holder of an approved
NDA or BLA, including withdrawal or recall of the product from
the market or other voluntary or FDA-initiated action that could
delay further marketing. Also, new government requirements may
be established that could delay or prevent regulatory approval
of our products under development.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Regulation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing
clinical trials and commercial sales and distribution of our
products, including Macugen. Whether or not we obtain FDA
approval for a product, we must obtain approval of a product by
the comparable regulatory authorities of foreign countries
before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under European Union regulatory systems, we may
submit marketing authorizations either under a centralized or
decentralized procedure. The centralized procedure provides for
the grant of a single marketing authorization that is valid for
all European Union member states. The decentralized procedure
provides for mutual recognition of national approval decisions.
Under this procedure, the holder of a national marketing
authorization may submit an application to the remaining member
states. Within 90&nbsp;days of receiving the applications and
assessment report, each member state must decide whether to
recognize approval.
</FONT>

<P align="left">
<B><FONT size="2">Third Party Reimbursement and Pricing
Controls</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States and elsewhere, sales of
therapeutic and other pharmaceutical products depend in
significant part on the availability of reimbursement to the
consumer from third party payors, such as government and private
insurance plans. Third party payors are increasingly challenging
the prices charged for medical products and services. It will be
time consuming and expensive for us to go through the process of
seeking reimbursement from Medicare and private payors. Our
products may not be considered cost-effective, and reimbursement
may not be available or sufficient to allow us to sell our
products on a competitive and profitable basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In many non-U.S.&nbsp;markets, including Canada
and the countries in the European Union, pricing of
pharmaceutical products is subject to governmental control. In
the United States, there have been, and we expect that there
will continue to be, a number of federal and state proposals to
implement similar governmental pricing control. While we cannot
predict whether such legislative or regulatory proposals will
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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<DIV align="left">
<FONT size="2">be adopted, the adoption of such proposals could
have a material adverse effect on our business, financial
condition and profitability.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Medicare</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to obtaining required marketing
approvals, we plan to market Macugen to physicians for use in
the treatment of conditions such as wet AMD and DME. We expect
that in the United States a majority of the patients who are
treated with Macugen for these indications will be Medicare
beneficiaries. The Centers for Medicare&nbsp;&#38; Medicaid
Services, or CMS, is the agency within the Department of Health
and Human Services that administers Medicare and will be
responsible for reimbursement of the cost of Macugen when
administered to Medicare beneficiaries and for the cost of
physician services for administering the drug.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, Medicare makes separate payment to
the physician or other purchaser for drugs, such as Macugen,
that meet statutorily covered requirements, are not usually
self-administered and are furnished by physicians in the office
or in other outpatient settings. Prior to 2004, Medicare paid
for part of the cost of these physician-administered drugs at
the lower of the amount the physician charges for the drug or
95% of the drug&#146;s national &#147;average wholesale
price&#148; as published by certain data sources. Patients, or
their secondary insurer, are responsible for a coinsurance
amount. Specifically, for physician-administered drugs, Medicare
paid 80% of 95% of the average wholesale price, while patients,
or their secondary insurer, are responsible for the remaining
20%. As described below, these payment amounts will change under
the recently enacted Medicare prescription drug coverage
legislation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If Macugen is approved for marketing by the FDA,
it will be covered by Medicare when administered in the
physician office unless CMS or a local Medicare contractor
decides not to cover it. CMS has asserted the authority of
Medicare not to cover particular drugs if it determines that
they are not &#147;reasonable and necessary&#148; for Medicare
beneficiaries. CMS may create a national coverage determination
for a product, which establishes on a nationwide basis the
indications that will be covered and the frequency limits for
administration of the product. However, for most new drugs that
are eligible for payment, CMS does not create a national
coverage determination and we do not know whether or not we will
obtain a national coverage determination for Macugen or our
other potential products. In these cases, the local Medicare
contractors who are responsible for administering the program on
a state by state basis have the discretion to issue local
coverage decisions. These policies can include both coverage
criteria for the drug and frequency limits for the
administration of the drug. The local contractors in different
areas of the country may establish varying coverage criteria and
frequency limits for Macugen.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to payment for the drug itself, CMS
also reimburses physicians for administering the product to
Medicare beneficiaries. Medicare payment for physician services
is determined according to a prospectively set payment rate,
determined by a procedure code established by the American
Medical Association. These codes, called Current Procedural
Terminology, or CPT, codes, describe the procedure performed,
but generally are not drug specific. We believe that there is an
existing CPT code to describe the procedure for administering
Macugen and that most physicians will find this code to be
adequate to cover the cost of administration. However, if it is
determined that the existing CPT code and associated payment
amount are not applicable to Macugen, it may affect the
willingness of physicians to perform the procedure.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2003, President Bush signed into law
new Medicare prescription drug coverage legislation that
includes provisions that will change Medicare payment for
physician-administered drugs effective in January 2004.
Effective January&nbsp;1, 2004, the legislation reduces the
percentage of the average wholesale price reimbursed by Medicare
from 95% to 85% and grants the Secretary of Health and Human
Services the authority to further reduce the rate to 80%. New
drugs coming on the market will be allowed to retain the 95%
rate through the end of 2004. Effective January 2005,
reimbursement will be limited to a statutorily defined
manufacturer&#146;s average sale price plus 6%. The definition
of manufacturer&#146;s average sale price is intended to lead to
lower levels of reimbursement to physicians than currently
provided under the average wholesale price method. In addition,
starting in January 2006, this legislation directs the Secretary
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<DIV align="left">
<FONT size="2">to contract with procurement organizations to
purchase physician-administered drugs from the manufacturers and
provides physicians with the option to obtain drugs through
these organizations as an alternative to purchasing from the
manufacturers, which some physicians may find advantageous.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These changes may reduce our potential revenues
as a result of two principal factors. First, because physicians
will likely receive lower levels of reimbursement under the
manufacturer&#146;s average sale price methodology than under
the current average wholesale price methodology, physicians may
be less likely to purchase Macugen directly and more likely to
obtain the product through procurement organizations. Second,
the negotiated payment that we receive from procurement
organizations may be less than the amount that we could
otherwise have obtained from sales to physicians. Because we
have not received marketing approval for Macugen or established
a price for the product, it is difficult to predict the effect
on us of this new legislation and the other changes to Medicare
proposed by CMS. However, this new legislation and other changes
could adversely affect our potential future revenues and results
of operations, possibly materially.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Commercial Insurers&#146; Payment for
    Physician-Administered Drugs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Commercial insurers usually offer two types of
benefits&nbsp;&#151; medical benefits and pharmacy benefits. In
most private insurance plans, physician-administered injectable
drugs, such as Macugen, are provided under the medical benefit.
If private insurers decide to cover Macugen, they will reimburse
for the drug in a variety of ways depending on the particular
insurance plan and the contract that the plan has negotiated
with physicians. Like Medicare, commercial insurers have the
authority to place coverage and utilization limits on
physician-administered drugs. In response to the recent
prescription drug coverage legislation that could result in
reduced Medicare payment for physician-administered drugs,
private insurers may adopt similar reduced payment amounts.
</FONT>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our success will depend greatly
on our ability to identify, attract and retain capable
employees. As of March&nbsp;31, 2004, we had 161 full time
employees, including a total of 31 employees who hold M.D. or
Ph.D. degrees. Our employees are not represented by any
collective bargaining unit, and we believe our relations with
our employees are good.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Recruiting and retaining qualified scientific
personnel to perform research and development work in the future
will also be critical to our success. We face the risk that we
may not be able to attract and retain personnel on acceptable
terms given the competition among biotechnology, pharmaceutical
and health care companies, universities and non profit research
institutions. In addition we rely on member of our Scientific
Advisory Board and a significant number of consultants to assist
us in formulating our research and development strategies.
</FONT>

<P align="left">
<B><FONT size="2">Trademarks</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech<SUP>TM</SUP>, Eyetech
Pharmaceuticals<SUP>TM</SUP> and Macugen<SUP>TM</SUP> are our
trademarks. All are covered by pending applications for
registration in the United States Patent and Trademark Office.
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<P align="left">
<B><FONT size="2">Facilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, we leased a total of
approximately 114,300&nbsp;square feet of office and laboratory
space. Our leased properties are described below.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Approximate</FONT></B></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Lease</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Property Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Square Feet</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Use</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3&nbsp;Times Square,<BR>
    New&nbsp;York, New&nbsp;York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">New Corporate, Clinical, Safety and Regulatory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">November 2021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">500 Seventh Avenue,<BR>
    New&nbsp;York, New&nbsp;York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Old Corporate, Clinical, Safety and Regulatory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">December 2010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Woburn, Massachusetts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Laboratory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">July 2007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cedar Knolls, New Jersey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Laboratory
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">April 2008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2004, we entered into a lease for our
new corporate headquarters in New&nbsp;York City, located at
3&nbsp;Times Square. We are currently seeking to sublet our old
corporate headquarters.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are currently not a party to any material
legal proceedings.
</FONT>

<P align="center"><FONT size="2">65
</FONT>
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<DIV align="left">
<A name='112'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our executive officers, directors and other
significant employees and their respective ages are as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Executive Officers and
    Directors</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John P. McLaughlin(1)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Operating Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Financial Officer and Senior Vice
    President, Finance
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Scientific Officer and Senior Vice
    President, Research
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Legal, General Counsel and
    Secretary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Srinivas Akkaraju,&nbsp;M.D.,&nbsp;Ph.D.(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael G. Mullen(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Edward Penhoet,&nbsp;Ph.D.(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry Simon(2)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Damion E. Wicker,&nbsp;M.D.(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Other Significant Employees</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denis O&#146;Shaughnessy,&nbsp;Ph.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Clinical Development
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arda Ural
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Marketing and Sales
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Member of the Compensation Committee
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Member of the Audit Committee
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Member of the Governance and Nominations Committee
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John P. McLaughlin
</FONT></I><FONT size="2">is a co-founder of our company and has
been our Chairman of the Board and a director since February
2000. Mr.&nbsp;McLaughlin has served as President and Chief
Executive Officer of Corgentech,&nbsp;Inc., a publicly-traded
biopharmaceutical company, since January 2000. From December
1997 to September 1999, Mr.&nbsp;McLaughlin was president of
Tularik,&nbsp;Inc., a biopharmaceutical company. From September
1987 to December 1997, Mr.&nbsp;McLaughlin held a number of
senior management positions at Genentech,&nbsp;Inc., a
biopharmaceutical company, including Executive Vice President,
with responsibility for many commercial functions.
Mr.&nbsp;McLaughlin served as a counsel to the United States
House of Representatives committee responsible for drafting
several of the FDA laws, including those governing orphan drugs,
generic drug approvals, patent term extensions and export of
unapproved drugs from the United States, and previously
practiced law in Washington,&nbsp;D.C. Mr.&nbsp;McLaughlin
received his J.D. from Catholic University and B.A. from the
University of Notre Dame.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David R.
Guyer,&nbsp;M.D.</FONT></I><FONT size="2"> is a co-founder of
our company and has been our Chief Executive Officer and a
director since February 2000. Dr.&nbsp;Guyer is also currently a
voluntary Clinical Professor of Ophthalmology at the
New&nbsp;York University School of Medicine. From June 2000 to
October 2002, he was also Professor and Chairman of the
Department of Ophthalmology at the New&nbsp;York University
School of Medicine. Dr.&nbsp;Guyer was Clinical Associate
Professor of Ophthalmology at Cornell University Medical Center
from July 1995 until June 2000, during which time he also served
as Director of Residency Training at Manhattan Eye,
Ear&nbsp;&#38; Throat Hospital and was in private practice.
Dr.&nbsp;Guyer has also served as the chief medical editor of
Ophthalmology Times from July 1996 to the present. From 1992 to
2000, Dr.&nbsp;Guyer was the Study Co-chairman of the
Pharmacological Therapy for Macular Degeneration Study Group, a
45-center worldwide group of retinal specialists studying drug
therapy for AMD. Dr.&nbsp;Guyer received his M.D. from The Johns
Hopkins University School of Medicine and his
</FONT>

<P align="center"><FONT size="2">66
</FONT>
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<DIV align="left">
<FONT size="2">undergraduate degree from Yale College. He was an
ophthalmology resident at The Wilmer Eye Institute, The Johns
Hopkins University School of Medicine and completed his
fellowship training in retinal surgery at the Massachusetts Eye
and Ear Infirmary, a teaching affiliate of Harvard Medical
School, where he was a Heed-Knapp Fellow. Dr.&nbsp;Guyer is the
author of more than 100 scientific articles concerning
ophthalmic diseases.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Paul G. Chaney </FONT></I><FONT size="2">has
been our Chief Operating Officer since August 2003.
Mr.&nbsp;Chaney has more than 20&nbsp;years of experience in the
pharmaceutical industry, including from 1996 to August 2003,
serving in various senior management positions at Pharmacia
Corporation, a pharmaceutical company acquired by Pfizer in
April 2003, where he was responsible for the launch of several
products, including Tecnis&#174;, Xalatan and Xalcom&#174;. More
specifically, from July 2002 to August 2003, Mr.&nbsp;Chaney
served as Vice President, Global Commercial Operations,
Ophthalmology Franchise; from May 2001 to June 2002, he served
as Vice President, Global Ophthalmology Business; from February
2000 to April 2001, he served as Vice President, Global
Pharmaceutical Ophthalmology; from February 1998 to February
2000, he served as Business Director, Ophthalmology, North
America; and from February 1996 to February 1998, he served as
Director, U.S.&nbsp;Ophthalmology Business. Mr.&nbsp;Chaney
received a double B.A. with honors in English and Biological
Sciences from the University of Delaware.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Glenn P. Sblendorio
</FONT></I><FONT size="2">has been our Chief Financial Officer
and Senior Vice President, Finance since February 2002. From
July 2000 to February 2002, Mr.&nbsp;Sblendorio served as Senior
Vice President of Business Development for The Medicines
Company, a specialty pharmaceutical company. From 1998 to July
2000, Mr.&nbsp;Sblendorio was the Chief Executive Officer, Chief
Financial Officer and Managing Director of MPM Capital Advisors,
LLC, an investment bank specializing in healthcare related
transactions. Mr.&nbsp;Sblendorio&#146;s pharmaceutical
experience also includes 12&nbsp;years at
Hoffmann-La&nbsp;Roche,&nbsp;Inc., a pharmaceutical company, in
a variety of senior financial positions, including Chief
Financial Officer of Roche Molecular Systems and Head of
Finance-Controller for Amgen/ Roche Europe. Mr.&nbsp;Sblendorio
received his B.A. in Accounting from Pace University and his
M.B.A. in Finance from Fairleigh Dickinson University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Anthony P.
Adamis,&nbsp;M.D.</FONT></I><FONT size="2"> is a scientific
pioneer of our company and has been our Chief Scientific Officer
and Senior Vice President, Research since July 2002.
Dr.&nbsp;Adamis has served as a member of our Scientific
Advisory Board since February 2002 and was our Director of
Preclinical Research from February 2000 to June 2002. From
January 1998 to June 2002, Dr.&nbsp;Adamis was an Associate
Professor of Ophthalmology at Harvard Medical School. From 1992
to June 2002, Dr.&nbsp;Adamis served as Director of Residency
Training in Ophthalmology at the Massachusetts Eye and Ear
Infirmary, a teaching affiliate of Harvard Medical School. From
2000 to 2002, he also served as a principal investigator and
co-director of the Retina Research Institute for Diabetic
Retinopathy and Macular Degeneration at the Massachusetts Eye
and Ear Infirmary. From January 2001 to December 2001,
Dr.&nbsp;Adamis also served as President of the Medical Staff
and from January 2001 to December 2001 was a member of the board
of directors of the Massachusetts Eye and Ear Infirmary.
Dr.&nbsp;Adamis is a specialist in ocular vascular disease and
ocular drug delivery. He co-discovered the role that VEGF plays
in new blood vessel growth and blood vessel leakage related to
various diseases of the eye. Dr.&nbsp;Adamis received his M.D.
with Honors from the University of Chicago Pritzker School of
Medicine and his undergraduate degree from the University of
Illinois, Urbana. Dr.&nbsp;Adamis completed his ophthalmology
residency training at the University of Michigan.
Dr.&nbsp;Adamis is the author of more than 100 scientific
articles concerning ophthalmic diseases.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Douglas H. Altschuler
</FONT></I><FONT size="2">has been our Senior Vice President,
Legal, General Counsel and Secretary since May 2003. From
September 2001 to May 2003, Mr.&nbsp;Altschuler was the General
Counsel of Nektar Therapeutics, a provider of drug delivery
technology. From December 2000 through November 2001, he was the
General Counsel of AXYS Pharmaceuticals, a company that
researched and developed new therapeutics. AXYS Pharmaceuticals
merged with Celera Genomics in November 2001. From 1996 to
October 2000, Mr.&nbsp;Altschuler was the Vice President/General
Counsel and Compliance Officer of Mentor Corporation, a medical
device company. Mr.&nbsp;Altschuler received his J.D. from the
University of Arizona School of Law and a B.S. in chemistry and
biology from the University of Arizona.
</FONT>

<P align="center"><FONT size="2">67
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Srinivas
Akkaraju,&nbsp;M.D.,&nbsp;Ph.D.</FONT></I><FONT size="2"> has
been a director since July 2001. Since April 2001,
Dr.&nbsp;Akkaraju has been a principal of the Life Sciences team
in the Healthcare Group at JPMorgan Partners, LLC, formerly
Chase Capital Partners, a global private equity company
affiliated with J.P.&nbsp;Morgan Chase&nbsp;&#38; Co. From
October 1998 to April 2001, he was in the Business and Corporate
Development group at Genentech,&nbsp;Inc., most recently as
senior manager, where he was responsible for worldwide
partnering activities including technology access deals,
in-licensing of early and late-stage therapeutics, and
out-licensing of Genentech development projects. In addition to
his business development role, he also served for the last year
as project team leader for one of Genentech&#146;s clinical
development products. During this time, Dr.&nbsp;Akkaraju was
also a founding member of BioStreet, an online marketplace for
biotech opportunities. Prior to joining Genentech in 1998,
Dr.&nbsp;Akkaraju was a graduate student at Stanford University.
Dr.&nbsp;Akkaraju is a director of Seattle Genetics,&nbsp;Inc.,
a biotechnology company. Dr.&nbsp;Akkaraju received his
undergraduate degrees in Biochemistry and Computer Science from
Rice University and his M.D. and Ph.D. in Immunology from
Stanford University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marty Glick </FONT></I><FONT size="2">is a
co-founder of our company and has been a director since February
2000. Mr.&nbsp;Glick has served as Executive Vice President and
Chief Financial Officer of Theravance Inc., a biopharmaceutical
company, since July 1998. From 1988 to October 1997,
Mr.&nbsp;Glick held various positions at Genentech,&nbsp;Inc.,
including serving as Vice President of Finance from 1995 to
October 1997. Mr.&nbsp;Glick is the chair of the Biotechnology
Industry Organization&#146;s Tax and Finance Committee.
Mr.&nbsp;Glick received his M.B.A. in Finance from the Kellogg
School of Management at Northwestern University. Mr.&nbsp;Glick
is also a Certified Public Accountant and a Chartered Accountant
(Canada).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael G. Mullen, CFA
</FONT></I><FONT size="2">has been a director since October
2002. Since 1999, Mr.&nbsp;Mullen has been a member of the
Bellevue Group of Switzerland, which focuses on investing in
public and private biotechnology companies in the United States
and Europe. He currently serves as President of Bellevue
Research,&nbsp;Inc., the United States research arm of the
Bellevue Group. From 1990 to September 1999, Mr.&nbsp;Mullen
held various positions at SG Cowen Securities, formerly
Cowen&nbsp;&#38; Co, including partner, managing director and
senior research analyst in medical technology. Mr.&nbsp;Mullen
is also a member of the Board of Directors of Theravance Inc.
Mr.&nbsp;Mullen received his M.B.A. in Finance from the Kelley
School of Business at Indiana University, Bloomington. He is
also a Chartered Financial Analyst and a member of the
Association for Investment Management and Research.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Samir
Patel,&nbsp;M.D.</FONT></I><FONT size="2"> is a co-founder of
our company and has been a director since February 2000 and a
consultant since November 2001. From 1992 to December 2003,
Dr.&nbsp;Patel served as the Director of the Retina Service at
the University of Chicago, where he is an Associate Professor.
His main area of research at the University of Chicago was
focused on age-related macular degeneration. Dr.&nbsp;Patel
served as the Residency Program Director at the University of
Chicago from 1992 until July 2000. Dr.&nbsp;Patel received his
M.D. from the University of Massachusetts Medical School and was
an ophthalmology resident at the University of Chicago.
Dr.&nbsp;Patel completed his fellowship training in retinal
surgery at the Massachusetts Eye and Ear Infirmary, a teaching
affiliate of Harvard Medical School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Edward
Penhoet,&nbsp;Ph.D.</FONT></I><FONT size="2"> has been a
director since July 2001. Dr.&nbsp;Penhoet is the Chief Program
Officer for Science and Higher Education Programs at the Gordon
and Betty Moore Foundation and is a Professor of Health Policy
and Management at the School of Public Health at the University
of California, Berkeley. Dr.&nbsp;Penhoet was the Dean of the
School of Public Health and Professor of Public Health and of
Molecular and Cell Biology at University of California, Berkeley
from 1999 until June 2002. Since 1981, Dr.&nbsp;Penhoet has also
served as a director of Chiron Corporation, a biotechnology
company. Dr.&nbsp;Penhoet served as Chiron&#146;s President and
Chief Executive Officer from the time he co-founded the company
in 1981 until April 1998. From March 1997 to December 1998,
Dr.&nbsp;Penhoet was a chairperson of the California Healthcare
Institute. He is a member of the Boards of Directors of the Bay
Area Council, the Oakland Museum Foundation, the UC System
Biotech Advisory Committee, Kaiser Permanente, and the Advisory
board for the Lester Center for Entrepreneurship and Innovation
at UC Berkeley. He is also a director of Alta Partners, a
venture capital firm, and a member of the boards of
ZymoGenetics,&nbsp;Inc., a biopharmaceutical company, and Chiron
Corporation.
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Henry Simon </FONT></I><FONT size="2">has been
a director since July 2001. Since 1987, Mr.&nbsp;Simon has held
various positions with Schroder Ventures in London, a global
private equity group, serving as the Chief Executive Officer of
the life sciences team until 1997, its Chairman from April 1997
to December 2001 and a Special Partner since January 2002.
Mr.&nbsp;Simon has been Chairman of Leica Microsystems AG since
1998, Chairman of Zarlink Semiconductors since 1994 and a
director of Gyros AB since September 2002. From 1988 to 1997, he
was the Chairman of Shire Pharmaceuticals and from 1993 to 1996
also served as the Chairman of Chiroscience. Prior to joining
Schroder Ventures, Mr.&nbsp;Simon was President of Technicon
Corporation, a diagnostics manufacturer, and prior to that Group
Executive and Vice President of ITT Europe. Mr.&nbsp;Simon
started his career at Bell Laboratories in 1959 after graduating
from the Institute of Technology in Munich, Germany and the
Royal Institute of Technology in Stockholm, Sweden.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Damion E.
Wicker,&nbsp;M.D.</FONT></I><FONT size="2"> has been a director
since July 2001. Dr.&nbsp;Wicker is currently co-head of Life
Sciences and Healthcare Infrastructure of JPMorgan Partners,
LLC. Since December 1996, Dr.&nbsp;Wicker has been a partner
with JPMorgan Partners. Prior to joining JPMorgan Partners in
1993, Dr.&nbsp;Wicker was President of Adams Scientific, a
medical diagnostics company, and held various positions with MBW
Venture Partners, a venture capital firm. Dr.&nbsp;Wicker was
also a Commonwealth Fund Medical Fellow for the National
Institute of Health. He is currently a member of the NVCA Life
Science Group Board and the Board of Trustees of the
New&nbsp;York Academy of Medicine. Dr.&nbsp;Wicker is also a
Director of several privately held companies. Dr.&nbsp;Wicker
received a B.S. with honors from M.I.T., an M.D. from The Johns
Hopkins University School of Medicine, and an M.B.A. from The
Wharton School of the University of Pennsylvania.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Denis
O&#146;Shaughnessy,&nbsp;Ph.D.</FONT></I><FONT size="2"> has
been our Senior Vice President, Clinical Development since
August 2000. From November 1990 to July 2000,
Dr.&nbsp;O&#146;Shaughnessy held various clinical research and
management roles with Hoffmann-La&nbsp;Roche Inc., including
Senior Manager responsible for overseeing global clinical
research programs. Dr.&nbsp;O&#146;Shaughnessy received his
Ph.D. from Royal Post-Graduate Medical School in the United
Kingdom and his undergraduate degree from London University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Arda Ural </FONT></I><FONT size="2">has been
our Senior Vice President, Marketing and Sales since September
2002. From 1992 to August 2002, Mr.&nbsp;Ural held various
positions at Pfizer Inc. in which he had marketing, sales and
business development responsibilities in several therapeutic
areas. More specifically, from January 2002 until September
2002, Mr.&nbsp;Ural was a Director/ Team Leader for
Pfizer&#146;s Celebrex&#174; U.S.&nbsp;Team, from August 2000
until December 2001, Mr.&nbsp;Ural was a Director/ Team Leader
for Pfizer&#146;s Cardura/ XL Worldwide Team and from September
1998 until August 2000, Mr.&nbsp;Ural was a Marketing Director
for Pfizer&#146;s Viagra&#174; U.S.&nbsp;team. Mr.&nbsp;Ural
received B.Sc. and M.Sc. degrees in mechanical engineering from
Bosporus University in Istanbul, Turkey. He has also received an
M.B.A. from Marmara University in Istanbul.
</FONT>

<P align="left">
<B><FONT size="2">Board Committees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has established three standing
committees&nbsp;&#151; Audit, Compensation, and Governance and
Nominations&nbsp;&#151; each of which operates under a charter
that has been approved by the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has determined that all of the members
of each of the Board&#146;s three standing committees are
independent as defined under the new rules of the Nasdaq Stock
Market applicable to us, including, in the case of all members
of the Audit Committee, the independence requirements
contemplated by Rule&nbsp;10A-3 under the Securities and
Exchange Act of 1934 (the &#147;Exchange Act&#148;).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Audit Committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee&#146;s responsibilities
include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">appointing, approving the compensation of, and
    assessing the independence of our independent auditor;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">overseeing the work of our independent auditor,
    including through the receipt and consideration of certain
    reports from our independent auditors;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">69
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and discussing with management and the
    independent auditors our annual and quarterly financial
    statements and related disclosures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">monitoring our internal control over financial
    reporting, disclosure controls and procedures and code of
    business conduct and ethics;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">overseeing our internal audit function;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">discussing our risk management policies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">establishing policies regarding hiring employees
    from the independent auditor and procedures for the receipt and
    retention of accounting related complaints and concerns;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">meeting independently with our internal
    accounting staff, independent auditors and management;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">preparing the audit committee report required by
    SEC rules.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The members of the Audit Committee are
Mr.&nbsp;Simon, the chairman of the committee, and
Messrs.&nbsp;Glick and Mullen.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Compensation Committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee&#146;s
responsibilities include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">annually reviewing and approving corporate goals
    and objectives relevant to CEO compensation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">determining the CEO&#146;s compensation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and approving, or making
    recommendations to the Board with respect to, the compensation
    of our other executive officers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">overseeing an evaluation of our senior executives;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">overseeing and administering our cash and equity
    incentive plans;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and making recommendations to the Board
    with respect to director compensation.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The members of the Compensation Committee are
Dr.&nbsp;Penhoet, the chairman of the committee, and
Dr.&nbsp;Akkaraju and Mr.&nbsp;McLaughlin.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Governance and Nominations
    Committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Governance and Nominations Committee&#146;s
responsibilities include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">identifying individuals qualified to become Board
    members;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">recommending to the Board the persons to be
    nominated for election as directors and to each of the
    Board&#146;s committees;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewing and making recommendations to the Board
    with respect to management succession planning;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">developing and recommending to the Board
    corporate governance principles;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">overseeing evaluation of the Board.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The members of the Governance and Nominations
Committee are Dr.&nbsp;Wicker, the chairman of the committee,
and Mr.&nbsp;Simon and Mr.&nbsp;McLaughlin.
</FONT>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of our executive officers serves as a member
of the board of directors or compensation committee, or other
committee serving an equivalent function, or of any other entity
that has one or more
</FONT>

<P align="center"><FONT size="2">70
</FONT>

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<DIV align="left">
<FONT size="2">of its executive officers serving as a member of
our board of directors or compensation committee. None of the
members of our compensation committee has ever been our employee.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Election of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors is divided into three
classes, each of whose members serve for staggered three year
terms. Drs.&nbsp;Patel, Penhoet and Wicker serve in the class of
directors whose terms expire at our 2005 annual meeting;
Mr.&nbsp;Glick, Dr.&nbsp;Guyer and Mr.&nbsp;Simon serve in the
class of directors whose terms expire at our 2006 annual
meeting; and Mr.&nbsp;McLaughlin, Dr.&nbsp;Akkaraju and
Mr.&nbsp;Mullen were re-elected at our 2004 annual meeting to
serve for another three year term that will expire at the 2007
annual meeting. Upon expiration of the term of a class of
directors, directors in that class will be eligible to be
elected for a new three-year term at the annual meeting of
stockholders in the year in which their term expires.
</FONT>

<P align="left">
<B><FONT size="2">Director Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We reimburse each member of our Board for
reasonable travel and other expenses in connection with
attending meetings of the Board. Dr.&nbsp;Guyer, our Chief
Executive Officer, does not receive any separate compensation
for his Board activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, we granted to each of our board members
other than Dr.&nbsp;Guyer options to purchase 30,000&nbsp;shares
of our common stock at an exercise price of $1.44&nbsp;per
share. These options are immediately exercisable. However, the
shares purchasable upon exercise of these options are subject to
our right of repurchase that, subject to the director&#146;s
continued service on our board, lapses monthly over the
four-year period from the date of grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In September 2003, our Board approved a program
under our 2003 stock incentive plan in which each non-employee
director is eligible to receive an option to purchase
30,000&nbsp;shares of our common stock upon his or her
appointment to our Board. One-quarter of these options will vest
on the first anniversary of the grant date and then in 36 equal
monthly installments, subject to the recipient&#146;s continued
service as a director. Each non-employee director is also
eligible to receive an annual grant of an option to purchase
7,500&nbsp;shares of our common stock at each year&#146;s annual
meeting after which he or she will continue to serve as a
director. These options will vest in 48&nbsp;monthly
installments beginning one month after the grant date, subject
to the recipient&#146;s continued service as a director. Each
non-employee director stock option will terminate on the earlier
of 10&nbsp;years from the date of grant and 90&nbsp;days after
the recipient ceases to serve as a director, except in the case
of death or disability, in which event the option will terminate
three months from the date of the director&#146;s death or
disability. The exercise price of all of these options will
equal the fair market value of our common stock on the date of
grant.
</FONT>

<P align="left">
<B><FONT size="2">Scientific Advisory Board</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have established a scientific advisory board
made up of leading experts in the field of retinal disease.
Members of our scientific advisory board consult with us
regularly on matters relating to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our research and development programs;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the design and implementation of our clinical
    trials;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market opportunities from a clinical perspective;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">new technologies relevant to our research and
    development programs;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">scientific and technical issues relevant to our
    business.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">71
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The current members of our scientific advisory
board are:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Professional Affiliation</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Research and Chief
    Scientific Officer, Eyetech Pharmaceuticals,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark Blumenkranz,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor and Chairman of Ophthalmology, Stanford
    University
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Evangelos S. Gragoudas, M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Acting Chairman Emeritus, Department of
    Ophthalmology and Professor of Ophthalmology, Harvard Medical
    School; Director of Retina Service, Massachusetts Eye and Ear
    Infirmary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morton F. Goldberg,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor and Chairman, Emeritus, of
    Ophthalmology, Johns Hopkins University School of Medicine
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dennis Henner,&nbsp;Ph.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Partner, MPM Capital Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Joan W. Miller,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor and Chair of Ophthalmology,
    Massachusetts Eye and Ear Infirmary, Harvard Medical School
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Steven Schwartz,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief of Retina Division, Doris Stein Eye
    Research Center, University of California, Los Angeles Medical
    School
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence Singerman,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Clinical Professor of Ophthalmology, Case Western
    Reserve University School of Medicine; Ophthalmologist, Retina
    Associates of Cleveland; Founder, Macula Society
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence A. Yannuzzi,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Professor of Clinical Ophthalmology, Columbia
    University
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">72
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">
<B><FONT size="2">Executive Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the compensation
paid or accrued during the years ended December&nbsp;31, 2002
and 2003 to our chief executive officer and to our four other
most highly compensated executive officers whose salary and
bonus are expected to exceed $100,000 for the year ended
December&nbsp;31, 2003. We refer to these officers collectively
as our named executive officers.
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Long-Term Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">338,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">135,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">325,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">255,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">95,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4,500</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(2)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Operating Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">232,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">64,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">192,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">132,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis,&nbsp;M.D.(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">82,500</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&nbsp;&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Research
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">137,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">91,250</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">87,500</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(7)</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler(8)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">165,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">70,069</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Legal
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Chaney joined our company in August 2003.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents automobile allowance.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Sblendorio joined our company in
    February 2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dr.&nbsp;Adamis joined our company in July 2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents guaranteed bonus in accordance with
    Dr.&nbsp;Adamis&#146; employment agreement.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes a $50,000 signing bonus paid to
    Dr.&nbsp;Adamis in July 2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents consulting fees paid to
    Dr.&nbsp;Adamis during 2002 before he joined our company as an
    employee in July 2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Altschuler joined our company in May
    2003.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes a signing bonus paid to
    Mr.&nbsp;Altschuler in May 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Stock Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table contains information
regarding grants of options to purchase shares of our common
stock to our named executive officers during the fiscal year
ended December&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amounts in the following table represent
potential realizable gains that could be achieved for the
options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation
are calculated based on the requirements of the Securities and
Exchange Commission and do not represent an estimate or
projection of our future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of
our common stock from the fair market value on the date of
grant. Actual gains, if any, on stock option exercises depend on
the future
</FONT>

<P align="center"><FONT size="2">73
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">performance of the common stock and overall stock
market conditions. The amounts reflected in the following table
may not necessarily be achieved.
</FONT>
</DIV>

<P align="center">
<B><FONT size="2">Option Grants in Last Fiscal Year</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Potential Realizable Value at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Assumed Annual Rates of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Stock Price Appreciation for</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Option Term(2)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price Per</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted(#)(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5%($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10%($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8/11/2013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,444,366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,016,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis, M.D
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7/7/2013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,141,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,193,718</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The options that we granted to our executive
    officers and other employees in January 2003 prior to our
    initial public offering typically were exercisable as of the
    date of grant. However, the shares purchasable upon exercise of
    these options are subject to our right of repurchase that,
    subject to continued employment on the applicable dates, lapses
    with respect to 25% of the shares on the first anniversary of
    the date of grant and thereafter in thirty-six monthly
    installments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The dollar amounts under these columns are the
    result of calculations at rates set by the Securities and
    Exchange Commission and, therefore, are not intended to forecast
    possible future appreciation, if any, in the price of the
    underlying common stock. The potential realizable values are
    calculated using the initial public offering price of
    $21.00&nbsp;per share and assuming that the market price
    appreciates from this price at the indicated rate for the entire
    term of each option and that each option is exercised and sold
    on the last day of its term at the assumed appreciated price.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Option Exercises and Year-End Option
    Values</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides information about
the number of shares issued upon option exercises by our named
executive officers during the year ended December&nbsp;31, 2003,
and the value realized by our named executive officers. The
table also provides information about the number and value of
options held by our named executive officers at
December&nbsp;31, 2003.
</FONT>

<P align="center">
<B><FONT size="2">Aggregated Option Exercises in Last Fiscal
Year and</FONT></B>

<DIV align="center">
<B><FONT size="2">Fiscal Year-End Option Values</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underlying Unexercised Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">In-the-Money Options at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Acquired on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Realized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer,&nbsp;M.D.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,812,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,928,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis, M.D
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,419,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The options that we granted to our executive
    officers, including Messrs.&nbsp;Chaney, Sblendorio and
    Altschuler and Dr.&nbsp;Adamis, were exercisable as of the date
    of grant. However, the shares purchasable upon exercise of these
    options are subject to our right of repurchase that, subject to
    continued employment on the applicable dates, lapses with
    respect to 25% of the shares on the first anniversary of the
    date of grant and thereafter in thirty-six monthly installments.
    As of December&nbsp;31, 2003, our right of repurchase had lapsed
    with respect to 91,667 of the shares underlying the options held
    by
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">74
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Sblendorio and 79,688 of the shares
    underlying the options held by Dr.&nbsp;Adamis. Our right of
    repurchase has not lapsed with respect to any of the shares
    underlying the options held by Messrs.&nbsp;Chaney and
    Altschuler.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There was no public trading market for our common
stock as of December&nbsp;31, 2003. Accordingly, as permitted by
the rules of the Securities and Exchange Commission, we have
calculated the value of unexercised in-the-money options at
fiscal year-end on the basis of an assumed fair market value of
our common stock as of December&nbsp;31, 2003 equal to the
initial public offering price of $21.00&nbsp;per share, less the
aggregate exercise price.
</FONT>

<P align="left">
<B><FONT size="2">Employment Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Guyer.</FONT></I><FONT size="2">
Pursuant to an employment agreement effective April&nbsp;12,
2000 and amended August&nbsp;25, 2003, we are employing
Dr.&nbsp;Guyer as our Chief Executive Officer. Under the amended
agreement, Dr.&nbsp;Guyer receives an annual base salary of
$308,275, subject to increases upon an annual review by our
board of directors. The amended agreement provides for a
discretionary annual bonus based on Dr.&nbsp;Guyer&#146;s
performance and our company&#146;s business results as
determined by our board of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Dr.&nbsp;Guyer may terminate his employment at any time, subject
to continuation of salary payment and benefits for
18&nbsp;months if we terminate Dr.&nbsp;Guyer&#146;s employment
without cause or if Dr.&nbsp;Guyer terminates his employment for
good reason. If we terminate Dr.&nbsp;Guyer&#146;s employment
without cause or if he terminates his employment for good reason
within three months before or 12&nbsp;months following a change
in control of our company, we are obligated to pay
Dr.&nbsp;Guyer a lump sum payment equal to two years of his then
current base salary and reimburse Dr.&nbsp;Guyer for the costs
of medical and dental benefits for up to 18&nbsp;months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr.&nbsp;Guyer&#146;s unvested
equity rights in our company will immediately vest, and if we
terminate Dr.&nbsp;Guyer&#146;s employment without cause or if
he terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Dr.&nbsp;Guyer&#146;s unvested equity rights in our company
will immediately vest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mr.&nbsp;Chaney.</FONT></I><FONT size="2">
Pursuant to an employment agreement dated August&nbsp;25, 2003,
we are employing Mr.&nbsp;Chaney as our Chief Operating Officer.
Under the agreement, Mr.&nbsp;Chaney receives an annual base
salary of $275,000, subject to increases upon an annual review
by our board of directors. The agreement also provides for a
monthly automobile allowance of $900 and that Mr.&nbsp;Chaney is
eligible to receive additional incentive compensation of up to
35% of his base salary at the sole discretion of our board of
directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the agreement, either we or Mr.&nbsp;Chaney
may terminate his employment at any time, subject to
continuation of salary payment and benefits for one year if we
terminate Mr.&nbsp;Chaney&#146;s employment without cause or if
Mr.&nbsp;Chaney terminates his employment for good reason. If we
terminate Mr.&nbsp;Chaney&#146;s employment without cause or if
he terminates his employment for good reason within three months
before or 12&nbsp;months following a change in control of our
company, we are obligated to pay Mr.&nbsp;Chaney a lump sum
payment equal to 15&nbsp;months of his then current base salary
and reimburse Mr.&nbsp;Chaney for the costs of medical and
dental benefits for up to 15&nbsp;months. The agreement also
provides that upon any change in control of our company, 50% of
all of Mr.&nbsp;Chaney&#146;s unvested equity rights in our
company will immediately vest, and if we terminate
Mr.&nbsp;Chaney&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Mr.&nbsp;Chaney&#146;s unvested equity rights in our company
will immediately vest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mr.&nbsp;Sblendorio.</FONT></I><FONT size="2">
Pursuant to an employment agreement dated February&nbsp;1, 2002
and amended October&nbsp;17, 2003, we are employing
Mr.&nbsp;Sblendorio as our Chief Financial Officer. Under the
amended agreement, Mr.&nbsp;Sblendorio receives an annual base
salary of $225,000, subject to increases upon an annual review
by our board of directors. The amended agreement provides for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a guaranteed bonus for Mr.&nbsp;Sblendorio&#146;s
    first year of employment with us equal to 20% of his base
    salary, which was paid in April 2003;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">75
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an additional discretionary annual bonus based on
    Mr.&nbsp;Sblendorio&#146;s performance and our business results
    as determined by our board of directors or our senior management
    upon the recommendation of our Chief Executive Officer;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of stock options to purchase
    200,000&nbsp;shares of common stock, which grant was made in
    February 2002.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Mr.&nbsp;Sblendorio may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr.&nbsp;Sblendorio&#146;s employment
without cause or if Mr.&nbsp;Sblendorio terminates his
employment for good reason. If we terminate
Mr.&nbsp;Sblendorio&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following a change in control of our
company, we are obligated to pay Mr.&nbsp;Sblendorio a lump sum
payment equal to 15&nbsp;months of his then current base salary
and reimburse Mr.&nbsp;Sblendorio for the costs of medical and
dental benefits for up to 15&nbsp;months. The amended agreement
also provides that upon any change in control of our company,
50% of all of Mr.&nbsp;Sblendorio&#146;s unvested equity rights
in our company granted after the amendment of his employment
agreement will immediately vest, and if we terminate
Mr.&nbsp;Sblendorio&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Mr.&nbsp;Sblendorio&#146;s unvested equity rights in our
company granted after the amendment of his employment agreement
will immediately vest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Dr.&nbsp;Adamis.</FONT></I><FONT size="2">
Pursuant to an employment agreement dated April&nbsp;12, 2002
and amended October&nbsp;20, 2003, we are employing
Dr.&nbsp;Adamis as our Chief Scientific Officer and Senior Vice
President, Research. Under the amended agreement,
Dr.&nbsp;Adamis receives an annual base salary of $275,000,
subject to increases upon an annual review by our board of
directors. The amended agreement provides for:
</FONT>
<P>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a signing bonus of $50,000, which was paid in
    2002;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a guaranteed bonus equal to 30% of his base
    salary;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an additional discretionary annual bonus based on
    Dr.&nbsp;Adamis&#146; performance and our company&#146;s
    business results as determined by our board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the grant of stock options to purchase
    225,000&nbsp;shares of common stock, which grant was made in
    July 2002;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of an additional 75,000&nbsp;shares of
    fully vested stock at a price of $1.36&nbsp;per share, which
    shares were purchased by Dr.&nbsp;Adamis in February 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the amended agreement, either we or
Dr.&nbsp;Adamis may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Dr.&nbsp;Adamis&#146; employment without
cause or if Dr.&nbsp;Adamis terminates his employment for good
reason. If we terminate Dr.&nbsp;Adamis&#146; employment without
cause or if he terminates his employment for good reason within
three months before or 12&nbsp;months following a change in
control of our company, we are obligated to pay Dr.&nbsp;Adamis
a lump sum payment equal to 15&nbsp;months of his then current
base salary and reimburse Dr.&nbsp;Adamis for the costs of
medical and dental benefits for up to 15&nbsp;months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr.&nbsp;Adamis&#146; unvested
equity rights in our company granted after the amendment of his
employment agreement will immediately vest, and if we terminate
Dr.&nbsp;Adamis&#146; employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Dr.&nbsp;Adamis&#146; unvested equity rights in our company
granted after the amendment of his employment agreement will
immediately vest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mr.&nbsp;Altschuler.</FONT></I><FONT size="2">
Pursuant to an employment agreement dated August&nbsp;25, 2003,
we are employing Mr.&nbsp;Altschuler as our General Counsel.
Under the agreement, Mr.&nbsp;Altschuler receives an annual base
salary of $250,000, subject to increases upon an annual review
by our board of directors. The agreement also provides that
Mr.&nbsp;Altschuler is eligible to receive additional incentive
compensation of up to 35% of his base salary at the sole
discretion of our board of directors.
</FONT>

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</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the agreement, either we or
Mr.&nbsp;Altschuler may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr.&nbsp;Altschuler&#146;s employment
without cause or if Mr.&nbsp;Altschuler terminates his
employment for good reason. If we terminate
Mr.&nbsp;Altschuler&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following a change in control of our
company, we are obligated to pay Mr.&nbsp;Altschuler a lump sum
payment equal to 15&nbsp;months of his then current base salary
and reimburse Mr.&nbsp;Altschuler for the costs of medical and
dental benefits for up to 15&nbsp;months. The agreement also
provides that upon any change in control of our company, 50% of
all of Mr.&nbsp;Altschuler&#146;s unvested equity rights in our
company will immediately vest, and if we terminate
Mr.&nbsp;Altschuler&#146;s employment without cause or if he
terminates his employment for good reason within three months
before or 12&nbsp;months following the change in control, 100%
of Mr.&nbsp;Altschuler&#146;s unvested equity rights in our
company will immediately vest.
</FONT>

<P align="left">
<B><FONT size="2">Stock Option and Other Compensation
Plans</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2001 Stock Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our 2001 stock plan, as amended, was adopted by
our board of directors and approved by our stockholders in 2001.
The plan provides for the grant of incentive stock options,
non-statutory stock options and restricted stock awards. A
maximum of 8,175,000&nbsp;shares of common stock are authorized
for issuance under our 2001 stock plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with the terms of the 2001 stock
plan, our board of directors has authorized our compensation
committee to administer the 2001 stock plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a change in control of our company occurs, an
option or other award under the 2001 stock plan will become
fully exercisable and fully vested if the option or award is not
assumed by the surviving corporation or its parent or if the
surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 2001 stock
plan. A change in control under the 2001 stock plan includes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a merger or consolidation after which our
    stockholders own less than 50% of the surviving corporation or
    its parent company;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of all or substantially all of our
    assets.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This accelerated vesting provision shall not
apply, however, to a transaction if its sole purpose is to
change the jurisdiction of our incorporation or to create a
holding company owned by our stockholders in substantially the
same proportions in which they owned our shares prior to the
transaction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we become a party to a merger or
consolidation, the agreement of merger or consolidation shall
provide the following for our outstanding options:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">continuation of the options by us, if we are the
    surviving corporation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumption of the options by the surviving
    corporation or its parent;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">replacement of the options by comparable options
    by the surviving corporation or its parent;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">accelerated vesting of the options, followed by
    their cancellation;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">cancellation for a cash payment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, there were options to
purchase 4,701,004&nbsp;shares of common stock outstanding under
the 2001 stock plan and options to purchase
1,611,648&nbsp;shares of common stock had been exercised. Since
the effective date of the 2003 stock incentive plan described
below, we have granted no further stock options or other awards
under the 2001 stock plan.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 Stock Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, our Board of
Directors approved our 2003 Stock Incentive Plan. The 2003 Stock
Incentive Plan, which was approved by stockholders in December
2003, became effective on January&nbsp;29, 2004. The plan
provides for the grant of incentive stock options, non-statutory
stock options, restricted stock awards and other stock-based
awards. Upon effectiveness, 4,400,000&nbsp;shares of common
stock were reserved for issuance under the 2003 stock incentive
plan. In addition, the 2003 stock incentive plan contains an
&#147;evergreen provision&#148; that allows for an annual
increase in the number of shares available for issuance under
the plan on the first day of each of our fiscal years during the
period beginning in fiscal year 2005 and ending on the second
day of fiscal year 2013. The annual increase in the number of
shares shall be equal to the lowest of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2,500,000&nbsp;shares;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">5% of our outstanding shares on the first day of
    the fiscal year;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an amount determined by our board of directors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this provision, no annual increase shall be
made to the extent that the number of shares of common stock
available for issuance under the 2003 stock incentive plan and
all other employee or director equity incentive plans, including
our 2003 employee stock purchase plan, would exceed 30% of our
outstanding shares on the first day of the applicable fiscal
year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with the terms of the 2003 stock
incentive plan, our board of directors has authorized our
compensation committee to administer the 2003 stock incentive
plan. In accordance with the provisions of the 2003 stock
incentive plan, our compensation committee will select the
recipients of awards and determine:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of common stock covered by
    options and the dates upon which the options become exercisable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the exercise price of options;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the duration of options;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the method of payment of the exercise
    price;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of common stock subject to
    any restricted stock or other stock-based awards and the terms
    and conditions of such awards, including conditions for
    repurchase, issue price and repurchase price.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition our board of directors or any
committee to which the board of directors delegates authority
has the authority, with the consent of the affected plan
participants, to reprice or otherwise amend outstanding options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon a merger or other reorganization event under
our 2003 stock incentive plan, our board of directors shall
provide that all of our outstanding options shall be assumed or
substituted by the successor corporation. However, if the
succeeding corporation does not agree to assume, or substitute
for, outstanding options, then our board of directors shall
provide that all unexercised options will become exercisable in
full prior to the completion of the reorganization event and
that these options will terminate upon the completion of the
reorganization event if not previously exercised. Our board of
directors may also provide for a cash payment equal to the value
of any outstanding options. If the reorganization event also
constitutes a change in control event under our 2003 stock
incentive plan, any assumed or substituted option will become
immediately exercisable in full if on or prior to the date that
is six months after the reorganization event an option
holder&#146;s employment with us or our succeeding corporation
is terminated by us or the succeeding corporation without cause,
as defined in our 2003 stock incentive plan. In addition, upon a
change in control event that is not also a reorganization event
under our 2003 stock incentive plan, each option will continue
to vest according to its original vesting schedule, except that
an option will become immediately exercisable in full if on or
prior to the date that is six months after the change in
</FONT>

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<DIV align="left">
<FONT size="2">control event an option holder&#146;s employment
with us or the succeeding corporation is terminated by us or the
succeeding corporation without cause. Our 2003 stock incentive
plan provides similar change in control vesting provisions for
restricted stock and other awards under the plan.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, there were options to
purchase 1,028,660&nbsp;shares of common stock outstanding under
the 2003 incentive stock plan, and no options under the 2003
stock plan had been exercised. In addition, 37,501&nbsp;shares
of restricted common stock granted under the 2003 stock
incentive plan had not been issued as of March&nbsp;31, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 Employee Stock Purchase
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, our Board of
Directors approved our 2003 Employee Stock Purchase Plan. The
2003 Purchase Plan, which was approved by stockholders in
December 2003, became effective on January&nbsp;29, 2004. The
plan provides for the issuance of up to 500,000&nbsp;shares of
our common stock to participating employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our employees, including directors who are
employees, and all employees of any participating subsidiaries:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whose customary employment is more than
    20&nbsp;hours per week for more than five months in a calendar
    year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">who were employed by us for at least 90&nbsp;days
    prior to enrolling;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">who are employed on the first day of a designated
    payroll deduction offering period
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">are eligible to participate in the 2003 employee
stock purchase plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employees who would immediately after the grant
of an option under the 2003 employee stock purchase plan own 5%
or more of the total combined voting power or value of our stock
or the stock of any of our subsidiaries are not eligible to
participate in the purchase plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will make one or more offerings to our
employees to purchase stock under the 2003 employee stock
purchase plan. Offerings will begin on each February&nbsp;1 and
August&nbsp;1, except that our first offering commencement date
will begin on the date on which trading of our common stock
commences on the Nasdaq National Market in connection with this
offering. Each offering commencement date will begin a six-month
period during which payroll deductions will be made and held for
the purchase of our common stock at the end of the purchase plan
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On the first day of a designated payroll
deduction period, or offering period, we will grant to each
eligible employee who has elected to participate in the purchase
plan an option to purchase shares of our common stock as
follows: the employee may authorize up to 10% of his or her base
pay to be deducted by us during the offering period. On the last
day of the offering period, the employee is deemed to have
exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the
purchase plan, the option exercise price is an amount equal to
85% of the lower of the closing price of our common stock on the
first day or the last day of the offering period. For purposes
of the first offering period under the purchase plan, the
closing price of our common stock on the first day of such
period is deemed to equal the initial public offering price per
share in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In no event may an employee purchase in any one
offering period a number of shares which exceeds the number of
shares determined by dividing:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the product of $2,083 and the number of full
    months in the offering period, by
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the closing price of a share of our common stock
    on the commencement date of the offering period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors may, in its discretion,
choose a different offering period for each subsequent offering.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An employee who is not a participant on the last
day of the offering period is not entitled to exercise any
option, and the employee&#146;s accumulated payroll deductions
will be refunded. An employee&#146;s rights under the purchase
plan terminate upon voluntary withdrawal from the purchase plan
at any time, or when the employee ceases employment for any
reason, except that upon termination of employment because of
death, the balance in the employee&#146;s account will be paid
to the employee&#146;s beneficiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because participation in the purchase plan is
voluntary, we cannot now determine the number of shares of our
common stock to be purchased by any particular current executive
officer, by all current executive officers as a group or by
non-executive employees as a group.
</FONT>

<P align="left">
<B><FONT size="2">Limitation of Liability and Indemnification of
Officers and Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation limits the
personal liability of directors for breach of fiduciary duty to
the maximum extent permitted by the Delaware General Corporation
Law. Our certificate of incorporation provides that no director
will have personal liability to us or to our stockholders for
monetary damages for breach of fiduciary duty or other duty as a
director. However, these provisions do not eliminate or limit
the liability of any of our directors:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for any breach of their duty of loyalty to us or
    our stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for voting or assenting to unlawful payments of
    dividends or other distributions;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for any transaction from which the director
    derived an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amendment to or repeal of these provisions
will not eliminate or reduce the effect of these provisions in
respect of any act or failure to act, or any cause of action,
suit or claim that would accrue or arise prior to any amendment
or repeal or adoption of an inconsistent provision. If the
Delaware General Corporation Law is amended to provide for
further limitations on the personal liability of directors of
corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the
Delaware General Corporation Law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our certificate of incorporation
provides that we must indemnify our directors and officers and
we must advance expenses, including attorneys&#146; fees, to our
directors and officers in connection with legal proceedings,
subject to very limited exceptions.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;10b5-1 Sales Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our directors and executive officers may adopt
written plans, known as Rule&nbsp;10b5-1 plans, in which they
will contract with a broker to buy or sell shares of our common
stock on a periodic basis. Under a Rule&nbsp;10b5-1 plan, a
broker executes trades pursuant to parameters established by the
director or officer when entering into the plan, without further
direction from them. The director or officer may amend or
terminate the plan in some circumstances. Our directors and
executive officers may also buy or sell additional shares
outside of a Rule&nbsp;10b5-1 plan when they are not in
possession of material nonpublic information.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Drs.&nbsp;Guyer, Adamis and Patel and
Messrs.&nbsp;Sblendorio and Altschuler have adopted
Rule&nbsp;10b5-1 plans. The sale of any shares under such plans
are subject to lock-up agreements with the underwriters expiring
90&nbsp;days after the date of this prospectus, except that
sales under the Rule 10b5-1 plan of Mr.&nbsp;Altschuler are
subject to a lock-up agreement that will expire on July&nbsp;28,
2004.
</FONT>

<P align="center"><FONT size="2">80
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our incorporation in February 2000, we have
engaged in the following transactions with our directors and
officers and holders of more than 5% of our voting securities
and affiliates of our directors, officers and 5% stockholders:
</FONT>

<P align="left">
<B><FONT size="2">Stock Issuances</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Common Stock to
    Founders</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, in connection with our formation,
we issued common stock at a price per share of $0.01 to the
following directors:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John P. McLaughlin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;A Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, we issued 120,000&nbsp;shares of
our series A convertible preferred stock at a price per share of
$1.25 to the following directors:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Series&nbsp;A Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John P. McLaughlin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series A convertible preferred
stock automatically converted into an aggregate of
120,000&nbsp;shares of our common stock upon the consummation of
our initial public offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;B Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2000 and January 2001, we issued an
aggregate of 5,786,998&nbsp;shares of our series B convertible
preferred stock at a price per share of $6.00 for a total
purchase price of $34.7&nbsp;million. We also issued warrants to
purchase an aggregate of 1,142,902&nbsp;shares of series B
convertible preferred stock at an exercise price of
$6.00&nbsp;per share in connection with our series B financing.
The following table sets forth the number of series B shares and
warrants sold to our 5% stockholders and their affiliates.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="37%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;B</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series B convertible preferred
stock automatically converted into an aggregate of
5,786,998&nbsp;shares of our common stock upon the consummation
of our initial public offering. All warrants issued as part of
our series B Financing were exercised prior to completion of our
initial public offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;C Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July and August 2001, we issued an aggregate
of 7,964,229&nbsp;shares of our series&nbsp;C-1 convertible
preferred stock at a price per share of $6.80 for a total
purchase price of $54.2&nbsp;million. We also issued warrants to
purchase an aggregate of 1,592,846&nbsp;shares of
series&nbsp;C-1 convertible preferred stock at an
</FONT>

<P align="center"><FONT size="2">81
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">exercise price of $6.80&nbsp;per share in
connection with this portion of our series&nbsp;C financing. The
following table sets forth the number of
series&nbsp;C-1&nbsp;shares and warrants sold to our 5%
stockholders and their affiliates in July and August 2001.
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;C-1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech&nbsp;II, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,749,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">JPMorgan Partners (BHCA), LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,499,998</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Biotech Growth N.V.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,470,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">294,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,999,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital, LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,176,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,999,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;C-1 convertible
preferred stock converted into an aggregate of
7,964,229&nbsp;shares of common stock upon the consummation of
our initial public offering. All warrants were exercised prior
to completion of our initial public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 2002, we issued an aggregate of
7,521,777&nbsp;shares of our series&nbsp;C-2 convertible
preferred stock at a price per share of $7.20 for a total
purchase price of $54.2&nbsp;million. We also issued warrants to
purchase an aggregate of 1,504,354&nbsp;shares of
series&nbsp;C-2 convertible preferred stock at an exercise price
of $7.20&nbsp;per share in connection with this portion of our
series&nbsp;C financing. The following table sets forth the
number of series&nbsp;C-2&nbsp;shares and warrants sold to our
5% stockholders and their affiliates in August 2002.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Series&nbsp;C-2</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Purchase Price</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech&nbsp;II, L.P.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,750,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Entities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,444</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">JPMorgan Partners (BHCA), LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,736,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">347,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,499,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Biotech Growth N.V.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,388,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,999,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital, LP
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,111,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,999,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">All shares of our series&nbsp;C-2 convertible
preferred stock converted into an aggregate of
7,521,777&nbsp;shares of common stock upon the consummation of
our initial public offering. All warrants were exercised prior
to completion of our initial public offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Issuance of Series&nbsp;D Convertible
    Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, in connection with our Pfizer
collaboration, we issued an aggregate of 2,747,253&nbsp;shares
of our series&nbsp;D convertible preferred stock to an affiliate
of Pfizer at a price per share of $9.10 for a total purchase
price of $25.0&nbsp;million. All shares of our series D
convertible preferred stock automatically converted into an
aggregate of 2,747,253&nbsp;shares of common stock upon the
consummation of our initial public offering.
</FONT>

<P align="left">
<B><FONT size="2">Certain Relationships</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pfizer Collaboration</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, we entered into collaboration,
license and related agreements with Pfizer to collaboratively
develop, manufacture and commercialize Macugen for the
prevention and treatment of diseases of the eye and related
conditions. These agreements are discussed above under the
heading &#147;Business&nbsp;&#151; Collaboration with
Pfizer.&#148;
</FONT>

<P align="center"><FONT size="2">82
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consulting Agreement with Samir
    Patel</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From October 2001 through December 2003, we were
party to a consulting agreement with Samir Patel, one of our
founders and a member of our Board, under which Dr.&nbsp;Patel
provided consulting services to us relating to our development,
clinical investigation and commercialization of Macugen. Under
the terms of the agreement, Dr.&nbsp;Patel provided at least
40&nbsp;hours per month of consulting services to us in exchange
for annual compensation of $85,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed to extend Dr.&nbsp;Patel&#146;s
consulting arrangement with us through September 2004. Under
such arrangement, Dr.&nbsp;Patel provides us with consulting
services as defined in his agreement and will be paid a monthly
consultancy fee of $22,650. He is also eligible for a
discretionary bonus of up to 25% of such consultancy fee. In
addition, Dr.&nbsp;Patel has received payment from January 2004
based on his current consultancy rate for providing services for
us since the end of his prior arrangement with us in December
2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loan to Executive Officer</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;1, 2002, we provided a loan to
Anthony&nbsp;P. Adamis, our Chief Scientific Officer and Senior
Vice President, Research, that is evidenced by a promissory note
in the aggregate principal amount of $102,000. The note bears
interest at a fixed annual rate of 4.71%, with the interest
payable at maturity, and matures in July 2008. Dr.&nbsp;Adamis
used the proceeds from the loan to acquire 75,000&nbsp;shares of
our common stock. Dr.&nbsp;Adamis has pledged those shares to
secure the loan. As of March&nbsp;31, 2004, the total amount
outstanding under the loan was approximately $110,000 including
accrued interest.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Director Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Please see &#147;Management&nbsp;&#151; Director
Compensation&#148; for a discussion of options granted to our
non-employee directors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Executive Compensation and Employment
    Agreements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Please see &#147;Management&nbsp;&#151; Executive
Compensation&#148; and &#147;&#151;&nbsp;Stock Options&#148; for
additional information on compensation of our executive
officers. Information regarding employment agreements with
several of our executive officers is set forth under
&#147;Management&nbsp;&#151; Employment Agreements.&#148;
</FONT>

<P align="center"><FONT size="2">83
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "PRINCIPAL AND SELLING STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL AND SELLING STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information with
respect to the beneficial ownership of our common stock as of
March&nbsp;23, 2004, by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our named executive officers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person, or group of affiliated persons, who
    is known by us to beneficially own more than 5% of our common
    stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all of our directors and executive officers as a
    group;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our selling stockholders participating in
    this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares beneficially owned by each
entity, person, director or executive officer is determined
under the rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has the sole or shared voting
power or investment power and also any shares that the
individual has the right to acquire as of May&nbsp;22, 2004,
60&nbsp;days after March&nbsp;23, 2004, through the exercise of
any stock option or other right. Unless otherwise indicated,
each person has sole investment and voting power, or shares such
powers with his or her spouse, with respect to the shares set
forth in the following table. The percentage of shares owned
before and after the offering is based on 39,660,272 shares
outstanding on March&nbsp;23, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The information in the table-below with respect
to each selling stockholder has been obtained from that selling
stockholder. When we refer to the &#147;selling
stockholders&#148; in this prospectus, we mean those persons
listed in the table below as offering shares as well as the
pledgees, donees, assignees, transfees, successors and others
who may hold any of the selling stockholders&#146; interest.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as otherwise set forth below, the street
address of the beneficial owner is c/o&nbsp;Eyetech
Pharmaceuticals,&nbsp;Inc., 3&nbsp;Times Square, New&nbsp;York,
New&nbsp;York 10036.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Before the Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">After the Offering</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offered(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">5% Stockholders</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J.P.&nbsp;Morgan Partners (BHCA), L.P.(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,111,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,300,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1221 Avenue of the Americas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New&nbsp;York, NY 10020
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">BB Biotech AG(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,431,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,431,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vodergasse&nbsp;3
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CH-8300 Schaffhausen, Switzerland
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schroder Ventures Entities(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,714,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">531,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,183,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">22 Church Street
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hamilton, Bermuda HM 11
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pfizer Inc.(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,223,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,223,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">235&nbsp;E.&nbsp;42nd&nbsp;Street
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New&nbsp;York, NY 10017
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">MPM Capital, LP(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,745,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,745,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">111 Huntington Avenue, 31st&nbsp;Floor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Boston, MA 02199
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch Entities(7)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,572,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">504,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,068,718</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">95 Greene Street, 7th Floor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jersey City, NJ 07302
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">84
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Before the Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">After the Offering</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offered(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Owned</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lakeview EyeTech(8)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,281,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,834,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">125&nbsp;S.&nbsp;Wacker Drive, Suite&nbsp;1675
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Chicago,&nbsp;IL 60606
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Directors and Executive Officers</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John P. McLaughlin(9)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">595,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">595,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David R. Guyer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,470,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,249,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Paul G. Chaney(10)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glenn P. Sblendorio(11)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anthony P. Adamis(12)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Douglas H. Altschuler(13)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Srinivas Akkaraju(14)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,081,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,270,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marty Glick(15)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">598,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">538,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael Mullen(16)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,461,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,461,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Samir Patel(17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">545,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">463,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Edward Penhoet(18)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,279,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,034,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Henry Simon(19)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Damion E. Wicker(20)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,081,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,270,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All directors and executive officers as a group
    (13&nbsp;persons)(21)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,090,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,460,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,630,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Other Selling Stockholders</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alta BioPharma Partners II, L.P.(22)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,249,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,004,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gilead Sciences, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">646,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">646,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">International Biotechnology Trust plc(23)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">810,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">651,471</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arthur J. Remillard Jr.(24)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">719,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">578,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denis O&#146;Shaughnessy(25)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loni DaSilva(26)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">155,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Evelyn Harrison(27)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">155,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Emmett Cunningham(28)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alta Embarcadero BioPharma Partners&nbsp;II,
    LLC(28)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,078</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Less than 1%.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Assumes that the underwriters do not exercise
    their over-allotment option. In the event that the
    over-allotment option is exercised, certain of the selling
    stockholders will sell additional shares of common stock to
    cover overallotments as set forth in the footnotes below.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    4,051,119&nbsp;shares held by J.P.&nbsp;Morgan Partners
    (BHCA)&nbsp;LP and also includes 60,000&nbsp;shares of common
    stock issuable upon exercise of stock options exercisable within
    60&nbsp;days of March&nbsp;23, 2004 granted to Dr.&nbsp;Akkaraju
    and Dr.&nbsp;Wicker. Drs.&nbsp;Akkaraju and Wicker are obligated
    to transfer any shares issued upon exercise of these stock
    options to J.P.&nbsp;Morgan Partners (BHCA), L.P. The general
    partner of J.P.&nbsp;Morgan Partners (BHCA), L.P. is JPMP Master
    Fund Manager, L.P., the general partner of which is JPMP Capital
    Corp., a wholly owned subsidiary of J.P.&nbsp;Morgan
    Chase&nbsp;&#38; Co., a publicly traded company. Each of JPMP
    Master Fund Manager, L.P., JPMP Capital Corp. and
    J.P.&nbsp;Morgan Chase&nbsp;&#38; Co. may be deemed beneficial
    owners of the shares held by J.P.&nbsp;Morgan Partners (BHCA),
    L.P., however, each disclaims beneficial ownership except to the
    extent of its pecuniary interest therein. Dr.&nbsp;Wicker, a
    member of our Board, is a Partner with J.P.&nbsp;Morgan
    Partners, LLC, an affiliate of J.P.&nbsp;Morgan Partners (BHCA),
    L.P., and an executive officer of JPMP Capital Corp., and may be
    deemed to hold voting and dispositive power for these shares.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">85
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned consists
    of 3,431,362&nbsp;shares held by Biotech Growth, N.V., a wholly
    owned subsidiary of BB Biotech AG. Mr.&nbsp;Mullen, a member of
    our Board, is President of Bellevue Research,&nbsp;Inc., a
    wholly owned subsidiary of Asset Management N.V., which is the
    asset manager for BB Biotech&#146;s portfolios, and may be
    deemed to hold voting and dispositive power for these shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    1,590,733&nbsp;shares held by Schroder Ventures International
    Life Sciences Fund&nbsp;II, LP1, 311,681 of which are being sold
    in this offering; 677,484&nbsp;shares held by Schroder Ventures
    International Life Sciences Fund&nbsp;II, LP2, 132,743 of which
    are being sold in this offering; 180,544&nbsp;shares held by
    Schroder Ventures International Life Sciences Fund&nbsp;II, LP3,
    35,375 of which are being sold in this offering;
    24,539&nbsp;shares held by Schroder Ventures International Life
    Sciences Fund&nbsp;II Strategic Partners LP, 4,808 of which are
    being sold in this offering; 39,551&nbsp;shares held by SITCO
    Nominees Ltd VCO 1903, 7,749 of which are being sold in this
    offering; 6,194&nbsp;shares held by Schroder Ventures
    International Life Sciences Fund&nbsp;II Group Co-Investment
    Scheme, 1,214 of which are being sold in this offering;
    195,928&nbsp;shares held by SV (Nominees) Limited as nominee for
    Schroder Ventures Investments Limited, 38,389 of which are being
    sold in this offering. Schroder Venture Managers Limited is the
    fund manager for the Schroder entities. The investment committee
    of Schroder Venture Managers Limited consists of Nichola Walker,
    Gary Carr, Deborah Speight, Douglas Mello and Peter Everson, all
    of whom share voting and dispositive power over these shares.
    The number of shares offered does not include the following
    maximum number of additional shares that each of the Schroder
    entities has agreed to sell, in each case to cover
    overallotments: Schroder Ventures International Life Sciences
    Fund&nbsp;II, LP1 - 91,898&nbsp;shares; Schroder Ventures
    International Life Sciences Fund&nbsp;II, LP2 -
    39,139&nbsp;shares; Schroder Ventures International Life
    Sciences Fund&nbsp;II, LP3 - 10,430&nbsp;shares; Schroder
    Ventures International Life Sciences Fund&nbsp;II Strategic
    Partners LP - 1,418&nbsp;shares; SITCO Nominees Ltd VCO 1903 -
    2,285&nbsp;shares; Schroder Ventures International Life Sciences
    Fund&nbsp;II Group Co-Investment Scheme&nbsp;- 358&nbsp;shares;
    and SV (Nominees) Limited as nominee for Schroder Ventures
    Investments Limited - 11,319&nbsp;shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Shares are held by Pfizer Overseas
    Pharmaceuticals, an affiliate of Pfizer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    165,940&nbsp;shares held by MPM BioVentures&nbsp;II, L.P.;
    1,503,730&nbsp;shares held by MPM BioVentures&nbsp;II-QP, L.P.;
    529,494&nbsp;shares held by MPM BioVentures GmbH&nbsp;&#38; Co.
    Parallel-Beteiligungs KG; 31,225&nbsp;shares held by MPM Asset
    Management Investors 2001 LLC; and 514,706&nbsp;shares held by
    MPM BioEquities Master Fund, LP. MPM Capital, LP and Medical
    Portfolio Management LLC, its general partner, are direct or
    indirect parent entities of MPM Asset Management LLC and MPM
    BioEquities Adviser, LLC, funds managed or advised by them
    (including MPM BioVentures&nbsp;II, L.P., MPM
    BioVentures&nbsp;II-QP., MPM BioVentures GmbH&nbsp;&#38; Co.
    Parallel-Beteiligungs KG, MPM Asset Management Investors 2001
    LLC and MPM BioEquities Master Fund, L.P.) and the general
    partners of such funds, and may be deemed to beneficially hold
    the securities owned by such funds, however, each disclaim
    beneficial ownership except to the extent of its pecuniary
    interest.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    700,952&nbsp;shares held by Merrill Lynch KECALP L.P. 1999,
    137,341 of which are being sold in this offering;
    60,952&nbsp;shares held by KECALP Inc., as nominee for Merrill
    Lynch KECALP International L.P. 1999, 11,943 of which are being
    sold in this offering; and 1,810,922&nbsp;shares held by Merrill
    Lynch Ventures L.P. 2001, 354,824 of which are being sold in
    this offering. Merrill Lynch KECALP L.P. 1999, Merrill Lynch
    KECALP International L.P. 1999 and Merrill Lynch Ventures L.P.
    2001 are affiliates of Merrill Lynch, Pierce, Fenner&nbsp;&#38;
    Smith Incorporated, one of the underwriters of our initial
    public offering and this offering. The number of shares offered
    does not include up to 40,495, 3,521 and 104,619&nbsp;shares
    that Merrill Lynch KECALP L.P. 1999, KECALP Inc., as nominee for
    Merrill Lynch KECALP International L.P. 1999 and Merrill Lynch
    Ventures L.P. 2001, respectively, have agreed to sell, in each
    case, to cover overallotments.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">86
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    1,714,285&nbsp;shares held by Lakeview EyeTech, L.P., 335,889 of
    which are being sold in this offering; and 567,155&nbsp;shares
    held by Lakeview EyeTech&nbsp;II, L.P., 111,126 of which are
    being sold in this offering. The general partner of Lakeview
    Eyetech, L.P. and Lakeview Eyetech&nbsp;II, L.P. is Private
    Capital Investors, L.L.C. The managing partner of Private
    Capital Investors, L.L.C. is Thomas Elden, who disclaims
    beneficial ownership of the shares held by Lakeview Eyetech,
    L.P. or Lakeview Eyetech&nbsp;II, L.P., except to the extent of
    his pecuniary interest therein. The number of shares offered
    does not include up to 99,036&nbsp;shares that Lakeview
    EyeTech,&nbsp;L.P. and 32,765&nbsp;shares that Lakeview
    EyeTech&nbsp;II, L.P. has agreed to sell, in each case, to cover
    overallotments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    105,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 85,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned consists
    of 275,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004. Our right to repurchase will not have lapsed within
    60&nbsp;days of March&nbsp;23, 2004 with respect to any of the
    shares underlying the options held by Mr.&nbsp;Chaney.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned consists
    of 200,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 112,500&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    225,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 103,125&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned consists
    of 200,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004 of which our right to repurchase 50,001&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(14)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004; also
    includes the shares described in Note (2)&nbsp;above.
    Dr.&nbsp;Akkaraju is obligated to transfer any shares issued
    upon exercise of the stock options granted to him to
    J.P.&nbsp;Morgan Partners (BHCA), L.P. As discussed in Note
    (2)&nbsp;above, Dr.&nbsp;Akkaraju may be deemed to hold voting
    and dispositive power of the shares described in Note&nbsp;(2).
    However, Dr.&nbsp;Akkaraju disclaims beneficial ownership of the
    shares held by J.P.&nbsp;Morgan Partners (BHCA), L.P., except to
    the extent of his pecuniary interest therein. Please see
    Note&nbsp;(2) for information regarding the sale of shares by
    J.P.&nbsp;Morgan Partners (BHCA),&nbsp;L.P.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(15)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(16)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004; also
    includes the shares described in Note&nbsp;(3) above.
    Mr.&nbsp;Mullen disclaims beneficial ownership of the shares
    held by Biotech Growth N.V., except to the extent of his
    pecuniary interest therein.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(17)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(18)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004. This
    number also includes 1,249,356&nbsp;shares held by Alta
    BioPharma Partners&nbsp;II, LP. Mr.&nbsp;Penhoet is a director
    of Alta BioPharma Management&nbsp;II, LLC, which is the general
    partner of Alta BioPharma Partners&nbsp;II, L.P.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">87
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">and a limited partner of Alta BioPharma Partners,
    L.P. Mr.&nbsp;Penhoet disclaims beneficial ownership of all such
    shares held by the Alta BioPharma Partners&nbsp;II, L.P, except
    to the extent of his proportionate pecuniary interests therein.
    Alta BioPharma Partners&nbsp;II, L.P. is selling the 244,793
    shares and may sell up to an additional 72,176&nbsp;shares to
    cover overallotments.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(19)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned consists
    of 30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    Mr.&nbsp;Simon is a special partner of Schroder Ventures Life
    Sciences Advisors,&nbsp;Inc., an affiliate of the Schroder
    entities described in Note&nbsp;(4) above, but does not have
    beneficial ownership of the shares held by those entities under
    Section&nbsp;13(d) of the Exchange Act and the rules and
    regulations of the SEC thereunder because he does not have
    voting or investment power over those shares. Please see
    Note&nbsp;(4) for information regarding the sale of shares by
    the Schroder entities.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(20)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    30,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 10,625&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004; also
    includes the shares described in Note&nbsp;(2) above.
    Dr.&nbsp;Wicker is obligated to transfer any shares issued upon
    exercise of the stock options granted to him to J.P.&nbsp;Morgan
    Partners (BHCA), L.P. As discussed in Note&nbsp;(2) above,
    Dr.&nbsp;Wicker may be deemed to hold voting and dispositive
    power of the shares described in Note&nbsp;(2). However,
    Dr.&nbsp;Wicker disclaims beneficial ownership of the shares
    held by J.P.&nbsp;Morgan Partners (BHCA), L.P., except to the
    extent of his pecuniary interest therein. Please see
    Note&nbsp;(2) for information regarding the sale of shares by
    J.P.&nbsp;Morgan Partners (BHCA), L.P.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(21)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares beneficially owned includes
    1,215,000&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 425,626&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004. This
    number also includes the shares described in Notes&nbsp;(2),
    (3)&nbsp;and (18).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(22)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares offered does not include up
    to 72,176&nbsp;shares that Alta BioPharma Partners II, L.P. has
    agreed to sell to cover overallotments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(23)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares offered does not include up
    to 46,807&nbsp;shares that International Biotechnology Trust plc
    has agreed to sell to cover overallotments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(24)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares offered does not include
    41,573 shares that Mr.&nbsp;Remillard has agreed to sell to
    cover overallotments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(25)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dr.&nbsp;O&#146;Shaughnessy has been Senior Vice
    President, Clinical of Eyetech since August 2000. The number of
    shares beneficially owned consists of 255,000&nbsp;shares of
    common stock issuable upon exercise of stock options exercisable
    within 60&nbsp;days of March&nbsp;23, 2004, of which our right
    to repurchase 239,375&nbsp;shares will have lapsed within
    60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(26)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Ms.&nbsp;daSilva has been Vice President,
    Regulatory of Eyetech since October 2000. The number of shares
    beneficially owned consists of 155,000&nbsp;shares of common
    stock issuable upon exercise of stock options exercisable within
    60&nbsp;days of March&nbsp;23, 2004, of which our right to
    repurchase 142,500&nbsp;shares will have lapsed within
    60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(27)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Ms.&nbsp;Harrison has been Vice President,
    Clinical Development of Eyetech since August 2000. The number of
    shares beneficially owned consists of 155,000&nbsp;shares of
    common stock issuable upon exercise of stock options exercisable
    within 60&nbsp;days of March&nbsp;23, 2004, of which our right
    to repurchase 145,625&nbsp;shares will have lapsed within
    60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(28)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Dr.&nbsp;Cunningham has been Vice President,
    Clinical and Research Development and Licensing of Eyetech since
    April 2002. The number of shares beneficially owned includes
    117,110&nbsp;shares of common stock issuable upon exercise of
    stock options exercisable within 60&nbsp;days of March&nbsp;23,
    2004, of which our right to repurchase 47,100&nbsp;shares will
    have lapsed within 60&nbsp;days of March&nbsp;23, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(29)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The number of shares offered does not include
    2,161 shares that Alta Embarcadero BioPharma Partners II, LLC
    has agreed to sell to cover overallotments.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">88
</FONT>
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<DIV align="left">
<A name='115'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description of our capital stock
and provisions of our certificate of incorporation and bylaws
are summaries and are qualified by reference to the certificate
of incorporation and the bylaws currently in effect. Copies of
these documents have been filed with the Securities and Exchange
Commission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, our authorized capital
stock consisted of 125,000,000&nbsp;shares of common stock, par
value $0.01&nbsp;per share, and 5,000,000&nbsp;shares of
preferred stock, par value $0.01&nbsp;per share, all of which
preferred stock has not been designated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, we had issued and
outstanding 40,337,109&nbsp;shares of common stock, held by 269
stockholders of record.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of common stock are entitled to one vote
for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are
entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive
proportionately our net assets available after the payment of
all debts and other liabilities and subject to the prior rights
of any outstanding preferred stock. Holders of common stock have
no preemptive, subscription, redemption or conversion rights.
The rights, preferences and privileges of holders of common
stock are subject to and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock
that we may designate and issue in the future.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of our certificate of
incorporation, our board of directors is authorized to issue
shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences of each series of preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of authorizing our board of directors
to issue preferred stock and determine its rights and
preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock,
while providing flexibility in connection with possible
acquisitions, future financings and other corporate purposes,
could have the effect of making it more difficult for a third
party to acquire, or could discourage a third party from seeking
to acquire, a majority of our outstanding voting stock. There
are no shares of preferred stock outstanding and we have no
present plans to issue any shares of preferred stock.
</FONT>

<P align="left">
<B><FONT size="2">Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2004, options to purchase
5,729,664&nbsp;shares of common stock at a weighted average
exercise price of $7.49&nbsp;per share were outstanding.
</FONT>

<P align="left">
<B><FONT size="2">Antitakeover Provisions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to Section&nbsp;203 of the General
Corporation Law of the State of Delaware. Subject to certain
exceptions, Section&nbsp;203 prevents a publicly held Delaware
corporation from engaging in a &#147;business combination&#148;
with any &#147;interested stockholder&#148; for three years
following the date that the person became an interested
stockholder, unless the interested stockholder attained such
status with the approval of our board of directors or unless the
business combination is approved in a prescribed manner. A
&#147;business
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">combination&#148; includes, among other things, a
merger or consolidation involving us, and the interested
stockholder and the sale of more than 10% of our assets. In
general, an &#147;interested stockholder&#148; is any entity or
person beneficially owning 15% or more of our outstanding voting
stock and any entity or person affiliated with or controlling or
controlled by such entity or person. The restrictions contained
in Section&nbsp;203 are not applicable to any of our existing
stockholders.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and our bylaws
divide our board of directors into three classes with staggered
three-year terms. In addition, our certificate of incorporation
and our bylaws provide that directors may be removed only for
cause and only by the affirmative vote of the holders of 75% of
our shares of capital stock present in person or by proxy and
entitled to vote. Under our certificate of incorporation and
bylaws, any vacancy on our board of directors, including a
vacancy resulting from an enlargement of our board of directors,
may be filled only by vote of a majority of our directors then
in office. The classification of our board of directors and the
limitations on the ability of our stockholders to remove
directors and fill vacancies could make it more difficult for a
third party to acquire, or discourage a third party from seeking
to acquire, control of our company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and our bylaws
provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of
stockholders may only be taken if it is properly brought before
such meeting and may not be taken by written action in lieu of a
meeting. Our certificate of incorporation and our bylaws also
provide that, except as otherwise required by law, special
meetings of the stockholders can only be called by our chairman
of the board, our chief executive officer or our board of
directors. In addition, our bylaws establish an advance notice
procedure for stockholder proposals to be brought before an
annual meeting of stockholders, including proposed nominations
of candidates for election to our board of directors.
Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before
the meeting by or at the direction of our board of directors or
by a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered
timely written notice in proper form to our secretary of the
stockholder&#146;s intention to bring such business before the
meeting. These provisions could have the effect of delaying
until the next stockholder meeting stockholder actions that are
favored by the holders of a majority of our outstanding voting
securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The General Corporation Law of the State of
Delaware provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is
required to amend a corporation&#146;s certificate of
incorporation or bylaws, unless a corporation&#146;s certificate
of incorporation or bylaws, as the case may be, requires a
greater percentage. Our bylaws may be amended or repealed by a
majority vote of our board of directors or by the affirmative
vote of the holders of at least 75% of the votes which all our
stockholders would be entitled to cast in any annual election of
directors. In addition, the affirmative vote of the holders of
at least 75% of the votes which all our stockholders would be
entitled to cast in any election of directors is required to
amend or repeal or to adopt any provisions inconsistent with any
of the provisions of our certificate of incorporation described
in the prior two paragraphs.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, holders of an
aggregate of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares (or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares, if the underwriters exercise their overallotment option
in full) of our common stock have the right to require us to
register these shares under the Securities Act under specific
circumstances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Demand Registration
Rights.</FONT></I><FONT size="2"> Beginning August&nbsp;4, 2004,
subject to specified limitations, these stockholders may require
that we register all or part of these securities for sale under
the Securities Act. Until we are entitled to register our shares
on Form&nbsp;S-3, a short form registration statement, these
holders may only make three demands for registration of their
securities. Once we are entitled to use Form&nbsp;S-3, holders
of these shares may make demands for registrations on
Form&nbsp;S-3 on up to two occasions during any 12-month period.
</FONT>

<P align="center"><FONT size="2">90
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Incidental Registration
Rights.</FONT></I><FONT size="2"> If we register any of our
common stock, either for our own account or for the account of
other security holders, these stockholders are entitled to
notice of the registration and to include their shares of common
stock in the registration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Limitations and
Expenses.</FONT></I><FONT size="2"> Other than in a demand
registration, with specified exceptions, a holder&#146;s right
to include shares in a registration is subject to the right of
the underwriters to limit the number of shares included in the
offering. We will pay all fees, costs and expenses of any demand
or incidental registrations, and the holders of the securities
being registered will pay all selling expenses.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transfer agent and registrar for our common
stock is American Stock Transfer&nbsp;&#38; Trust Company.
</FONT>

<P align="left">
<B><FONT size="2">Nasdaq National Market</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our common stock is quoted on the Nasdaq National
Market under the symbol &#147;EYET.&#148;
</FONT>

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</FONT>

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<DIV align="left">
<A name='116'></A>
</DIV>

<!-- link1 "UNDERWRITERS" -->

<P align="center">
<B><FONT size="2">UNDERWRITERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Merrill
Lynch, Pierce, Fenner&nbsp;&#38; Smith Incorporated, Morgan
Stanley&nbsp;&#38; Co. Incorporated and Bear, Stearns&nbsp;&#38;
Co. Inc. are acting as representatives, have severally agreed to
purchase, and the selling stockholders have agreed to sell to
them, severally, the number of shares indicated below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Underwriter</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch, Pierce, Fenner&nbsp;&#38;
    Smith<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morgan Stanley&nbsp;&#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bear, Stearns&nbsp;&#38; Co. Inc
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are offering the shares of
common stock subject to their acceptance of the shares from the
selling stockholders and subject to prior sale. The underwriting
agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of
common stock offered by this prospectus are subject to the
approval of specified legal matters by their counsel and to
other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered by this prospectus
if any such shares are taken. However, unless the underwriters
exercise their option, the underwriters are not required to take
or pay for the shares covered by the underwriters&#146;
over-allotment option described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share on sales to other underwriters or to certain dealers.
After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be
varied by the representatives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selling stockholders have granted to the
underwriters an option, exercisable for 30&nbsp;days from the
date of this prospectus, to purchase up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional shares of common stock as the number listed next to
the underwriter&#146;s name in the preceding table bears to the
total number of shares of common stock listed next to the names
of all underwriters in the preceding table. If the
underwriters&#146; option is exercised in full, the total price
to the public would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
the total underwriters&#146; discounts and commissions would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the total proceeds to the selling stockholders would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, we have agreed
that, without the prior written consent of Merrill Lynch,
Pierce, Fenner&nbsp;&#38; Smith Incorporated and Morgan
Stanley&nbsp;&#38; Co. Incorporated, on behalf of the
underwriters, we will not, during the period ending 90&nbsp;days
after the date of this prospectus:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">file any registration statement with the
    Securities and Exchange Commission relating to the offering of
    any shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;&nbsp;or
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">92
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares pursuant to this prospectus;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our issuance of shares of common stock upon the
    exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus that is
    described in this prospectus or of which the underwriters have
    been advised in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our issuance of shares or options to purchase
    shares of common stock pursuant to our stock incentive and
    employee stock purchase plans, provided that the recipient of
    the shares agrees to be subject to the restrictions described in
    this paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our issuance of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our issuance of shares of common stock to Pfizer
    or affiliates of Pfizer pursuant to the preferred stock purchase
    agreement we entered into with Pfizer in December, 2002,
    provided that the recipient of the shares agrees to be subject
    to the restrictions described in this paragraph.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, our directors
and officers, the selling stockholders and certain of our other
stockholders have agreed that, without the prior written consent
of Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith Incorporated
and Morgan Stanley&nbsp;&#38; Co. Incorporated, on behalf of the
underwriters, they will not, during the period ending
90&nbsp;days after the date of this prospectus:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">make any demand for or exercise any right with
    respect to, the registration of any shares of common stock or
    any securities convertible into or exercisable or exchangeable
    for common stock;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares pursuant to this prospectus;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions relating to shares of common stock
    or other securities acquired in open market transactions after
    the completion of this offering; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by gift, will or intestacy, or to
    immediate family members, stockholders or limited partners,
    provided that the transferee agrees to be bound by such
    restrictions and the transfer does not require a filing with the
    Securities and Exchange Commission other than filing a
    Form&nbsp;5 after the termination of the 90-day period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">In addition, these restrictions shall not apply
to sales of common stock pursuant to the sales plan of one of
our executive officers, Mr.&nbsp;Altschuler, established in
accordance with Rule&nbsp;10b5-1 of the Exchange Act and
outstanding on the date hereof.
</FONT>

<P align="center"><FONT size="2">93
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the foregoing restrictions
applicable to us, our directors and officers, the selling
stockholders and certain other stockholders, if:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">during the last 17&nbsp;days of the 90-day
    restricted period, we issue an earnings release or a material
    event relating to us occurs;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prior to the expiration of the 90-day restricted
    period, we announce that we will release earnings results during
    the 16-day period beginning on the last day of the 90-day period,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">these restrictions will continue to apply until
the expiration of the 18-day period beginning on the issuance of
the earnings release or the occurrence of the material event.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, in connection with our initial
public offering, we, each of our directors and officers and
holders of substantially all of our outstanding stock prior to
the initial public offering agreed that, without the prior
written consent of Merrill Lynch, Pierce, Fenner&nbsp;&#38;
Smith Incorporated and Morgan Stanley&nbsp;&#38; Co.
Incorporated, on behalf of the underwriters of our initial
public offering, we and they will not, during the period ending
July&nbsp;28, 2004:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding as of January&nbsp;29, 2004 that was
    described in the prospectus for the initial public offering or
    of which the underwriters of the initial public offering were
    advised in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares or options to
    purchase shares of common stock pursuant to our stock incentive
    and employee stock purchase plans, provided that the recipient
    of the shares agrees to be subject to the restrictions described
    in this paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by Biotech Growth, N.V., a wholly
    owned subsidiary of BB Biotech AG and one of our principal
    stockholders, involving any shares of common stock that they
    acquired in the initial public offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after completion of the initial public
    offering;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by any person other than us by gift,
    will or intestacy, or to immediate family members, stockholders
    or limited partners, provided that the transferee agrees to be
    bound by such restrictions and the transfer does not require a
    filing under the Exchange Act other than filing a Form&nbsp;5
    after the termination of the 180-day period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, Merrill Lynch,
Pierce, Fenner&nbsp;&#38; Smith Incorporated and Morgan
Stanley&nbsp;&#38; Co. Incorporated, on behalf of the
underwriters of the initial public offering, intend to waive
</FONT>

<P align="center"><FONT size="2">94
</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">these restrictions to the extent necessary to
permit the offer and sale of shares by the selling stockholders
contemplated by this prospectus.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the underwriting
discounts and commissions that the selling stockholders are to
pay to the underwriters in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of
the underwriters&#146; option to purchase additional shares of
our common stock from those selling stockholders.
</FONT>

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Paid by Selling Stockholders</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">No Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Full Exercise</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we estimate that the expenses of
this offering payable by us will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate this offering of the
common stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in this offering. In addition, to stabilize the price of the
common stock, the underwriters may bid for, and purchase, shares
of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the common stock in
this offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate
short positions or to stabilize the price of the common stock.
Any of these activities may stabilize or maintain the market
price of the common stock above independent market levels. The
underwriters are not required to engage in these activities, and
may end any of these activities at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of Merrill Lynch KECALP L.P. 1999, Merrill
Lynch KECALP International L.P. 1999 and Merrill Lynch Ventures
L.P. 2001, are selling stockholders in this offering and are
affiliates of Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith
Incorporated, one of the underwriters in this offering. Prior to
the offering, these entities beneficially own in the aggregate
2,572,826&nbsp;shares, or 6.4%, of our outstanding common stock.
Immediately following the offering, these entities will
beneficially own in the aggregate 2,068,718&nbsp;shares, or 5.2%
of our outstanding common stock (assuming no exercise of the
underwriters overallotment option).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the selling stockholders and the underwriters
have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
</FONT>

<P align="center"><FONT size="2">95
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='117'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain legal matters with respect to the
validity of the shares of common stock offered hereby will be
passed upon for us by Morrison&nbsp;&#38; Foerster, LLP,
New&nbsp;York, New&nbsp;York. Ropes&nbsp;&#38; Gray LLP, Boston,
Massachusetts has acted as counsel for the underwriters in
connection with certain legal matters related to this offering.
</FONT>

<DIV align="left">
<A name='118'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ernst&nbsp;&#38; Young LLP, independent auditors,
have audited our consolidated financial statements at
December&nbsp;31, 2001, 2002 and 2003 and for each of the three
years in the period ended December&nbsp;31, 2003, as set forth
in their report. We have included our financial statements in
the prospectus and elsewhere in the registration statement in
reliance on Ernst&nbsp;&#38; Young LLP&#146;s report, given on
their authority as experts in accounting and auditing.
</FONT>

<DIV align="left">
<A name='119'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission a registration statement on Form&nbsp;S-1 under the
Securities Act with respect to the shares of common stock
offered by the selling stockholders. This prospectus, which
constitutes part of the registration statement, does not include
all of the information contained in the registration statement.
You should refer to the registration statement and its exhibits
for additional information. Whenever we make reference in this
prospectus to any of our agreements or other documents, the
references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for copies
of the actual agreement or other document. We also file annual,
quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. These
documents are publicly available, free of charge, on our website
at <I>www.eyetech.com </I>as soon as reasonably practicable
after filing such documents with the Securities and Exchange
Commission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You can read the registration statement and our
filings with the Securities and Exchange Commission, over the
Internet at the Securities and Exchange Commission&#146;s web
site at <I>http://www.sec.gov.</I> You may also read and copy
any document that we file with the Securities and Exchange
Commission at its public reference room at 450&nbsp;Fifth
Street, N.W., Washington, DC 20549.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of
the Securities and Exchange Commission at 450&nbsp;Fifth Street,
NW, Washington, DC 20549. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference room.
</FONT>

<P align="center"><FONT size="2">96
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='120'></A>

<!-- link1 "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center">
<B><FONT size="2">INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>
</DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="92%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#121'>Report of Independent
    Auditors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#122'>Consolidated Balance Sheets
    as of December&nbsp;31, 2002 and 2003</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#123'>Consolidated Statements of
    Operations for Years Ended December&nbsp;31, 2001, 2002 and
    2003.</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#124'>Consolidated Statements of
    Stockholders&#146; (Deficit) Equity for the Years Ended
    December&nbsp;31, 2001, 2002 and 2003</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#125'>Consolidated Statements of
    Cash Flows for the Years Ended December&nbsp;31, 2001, 2002 and
    2003.</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#126'>Notes to Consolidated
    Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#127'>Condensed Consolidated
    Balance Sheets as of December&nbsp;31, 2003 and March&nbsp;31,
    2004 (Unaudited)</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#128'>Condensed Consolidated
    Statements of Operations for the Three Months Ended
    March&nbsp;31, 2003 and 2004 (Unaudited)</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#129'>Condensed Consolidated
    Statements of Cash Flows for the Three Months Ended
    March&nbsp;31, 2003 and 2004 (Unaudited)</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#130'>Notes to Condensed Unaudited
    Consolidated Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left">
<A name='121'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT AUDITORS" -->

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT AUDITORS</FONT></B>

<P align="left">
<FONT size="2">The Board of Directors and Stockholders
</FONT>

<DIV align="left">
<FONT size="2">Eyetech Pharmaceuticals,&nbsp;Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheets of Eyetech Pharmaceuticals,&nbsp;Inc. as of
December&nbsp;31, 2002 and 2003, and the related consolidated
statements of operations, stockholders&#146; deficit, and cash
flows for each of the three years in the period ended
December&nbsp;31, 2003. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Eyetech
Pharmaceuticals,&nbsp;Inc. at December&nbsp;31, 2002 and 2003,
and the consolidated results of their operations and their cash
flows for each of the three years in the period ended
December&nbsp;31, 2003, in conformity with accounting principles
generally accepted in the United States.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ ERNST&nbsp;&#38; YOUNG LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">MetroPark, New Jersey
</FONT>

<DIV align="left">
<FONT size="2">February&nbsp;19, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='122'></A>

<!-- link1 "CONSOLIDATED BALANCE SHEETS" -->

<DIV align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Note&nbsp;2)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="14" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,013,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,013,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,359,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,360,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,360,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,562,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,562,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">971,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,121,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,236,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,236,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,012,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,867,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,867,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,665,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,623,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,623,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">789,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,751,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,751,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="14" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146;
    (DEFICIT)&nbsp;EQUITY</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,442,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,308,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,308,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred rent liability, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,152,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,098,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,098,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue, net of current
    portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,416,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,416,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,656,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,038,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,038,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; $.01&nbsp;par value; 29,093,695&nbsp;shares
    authorized; 21,273,004, 25,062,278 and no shares issued and
    outstanding at December&nbsp;31, 2002, 2003 and pro forma,
    respectively, liquidation preference of $252,053,310 as of
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,323,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,506,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; (deficit)&nbsp;equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible preferred stock&nbsp;&#151;
    $.01&nbsp;par value; 120,000&nbsp;shares authorized, issued and
    outstanding at December&nbsp;31, 2002 and 2003 and no shares pro
    forma, liquidation preference of $225,000 as of
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&nbsp;&#151; $.01&nbsp;par value;
    60,000,000&nbsp;shares authorized; 4,162,000 issued and
    3,737,000 outstanding at December&nbsp;31, 2002; 4,527,736
    issued and 4,102,736 outstanding at December&nbsp;31, 2003; and
    29,710,014 issued and 29,285,014 outstanding pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">297,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,125,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,804,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,209,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,299,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,956,265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,956,265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock, at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635,129</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137,494,756</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137,494,756</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; (deficit)&nbsp;equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(123,005,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,500,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146;
    (deficit) Equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,589,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='123'></A>

<!-- link1 "CONSOLIDATED STATEMENTS OF OPERATIONS" -->

<DIV align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration revenue:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,583,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,835,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,419,166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,156,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,663,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,931,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,598,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,338,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,286,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,822,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,495,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,950,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82,353,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,495,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,950,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,934,287</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,815,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,808,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,171,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(248,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,011,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,688,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,160,382</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,859,627</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Historical&nbsp;&#151; Basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    historical basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,950,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma basic and diluted net loss attributable
    to common stockholders per share (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.77</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma weighted average shares
    outstanding&nbsp;&#151; basic and diluted (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,094,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='124'></A>

<!-- link1 "CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; DEFICIT For the Years Ended December 31, 2001 and 2002 and 2003" -->

<DIV align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146;
DEFICIT</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">For the Years Ended December&nbsp;31, 2001 and
2002 and 2003</FONT></B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Series&nbsp;A Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Loans to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deferred</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,895,718</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,134,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">321,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(321,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,152,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">679,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,152,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,294,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(203,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,334,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,334,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(102,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,048,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,162,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,125,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(397,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,299,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,001,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,001,255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,344,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">365,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,416</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,397,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,527,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,804,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,956,265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Treasury Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,191,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,061,390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,134,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized appreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,379,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,365,385</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,327,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants issued in connection with the issuance
    of Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(75,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,048,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,295,369</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(87,635,129</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,036,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation related to stock options,
    net of cancellations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,344,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to purchase restricted stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options granted to nonemployees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,397,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,160,382</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,160,382</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized depreciation on marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(101,957</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(101,957</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,801,202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137,494,756</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(123,005,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='125'></A>

<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">891,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on disposal of assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">382,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,287,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,741,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash license expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(142,803</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(333,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,077</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,562,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(79,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,073</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(260,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,105,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,626,614</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,865,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,416,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">498,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,859</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,268,776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,821,082</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,440,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(192,840</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(582,330</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,778,026</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(289,359,394</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(136,447,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(400,556,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,017,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,796,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">357,470,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(980,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,084,543</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,958,225</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in prepaid expenses and other current
    assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(370,779</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39,538</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(407,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(300,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(839,395</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,701,223</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash (used in) provided by investing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36,186,360</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,942,446</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(51,931,212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,585,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,154,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,022,769</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(127,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(560,128</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) financing
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,676,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,033,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,712,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease) in cash and cash
    equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,778,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,269,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,221,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,301,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,522,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,013,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Noncash financing and investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repurchase of restricted common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed assets capitalized using capital leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,355,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders in connection with exercise
    of stock options and stock purchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Supplemental disclosures of cash flow
    information</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid during the period for:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,709,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='126'></A>

<!-- link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">December&nbsp;31, 2003</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Organization and Description of
    Business</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech Pharmaceuticals,&nbsp;Inc. and its wholly
owned subsidiary (collectively, &#147;Eyetech&#148; or the
&#147;Company&#148;), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company&#146;s
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company&#146;s most advanced
product candidate is Macugen<SUP>TM</SUP> (pegaptanib sodium),
which it is developing for the treatment of both the wet form of
age-related macular degeneration, known as AMD, and for the
treatment of diabetic macular edema, known as DME, which is a
complication of diabetic retinopathy. In the second half of
2001, the Company initiated two phase&nbsp;2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. Based on the
results from the first year of these trials, the Company plans
to prepare and file in 2004 a new drug application with the Food
and Drug Administration seeking marketing approval of Macugen
for the treatment of wet AMD. The Company is also currently
conducting a phase&nbsp;2 clinical trial for the use of Macugen
in the treatment of DME.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when it entered into several concurrent agreements with
Pfizer Inc. (&#147;Pfizer&#148;) (see Note&nbsp;11).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;4, 2004, the Company
successfully completed an initial public offering (IPO)&nbsp;of
its common stock. The IPO consisted of the sale of
6,500,000&nbsp;shares of common stock at a price of
$21.00&nbsp;per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000&nbsp;shares within 30&nbsp;days of the IPO to cover
over-allotments. This option was exercised in tandem with the
IPO. In addition, 476,190&nbsp;shares of common stock were
purchased concurrently with the IPO by Pfizer for $10,000,000 as
part of its commitment under Pfizer&#146;s collaboration with
the Company. (Note&nbsp;11)
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net proceeds of the IPO, including the sale of
stock to Pfizer, after deducting underwriter&#146;s discounts
and commission and offering expenses are estimated to be
$152,870,000. An additional $2,600,000 was received for the
issuance of 469,360&nbsp;shares of preferred stock in connection
with the exercise of preferred stock warrants. An additional
1,867,124&nbsp;shares of preferred stock were issued on a
cashless basis to the holders of 2,728,661 preferred stock
warrants, who will surrender 861,567 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, automatically converted to common shares upon the
completion of the IPO.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Basis of Presentation and Significant
    Accounting Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying consolidated financial
statements include the accounts of Eyetech
Pharmaceuticals,&nbsp;Inc. and its wholly owned subsidiary. All
intercompany significant account balances and transactions have
been eliminated in consolidation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company considers all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. At December&nbsp;31, 2003 the Company has
substantially all of its cash and cash equivalents deposited
with one financial institution.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Marketable Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketable securities are classified as
&#147;available-for-sale&#148; and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders&#146; deficit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Restricted Cash</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Restricted cash of $5,600,000 at
December&nbsp;31, 2003 collateralizes $5,600,000 of outstanding
letters of credit associated with the leases of the
Company&#146;s office and laboratory facilities. The funds are
invested in certificates of deposit. (Notes&nbsp;13 and 16)
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Concentration of Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allows the Company to manage risk.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fair Value of Financial
    Instruments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amounts of the Company&#146;s
financial instruments, which include cash and cash equivalents,
accounts payable and accrued expenses, approximate their fair
values. The estimated fair value of the redeemable convertible
preferred stock at December&nbsp;31, 2002 is approximately
$194,000,000, based on the February 2003 preferred stock sales
price of $9.10&nbsp;per share and at December&nbsp;31, 2003 is
approximately $526,000,000, based on the IPO common stock value
of $21.00&nbsp;per share.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Property and Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which range from three to
seven years. Leasehold improvements are amortized over the
estimated useful lives of the assets or related lease terms,
whichever is shorter.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Impairment of Long-Lived
    Asset</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective January&nbsp;1, 2002, the Company
assesses impairment of long-lived assets in accordance with
SFAS&nbsp;No.&nbsp;144, &#147;Accounting for the Impairment or
Disposal of Long-Lived Assets&#148;. Assessments of the
recoverability of long-lived assets are conducted when events or
changes in circumstances occur that indicate that the carrying
value of the asset may not be recoverable. The assessment of
possible impairment is based upon the ability to recover the
asset from the expected future undiscounted cash flows of
related operations. No events have been identified that caused
an evaluation of the recoverability of the long-lived assets for
the years ended December&nbsp;31, 2001, 2002 and 2003.
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues associated with the Company&#146;s
collaboration with Pfizer consist of non-refundable, up-front
license fees and reimbursement of development expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin No.&nbsp;101,
&#147;Revenue Recognition in Financial Statements&#148; and
Emerging Issues Task Force (&#147;EITF&#148;) Issue&nbsp;00-21
&#147;Revenue Arrangements with Multiple Deliverables&#148;
(&#147;EITF&nbsp;00-21&#148;). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue&nbsp;99-19 &#147;Reporting Revenue
Gross as a Principal Versus Net as an Agent&#148;
(&#147;EITF&nbsp;99-19&#148;), and EITF Issue&nbsp;01-14
&#147;Income Statement Characterization of Reimbursements
Received For &#147;Out-of-Pocket&#148; Expenses Incurred&#148;
(&#147;EITF&nbsp;01-14&#148;). According to the criteria
established by these EITF Issues, in transactions where the
Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Research and Development
    Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Research and development costs are expensed as
incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-Based Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, SFAS&nbsp;No.&nbsp;148,
&#147;Accounting for Stock-Based Compensation&nbsp;&#151;
Transition and Disclosure&nbsp;&#151; an amendment of FASB
Statement No.&nbsp;123&#148; (&#147;SFAS&nbsp;148&#148;) was
issued. SFAS&nbsp;148 provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation from the
intrinsic value-based method of accounting prescribed by APB
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB&nbsp;25&#148;). In addition,
SFAS&nbsp;148 amends the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; (&#147;SFAS&nbsp;123&#148;). The Company
adopted the disclosure requirements of SFAS&nbsp;148 effective
December&nbsp;31, 2002. As allowed by SFAS&nbsp;123, the Company
has elected to continue to apply the intrinsic value-based
method of accounting prescribed in APB&nbsp;25 and, accordingly,
does not recognize compensation expense for stock option grants
made at an exercise price equal to or in excess of the fair
market value of the stock at the date of grant.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Had compensation cost for the Company&#146;s
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS&nbsp;123, the Company&#146;s net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders, as
    reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,859,627</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: Non-cash employee compensation as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,344,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(216,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(350,877</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,450,510</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SFAS&nbsp;123 pro forma net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,272,397</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,382,021</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,965,984</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted loss attributable to common
    stockholders per share, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted loss attributable to common
    stockholders per share, SFAS&nbsp;123 pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.09</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note&nbsp;2),
    SFAS&nbsp;123 pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS&nbsp;123 pro forma information regarding net
loss is required by SFAS&nbsp;123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS&nbsp;123. The fair value of the options was estimated at
the date of grant using the minimum value pricing model since
the Company did not complete its IPO until February&nbsp;4,
2004, with the following assumptions:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk-free interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5%-5.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8%-4.2%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">5 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The effects of applying SFAS&nbsp;123 in this pro
forma disclosure are not indicative of future amounts. Pro forma
compensation related to stock option grants is expensed over
their respective vesting periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for options issued to
nonemployees under SFAS&nbsp;123 and EITF Issue&nbsp;96-18
&#147;Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services&#148; (&#147;EITF&nbsp;96-18&#148;). As such,
the value of such unvested options is periodically remeasured
and income or expense is recognized during their vesting terms.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Comprehensive Loss</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company reports comprehensive loss in
accordance with SFAS&nbsp;No.&nbsp;130, &#147;Reporting
Comprehensive Income&#148; (&#147;SFAS&nbsp;130&#148;).
SFAS&nbsp;130 establishes rules for the reporting and display of
comprehensive loss and its components. SFAS&nbsp;130 requires
unrealized gains on available-for-sale securities to be included
in other comprehensive loss.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">and tax basis of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation
allowance is provided when it is more likely than not that some
portion or all of a deferred tax asset will not be realized.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Net Loss Per Share</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards&nbsp;128, &#147;Earnings per Share&#148;
(&#147;SFAS&nbsp;No.&nbsp;128&#148;). Under the provisions of
SFAS&nbsp;128, basic net loss per common share (&#147;Basic
EPS&#148;) is computed by dividing net loss by the
weighted-average number of common shares outstanding. Diluted
net loss per common share (&#147;Diluted EPS&#148;) is computed
by dividing net loss by the weighted-average number of common
shares and dilutive common shares equivalents then outstanding.
Common equivalent shares consist of the incremental common
shares issuable upon the conversion of preferred stock, shares
issuable upon the exercise of stock options and the conversion
of preferred stock upon the exercise of warrants. Diluted EPS is
identical to Basic EPS since common equivalent shares are
excluded from the calculation, as their effect is anti-dilutive.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pro Forma Information
    (Unaudited)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The pro forma balance sheet as of
December&nbsp;31, 2003 reflects the automatic conversion of all
outstanding shares of the Company&#146;s convertible preferred
stock into an aggregate of 25,182,278&nbsp;shares of common
stock upon completion of the Company&#146;s IPO. The pro forma
balance sheet as of December&nbsp;31, 2003 does not include the
exercise of 4,031,414 outstanding warrants exercisable for
shares of the Company&#146;s redeemable convertible preferred
stock, which in turn automatically converted into shares of the
Company&#146;s common stock effective upon the closing of the
Company&#146;s IPO. The warrants were exercised by paying the
exercise price in cash or pursuant to a cashless exercise
feature based on the IPO price. Upon completion of the
Company&#146;s IPO, 469,360 warrants were exercised for cash and
1,867,124 were exercised under the cashless exercise provision
through the exchange of 861,597 warrants. The pro forma balance
sheet as of December&nbsp;31, 2003 also does not include the
exercise of outstanding warrants to purchase 833,333&nbsp;shares
of the Company&#146;s redeemable convertible preferred stock,
which became exercisable into the Company&#146;s common stock
effective upon the closing of the Company&#146;s IPO.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pro forma basic and diluted net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock into
shares of the Company&#146;s common stock effective upon the
closing of the Company&#146;s IPO, as if such conversion had
occurred at the date of the original issuance. Accordingly, pro
forma basic and diluted net loss per common share has been
calculated assuming the preferred stock was converted as of the
original date of issuance of the preferred stock. Pro forma
common shares outstanding of 28,094,165 is based on the weighted
average conversion of 24,143,684&nbsp;shares of our convertible
preferred stock as of December&nbsp;31, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reclassification</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain prior period amounts have been
reclassified to conform to current year presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recently Issued Accounting
    Pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the year ended December&nbsp;31, 2003, the
Financial Accounting Standards Board (&#147;FASB&#148;) issued
various accounting standards and interpretations, including FASB
Statement No.&nbsp;150, &#147;Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity&#148; (&#147;SFAS&nbsp;150&#148;),&nbsp;Interpretation
No.&nbsp;46 (&#147;FIN&nbsp;46&#148;), &#147;Consolidation of
Variable Interest Entities, an interpretation of ARB 51&#148;
and Interpretation No.&nbsp;46-R &#147;Consolidation of Variable
Interest Entities&#148;
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">(&#147;FIN&nbsp;46-R&#148;). Adoption of these
standards and interpretations has not had a material effect on
the Company&#146;s financial condition, results of operations or
liquidity.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Available for Sale Investments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Available for sale investments consist primarily
of federal agency notes, asset backed securities, mortgage
backed securities, corporate debt, United States treasury notes
and municipal bonds at December&nbsp;31, 2002 and 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of available for sale
investments as of December&nbsp;31, 2002 and 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">December&nbsp;31, 2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities within one year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,143,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,168,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,621,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,665,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">639,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,738</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">637,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,953,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,005,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,357,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,477,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities between one to five years:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,909,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,970,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,937,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,961,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,423,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,341</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,437,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States treasury notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,497,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,512,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,768,673</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,882,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,126,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,375</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,359,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">December&nbsp;31, 2003</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities within one year:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,386,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,720</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,388,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,951,489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,695</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,960,464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,023,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,463</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,121,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,361,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,878</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,470,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities between one to five years:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,316,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,658</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,325,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal agency notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,909,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,664</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,895,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">730,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">738,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Municipal bonds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,911,724</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,617</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,929,341</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,867,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,889,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,229,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161,031</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,200</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,360,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Property and Equipment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment consists of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture and office equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">479,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">562,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computer equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">688,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,728,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Laboratory equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,828,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,348,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">454,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,452,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,198,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(440,164</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,331,341</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,012,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,867,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Included in property and equipment are assets
recorded under capital leases with a cost of approximately
$2,355,686 at December&nbsp;31, 2002 and December&nbsp;31, 2003.
There were no assets under capital leases prior to 2002.
Amortization of the assets recorded under capital leases is
included with depreciation expense. The accumulated amortization
related to these assets under capital leases was approximately
$196,000 and $649,000 at December&nbsp;31, 2002 and
December&nbsp;31, 2003, respectively.
</FONT>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Accounts Payable and Accrued
    Expenses</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accounts payable and accrued expenses consist of
the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Clinical development expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,418,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,862,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Manufacturing expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,469,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payroll and related expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,438,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,483,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">825,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,876,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">715,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,481,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,900,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,442,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,308,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Redeemable Convertible Preferred Stock and
    Stockholders&#146; Deficit</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, the Company is
authorized to issue 60,000,000&nbsp;shares of common stock. Each
holder of common stock is entitled to one vote for each share of
common stock held of record on all matters on which stockholders
generally are entitled to vote.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, the Company had
reserved shares of common stock for issuance as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,049,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;A preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;B preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,790,331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;C-1 and C-2 preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,524,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of Series&nbsp;D preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of warrants to purchase Series&nbsp;B,
    C-1 and C-2 preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,031,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,262,942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved a Restated Certificate of
Incorporation. The Restated Certificate of Incorporation, which
was approved by stockholders in December 2003 and became
effective upon the consummation of the Company&#146;s IPO in
February 2004, increased the Company&#146;s authorized common
stock to 125,000,000&nbsp;shares and authorized
5,000,000&nbsp;shares of preferred stock, issuable in one or
more series to be designated by the Company&#146;s Board of
Directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, employees and nonemployees exercised
options to purchase 1,152,000&nbsp;shares of the Company&#146;s
common stock for total consideration of $691,200. Of this
amount, the Company loaned $600,000 to one of the purchasers of
the stock pursuant to a full recourse note (see Note&nbsp;10).
Of those shares purchased, 1,075,000 were restricted, and
generally vest over a four-year period. In connection with the
termination of an executive, 500,000&nbsp;shares vested
immediately and 500,000&nbsp;shares were cancelled. At December
2003, 6,250&nbsp;shares remain restricted. Unvested shares are
subject to the Company&#146;s repurchase at the option&#146;s
exercise price. During 2002, one nonemployee exercised an option
to purchase 10,000&nbsp;shares of the Company&#146;s common
stock in exchange for $6,000 in cash. During 2003 employees and
nonemployees exercised options to purchase 365,736&nbsp;shares
of the Company&#146;s common stock in exchange for cash of
$250,000 and a full recourse note of $34,000. Included in these
purchases were 8,917&nbsp;shares purchased by employees and
18,750&nbsp;shares purchased by a nonemployee that had not yet
vested. At
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">December&nbsp;31, 2003, 8,292&nbsp;shares
purchased by employees and 13,542&nbsp;shares purchased by
nonemployees remain restricted.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Convertible Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During March 2000, the Company sold
120,000&nbsp;shares of Series&nbsp;A convertible preferred stock
(&#147;Series&nbsp;A&#148;) for $150,000. During April 2000, the
Company sold 5,766,332&nbsp;shares of Series&nbsp;B redeemable
convertible preferred stock (&#147;Series&nbsp;B&#148;) and
warrants to purchase 1,142,902&nbsp;shares of Series&nbsp;B for
approximately $34,473,000, net of issuance costs. The
Company&#146;s estimate of the fair value of the warrants was
determined to be $1,040,000. The warrants had an exercise price
of $6.00.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During January 2001, the Company sold
20,666&nbsp;shares of Series&nbsp;B for $124,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During July and August 2001, the Company sold
7,964,229&nbsp;shares of Series&nbsp;C-1 redeemable convertible
preferred stock (&#147;Series&nbsp;C-1&#148;) and warrants to
purchase 1,592,846&nbsp;shares of Series&nbsp;C-1 for
approximately $53,461,000, net of issuance costs. The
Company&#146;s estimate of the fair value of the warrants was
determined to be approximately $2,134,000. The warrants had an
exercise price of $6.80.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the completion of certain defined events,
the Company sold and issued to the purchasers of the
Series&nbsp;C-1, 7,521,777&nbsp;shares of Series&nbsp;C-2
redeemable convertible preferred stock
(&#147;Series&nbsp;C-2&#148;) and warrants to purchase
1,504,354&nbsp;shares of Series&nbsp;C-2 for approximately
$54,157,000, net of issuance costs, in August 2002. The
Company&#146;s estimate of the fair value of the warrants was
determined to be approximately $3,385,000. The warrants had an
exercise price of $7.20.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, the Company authorized the issuance of
2,747,253&nbsp;shares of Series&nbsp;D convertible preferred
stock (&#147;Series&nbsp;D&#148;). Concurrent with the closing
in February 2003 of the agreements with Pfizer to jointly
develop and commercialize Macugen, the Company sold
2,747,253&nbsp;shares of Series&nbsp;D to Pfizer for
$24,736,944, net of issuance costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, certain holders of warrants to purchase
Series&nbsp;B, Series&nbsp;C-1 and Series&nbsp;C-2 redeemable
convertible preferred stock exercised warrants to purchase
3,333, 531,825 and 506,863&nbsp;shares of Series&nbsp;B,
Series&nbsp;C-1 and Series&nbsp;C-2 redeemable convertible
preferred stock, respectively. Proceeds from these exercises
were $7,286,000. In addition, through December&nbsp;31, 2003 the
Company received notification of exercise, conditional upon
completion of the IPO, from warrant holders to purchase 16,667,
22,053 and 34,861&nbsp;shares of Series&nbsp;B, Series&nbsp;C-1
and Series&nbsp;C-2 redeemable convertible preferred stock,
respectively. Proceeds of $501,000 have been received by the
Company and are classified as short-term liabilities at
December&nbsp;31, 2003, pending completion of the IPO.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the Pfizer agreements, the
Company has also agreed to sell, and Pfizer has agreed to
purchase, up to $25,000,000 worth of additional capital stock
upon the completion of certain milestones at the then current
market price. Concurrent with the completion of the IPO, the
Company sold to Pfizer $10,000,000 worth of common stock.
Accordingly, after the IPO, Pfizer&#146;s remaining commitment
to purchase capital stock has been reduced to $15,000,000.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Preferred Stock Warrants</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued warrants in connection with
the sale of Series&nbsp;B, Series&nbsp;C-1 and Series&nbsp;C-2
preferred stock. Concurrent with the completion of the IPO in
February 2004, warrant holders exercised warrants to purchase
129,566, 134,256 and 131,957&nbsp;shares of Series&nbsp;B,
Series&nbsp;C-1 and Series&nbsp;C-2 stock, respectively.
Proceeds from these exercises aggregated $2,640,000. In
addition, other warrant holders exercised warrants, utilizing
the cashless exercise provisions of the warrant agreements, to
purchase 709,517, 611,746 and 545,861&nbsp;shares of the
Series&nbsp;B, Series&nbsp;C-1 and Series&nbsp;C-2 stock,
respectively. These exercises resulted in the exchange of
283,819, 292,966 and 284,812 warrants as payment for the purchase
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">of Series&nbsp;B, Series&nbsp;C-1 and
Series&nbsp;C-2 stock, respectively. The exchange price of the
warrants was the IPO price of $21.00&nbsp;per share. At
completion of the IPO, 833,333 warrants to purchase
Series&nbsp;B redeemable convertible preferred stock
automatically converted into warrants to purchase
833,333&nbsp;shares of common stock. These warrants remain
outstanding after completion of the IPO.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Voting</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preferred stockholders are entitled to the number
of votes equal to the number of shares of common stock into
which each share of preferred stock is convertible.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Dividends</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders of Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D were entitled
to annual non-cumulative dividends when, and if, declared, prior
and in preference to any dividends payable on common stock, at a
rate of $0.10&nbsp;per share, $0.48&nbsp;per share,
$0.54&nbsp;per share, $0.58&nbsp;per share and $0.73&nbsp;per
share, respectively. As of December&nbsp;31, 2003, no dividends
had been declared. In connection with the conversion of
preferred stock into common stock upon the completion of the
IPO, all dividend rights ceased.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Liquidation</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a defined liquidation event
(&#147;Liquidation Event&#148;), which includes a liquidation,
dissolution, winding up of the Company or a merger,
consolidation or reorganization of the Company that results in
the transfer of 50% or more of the outstanding voting power of
the Company or a sale of substantially all the assets of the
Company, the Series&nbsp;A, Series&nbsp;B, Series&nbsp;C-1,
Series&nbsp;C-2 and Series&nbsp;D preferred stockholders were
entitled to, prior and in preference to any other stockholders,
a liquidation preference distribution of the sum of
1.5&nbsp;times the original per share purchase price paid to the
Company, plus all declared and unpaid dividends, or if greater,
the amount per share as would have been payable had each share
of preferred stock been converted into the Company&#146;s common
stock prior to such Liquidation Event. The Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D preferred
stockholders rank senior in preference to the Series&nbsp;A
preferred stockholders, and share ratably on a pari passu basis
in the event of a liquidation. After payment of full
preferential amount to Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D preferred
stockholders, the remaining assets shall be distributed ratably
among the holders of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes convertible
preferred stock issued and outstanding (excluding preferred
stock warrants of 4,031,414), with liquidation preferences for
each series at December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Issued and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Liquidation</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Authorized Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preference</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;A
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,763,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,790,331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,112,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,557,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,496,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,659,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,026,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,028,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,709,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;D
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,747,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,500,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,213,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,182,278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">263,207,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the conversion of preferred
stock into common stock upon the completion of the IPO, all
liquidation rights ceased.
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Conversion</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each holder of Series&nbsp;A, Series&nbsp;B,
Series&nbsp;C-1, Series&nbsp;C-2 and Series&nbsp;D had the
ability to convert at any time, at its option, shares of
preferred into common stock on a one-for-one basis subject to
certain adjustments including dilutive issuances and splits, as
defined. All series of preferred stock were converted into
common shares at the completion of the IPO.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Redemption</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At any time on or after July&nbsp;20, 2010, at
the request of the holders of not less than 66&nbsp;2/3% of the
then outstanding Series&nbsp;C-1, Series&nbsp;C-2 and a majority
of the Series&nbsp;D and Series&nbsp;B or upon a liquidation
event as defined above, the Company shall redeem for cash such
convertible preferred stock at the greater of the sum of
1.5&nbsp;times the original series issue price plus declared but
unpaid dividends or the amount per share as would have been
payable had each share been converted into common stock.
Accordingly, the Company is recording and accreting the
Series&nbsp;B, Series&nbsp;C-1, Series&nbsp;C-2 and
Series&nbsp;D to its defined redemption value through
July&nbsp;20, 2010. Series&nbsp;A is not redeemable at the
option of the holder. In connection with the conversion of
preferred stock to common upon completion of the IPO, all
redemption rights ceased.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stock Options</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has reserved a maximum of
8,175,000&nbsp;shares under the Company&#146;s 2001 Stock Option
Plan (the &#147;2001 Plan&#148;) and 2,747,500&nbsp;shares for
stock options granted prior to the adoption of the 2001 Plan.
Stock options may be granted to employees and consultants.
Granted stock options are immediately exercisable into
restricted shares and generally vest over a four-year period
with substantially all options vesting with respect to 25% of
the shares on the first anniversary of the grant date and
thereafter in thirty-six monthly installments. Options expire
ten years from date of grant. Additionally, options that are
exercised into restricted shares of common stock continue to
vest under the original terms of the related options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes option activity
for the Company:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at January&nbsp;1, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,147,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,253,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,152,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(265,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,983,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,885,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(105,084</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,753,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,518,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(365,736</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(209,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,696,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information about
vested stock options outstanding:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vested stock options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">581,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,210,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,844,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average exercise price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information about
stock options outstanding at December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options Vested</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$&nbsp;0.60
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,482,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,225,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">&nbsp;1.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">&nbsp;1.36
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">926,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">366,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">&nbsp;1.44
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">746,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">&nbsp;2.91
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">&nbsp;3.50
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">890,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">10.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">14.00
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,696,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,844,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the granting of employee stock
options in 2001, 2002 and 2003, the Company recorded deferred
compensation of approximately $321,000, $1,335,000 and
$15,001,000, respectively. Deferred compensation is being
amortized over the vesting period of the options resulting in
non-cash stock-based compensation expense of approximately
$118,000, $239,000 and $2,344,000 for the years ended
December&nbsp;31, 2001, 2002 and 2003, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the years ended December&nbsp;31, 2001, 2002,
and 2003, the Company granted a total of 345,500, 137,500 and
5,000, respectively, in stock options to certain consultants and
Scientific Advisory Board members. The Company has accounted for
these options in accordance with EITF&nbsp;96-18 and,
accordingly, recorded non-cash expense of $264,000, $1,049,000
and $2,397,000 for the years ended December&nbsp;31, 2001, 2002,
and 2003, respectively. The Company will continue to remeasure
the fair value of unvested stock options to these consultants
and Scientific Advisory Board members until vesting is complete.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved the Company&#146;s 2003 Stock
Incentive Plan (the &#147;2003 Incentive Plan&#148;). The 2003
Incentive Plan, which was approved by stockholders in December
2003, became effective on February&nbsp;4, 2004, the date that
the registration statement relating to the Company&#146;s IPO
was declared effective. Under the 2003 Incentive Plan,
4,400,000&nbsp;shares of common stock are authorized for
issuance, subject to annual increases beginning in 2005 in
accordance with the terms of the 2003 Incentive Plan. Upon
effectiveness of the 2003 Incentive Plan, the Company will grant
no further stock options or other awards under the
Company&#146;s 2001 Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;10, 2003, the Company&#146;s
Board of Directors approved the Company&#146;s 2003 Employee
Stock Purchase Plan (the &#147;2003 Purchase Plan&#148;). The
2003 Purchase Plan, which was approved by stockholders in
December 2003, became effective on February&nbsp;4, 2004, the
date that the registration statement relating to the
Company&#146;s IPO was declared effective. Under the 2003
Purchase Plan, 500,000&nbsp;shares of common stock are reserved
for sale to participating employees at an amount equal to 85% of
the lower of the closing price of our common stock on the first
day or the last day of the offering period.
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Loss Per Share</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the computation of
basic and diluted net loss attributable to common stockholders
per share.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,679,930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,173,462</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,699,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,494,312</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,096,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,160,382</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator for basic and diluted net loss
    attributable to common stockholders per share&nbsp;&#151; net
    loss attributable for common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,174,242</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,269,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,859,627</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator for basic and dilutive net loss
    attributable to common stockholders per share&nbsp;&#151;
    weighted average shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,659,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,697,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,950,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share&nbsp;&#151; weighted average shares (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,094,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.77</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows dilutive common share
equivalents outstanding, which are not included in the above
historical calculations, as the effect of their inclusion is
anti-dilutive during each period:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,871,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,393,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,182,278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,983,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,753,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,696,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,569,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,031,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,423,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,219,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,910,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2003, the Company has a net
operating loss for federal income tax purposes of approximately
$43,315,000, which begins to expire in 2020.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has research and development tax
credit carry forwards at December&nbsp;31, 2003 of approximately
$1,027,000, which will expire in 2022. The Company also has
alternative minimum tax credit carry forwards at
December&nbsp;31, 2003 of approximately $833,000, which are
available for use against the Company&#146;s regular tax
liability in the future. If an ownership change, as defined
under Internal Revenue Code Section&nbsp;382, occurs, the use of
these carry forwards may be subject to limitation.
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provision for income tax at December&nbsp;31,
2003 consists of:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current Federal alternative minimum tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current State taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">855,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,688,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred income taxes reflect the net effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The Company&#146;s deferred tax
assets relate primarily to net operating loss carryforwards and
deferred license fee revenue. For the year ended
December&nbsp;31, 2003 the change in valuation allowance was
approximately $17,703,000. At December&nbsp;31, 2002 and 2003, a
valuation allowance was recorded to fully offset the net
deferred tax asset. Significant components of the Company&#146;s
deferred tax assets are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ending December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,864,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,326,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued bonus
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">505,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">707,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,286,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Start-up costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">236,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred license fee revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,167,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alternative minimum tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,027,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total gross deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,374,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,958,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(112,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(993,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total gross deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(112,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(993,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,262,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48,965,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of the statutory tax rates and
the effective tax rates for the years ended December&nbsp;31,
2002 and 2003 is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statutory rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State and local income taxes (net of federal tax
    benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax credits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Loans to Stockholders</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;15, 2001, the Company hired a new
President and Chief Operating Officer (the
&#147;Executive&#148;). The employment agreement with the
Executive provided for a $600,000 loan the proceeds of which was
used to exercise 1,000,000 stock options at a per share exercise
price of $0.60. The 1,000,000 restricted common shares were to
vest over a four-year period. The loan was a full-recourse note
and was non-interest bearing. Additionally, the Company loaned
the Executive an additional $500,000. This loan was also
non-interest bearing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;8, 2001, the Company and the
Executive mutually agreed to terminate the employment of the
Executive. In connection with the termination agreement, 500,000
of the 1,000,000 restricted common shares were immediately
vested, and the Company exercised its right to repurchase the
remaining 500,000 unvested shares at the original exercise price
of $0.60 or $300,000, which was credited to the $600,000 loan
principal due from the Executive. The Executive repaid $5,000 of
the loan principal during 2002. The remaining loan balance of
$295,000 is due in January 2007 and is collateralized by 500,000
restricted common shares. Additionally, the Company forgave
$250,000 of the $500,000 loan principal which was included as
additional expense. The remaining $250,000 of the loan principal
was repaid during 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">11.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Collaboration Agreements</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, the Company licensed the rights to
certain technology from a corporate licensor in exchange for an
up-front license fee of $7,000,000 and a warrant to purchase
833,333&nbsp;shares of Series&nbsp;B Convertible Preferred Stock
at an exercise price of $6.00&nbsp;per share. The warrant is
exercisable at any time through March&nbsp;30, 2005. In
addition, the Company may be required to make additional
payments aggregating up to $25,000,000 upon the achievement of
development and commercial launch milestones specified in the
licensing agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2001, the Company signed a license
agreement for the nonexclusive rights to certain technology from
a corporate licensor in exchange for an initial irrevocable and
nonrefundable license fee of $2,000,000, which was paid in 2002.
Additionally, the Company may be required to make additional
payments aggregating up to $4,000,000 upon the achievement of
specified regulatory milestones with respect to the use of
Macugen for the treatment of AMD and aggregating up to
$2,750,000 upon the achievement of specified regulatory
milestones with respect to the use of Macugen for other
therapeutic indications. For the year ended December&nbsp;31,
2001, the Company recorded the $2,000,000 license fee as a
research and development expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, the Company entered into a
license, manufacturing and supply agreement for the use of
certain technology rights to certain patents of a component of
Macugen. The contract calls for specified pricing based on
quantities purchased. The Company paid an up-front license fee
of $1,500,000 and may be required to make additional payments
aggregating up to $4,500,000 upon the achievement of specified
development milestones with respect to Macugen. The Company may
credit a portion of its future milestones payments against a
portion of the royalty payments that it may be required to make
under this agreement. For the year ended December&nbsp;31, 2002,
the Company recorded the $1,500,000 license fee as a research
and development expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February&nbsp;3, 2003 when government approval
was obtained, Pfizer made initial payments of $100,000,000 which
included the purchase of 2,747,253&nbsp;shares of the
Company&#146;s Series&nbsp;D preferred stock for $24,736,944,
net of issuance costs and a $75,000,000 initial license fee
which is being amortized over the expected term of the agreement
(estimated at 15&nbsp;years). In addition, the Company has
agreed to sell to
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<P align="left">
<FONT size="2">Pfizer and Pfizer has agreed to purchase from the
Company, up to an additional $25,000,000 of the Company&#146;s
capital stock at the then current market price upon the
completion of certain events, including $10,000,000 of the
Company&#146;s common stock at the IPO price concurrently with
the successful completion of an IPO. Concurrent with the IPO,
Pfizer purchased 476,190&nbsp;shares of common stock at
$21.00&nbsp;per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on the achievement of certain specified
worldwide regulatory submission and approvals, the Company would
be eligible to receive up to an additional $195,500,000 in
milestone payments. The Company also has the potential to
receive up to an additional $450,000,000 in milestone payments,
which are contingent upon successful commercialization of
Macugen and which are based on attainment of agreed-upon sales
levels. Pfizer may terminate the collaboration relationship upon
six to twelve months&#146; prior notice, depending on when such
notice is given.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If approved, Macugen will be co-promoted by the
Company and Pfizer in the United States where Eyetech will have
an ophthalmology sales force, maintain the inventory and book
all United States product sales. The Company and Pfizer will
share in profits and losses from the sale of Macugen products in
the United States. Outside the United States, Pfizer will market
the product exclusively under a license, for which the Company
will receive royalty income. As part of the agreement, the
Company will begin to assemble a sales force prior to commercial
launch of Macugen, which also allows for the detailing
Pfizer&#146;s Xalatan&#174; ophthalmologic treatment in exchange
for specified royalties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company&#146;s share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$36,835,829 in revenue and $3,305,552 in research and
development and marketing expenses during 2003. Through
December&nbsp;31, 2003, Pfizer has made payments to the Company
of $31,683,277. Accordingly, at December&nbsp;31, 2003, the
Company has recorded a collaboration receivable for the net
amount of $2,562,000 and a collaboration payable of $715,000. In
addition, the Company recognized $4,583,337 in connection with
the amortization of the $75,000,000 initial license fee paid by
Pfizer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">12.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Capital Leases</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases laboratory equipment and other
equipment under capital leases that bear interest from 9.6% to
10.1% and expire in 2006. The following is a schedule of the
future minimum lease payments under these capital leases as of
December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">756,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">438,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,888,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less amount representing interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Present value of the minimum lease payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,656,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less current portion of capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,038,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases office and laboratory space in
New&nbsp;York, New&nbsp;York, Cedar Knolls, New Jersey and
Woburn, Massachusetts. During 2002, the Company leased certain
office space in New&nbsp;York, New&nbsp;York, which expires on
July&nbsp;31, 2007. Under existing lease agreements, the Company
has secured bank letters of credit totaling approximately
$2,624,000, which are fully cash collateralized and the cash is
categorized as restricted cash in the balance sheet.
Additionally, the Company has obtained a $3,000,000 secured bank
letter of credit in anticipation of entering into a leasing
commitment for operational and administrative facilities.
(Note&nbsp;16)
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rent expense for the years ended
December&nbsp;31, 2001, 2002 and December&nbsp;31, 2003 was
approximately $482,000, $1,380,000 and $1,316,000, respectively.
Future minimum lease commitments, net of sublease income, are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,556,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,564,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,577,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,237,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,504,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,314,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under certain of the Company&#146;s collaborative
agreements it is obligated to make specified payments upon
achieving specified milestones relating to the development and
regulatory approval of Macugen. These contingent payment
obligations are not included in the above table.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">401(k) Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains a defined contribution
401(k) plan available to eligible employees. Employee
contributions are voluntary and are determined on an individual
basis, limited by the maximum amounts allowable under federal
tax regulations. The Company has discretion to make
contributions to the plan. However, to date no contributions
have been made.
</FONT>

<P align="center"><FONT size="2">F-23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Selected Quarterly Financial Data
    (Unaudited)</FONT></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Quarter Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2001</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,581,212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,041,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,816,970</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,240,515</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,958,852</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,419,327</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,588,020</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,208,043</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss) per common share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.36</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,747,753</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,631,821</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,697,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,096,037</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,833,552</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,717,620</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,971,922</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,746,650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss) per common share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2003 (Restated)**</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,475,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,948,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,143,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,267,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422,172</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,071,789</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,308,255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,897,029</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,681,135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,330,753</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,583,830</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,263,909</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss) per common share*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.88</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Per common share amounts for the quarters and
    full years have been calculated separately. Accordingly,
    quarterly amounts do not add to the annual amount because of
    differences in the weighted average common shares outstanding
    during each period principally due to the effect of the
    Company&#146;s issuing shares of its common stock during the
    year.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Diluted EPS is identical to Basic EPS since
    common equivalent shares are excluded from the calculation, as
    their effect is anti-dilutive.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">**&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The quarterly results for the reimbursement of
    development costs for the quarters ended March&nbsp;31, 2003,
    June&nbsp;30, 2003 and September&nbsp;30, 2003 have been
    restated due to certain reclassifications of reimbursable costs
    that were made to quarterly billings in connection with the
    Company&#146;s collaboration with Pfizer. These restatements do
    not alter the full year results or amounts receivable under the
    collaboration at December&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Subsequent Events</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Lease for New Corporate Headquarters
    Space</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2004, the Company entered into a
sub-sublease arrangement for additional office space in
New&nbsp;York, NY to be used as new corporate operational and
administrative space. Under the terms of the sub-sublease, the
Company will lease 62,000&nbsp;square feet of space through 2020
at an initial rate of $45&nbsp;per square foot, subject to
periodic rate increases. As security for the sublease, we have
named the sub-landlord as beneficiary under a secured bank
letter of credit in the amount of $3,000,000. (Note&nbsp;13)
</FONT>

<P align="center"><FONT size="2">F-24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='127'></A>

<!-- link1 "CONDENSED CONSOLIDATED BALANCE SHEETS" -->

<DIV align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED BALANCE
SHEETS</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="10" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,013,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,648,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,360,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,266,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,562,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,502,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,017,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,236,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,434,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,867,582</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,331,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,623,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,623,865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,751,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,087,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,478,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="10"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="10" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146; (DEFICIT)
    EQUITY</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,308,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,606,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenue, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,214,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">633,826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred rent liability, current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,098,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,627,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenue, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,416,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,457,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,038,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">873,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities, net of current portion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">949,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; $.01&nbsp;par value; 29,093,695&nbsp;shares
    authorized; 25,062,278 and none issued and outstanding at
    December&nbsp;31, 2003 and March&nbsp;31, 2004, respectively,
    liquidation preference of $252,053,310 as of December&nbsp;31,
    2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,506,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; (deficit) equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible preferred stock&nbsp;&#151;
    $.01&nbsp;par value; 120,000 and none authorized, issued and
    outstanding at December&nbsp;31, 2003 and March&nbsp;31, 2004,
    respectively; liquidation preference of $225,000 as of
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock $.01&nbsp;par value;
    5,000,000&nbsp;shares authorized, none issued and outstanding at
    December&nbsp;31, 2003 and March&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock $.01&nbsp;par value; 60,000,000 and
    125,000,000&nbsp;shares authorized; 4,527,736 issued and
    4,102,736 outstanding at December&nbsp;31, 2003; 40,762,109
    issued and 40,337,109 outstanding at March&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">407,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,804,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">373,844,810</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(430,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,956,265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,840,850</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock, at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(255,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">166,327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(137,494,756</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(153,322,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; (deficit)&nbsp;equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(123,005,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,569,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146;
    (deficit)&nbsp;equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,479,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">288,478,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='128'></A>

<!-- link1 "CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS" -->

<DIV align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration revenue:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reimbursement of development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,475,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,462,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total collaboration revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,309,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,712,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,616,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,930,892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">568,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,799,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,642,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,288,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,372,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,979,068</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,660,182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">618,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">694,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(61,580</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46,271</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422,172</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,011,745</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,258,963</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(816,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,681,135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,827,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,760,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,529,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma basic and diluted net loss attributable
    to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares outstanding&nbsp;&#151;
    pro forma basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,863,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,782,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='129'></A>

<!-- link1 "CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS" -->

<P align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422,172</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,011,745</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">181,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">551,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Noncash stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,945,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Gain) loss on sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Collaboration receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,945,954</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(434,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">301,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,379,572</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(144,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,537</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,422,261</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,200,158</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,166,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,250,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(105,974</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">523,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,607,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,285,271</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(907,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,015,957</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,639,104</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,822,600,498</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,956,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,790,722,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of loan to stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in prepaid expenses and other current
    assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,108</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(337,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash (used in) investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,613,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,529,631</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of common stock, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152,659,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,994,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,640,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(148,903</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,899,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">155,449,842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,893,331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,634,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,791,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,013,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,685,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,648,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Noncash financing and investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans to stockholders in connection with exercise
    of stock options and stock purchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Supplemental disclosures of cash flow
    information</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid during the period for:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of redeemable preferred stock on
    conditional exercise of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of redeemable and convertible
    preferred stock to common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189,613,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses in connection with initial public
    offering of common stock reclassified to additional paid in
    capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,701,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-27
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>

<P align="left">
<A name='130'></A>

<!-- link1 "NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">March&nbsp;31, 2004</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Organization and Description of
    Business</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eyetech Pharmaceuticals,&nbsp;Inc., together with
its wholly owned subsidiary (&#147;Eyetech&#148; or the
&#147;Company&#148;), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company&#146;s
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company&#146;s most advanced
product candidate is Macugen<SUP>TM</SUP> (pegaptanib sodium
injection), which it is developing in a collaboration with
Pfizer Inc. (&#147;Pfizer&#148;) for the treatment of both the
wet form of age-related macular degeneration, known as AMD, and
for the treatment of diabetic macular edema, known as DME, which
is a complication of diabetic retinopathy. In the second half of
2001, the Company initiated two Phase&nbsp;2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. Based on the
results from the first year of these trials, the Company plans
to prepare and file in 2004 a new drug application with the
United States Food and Drug Administration seeking marketing
approval of Macugen for the treatment of wet AMD. The Company is
also currently conducting a Phase&nbsp;2 clinical trial for the
use of Macugen in the treatment of DME and recently announced
preliminary data from this ongoing study.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when its several concurrent agreements with Pfizer became
effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;4, 2004, the Company
successfully completed an initial public offering of its common
stock. The initial public offering consisted of the sale of
6,500,000&nbsp;shares of common stock at a price of
$21.00&nbsp;per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000&nbsp;shares within 30&nbsp;days of the initial public
offering to cover over-allotments. This option was exercised in
full in February 2004. Net proceeds from the initial public
offering after deducting underwriters&#146; discounts and
expenses were $142.9&nbsp;million. In addition,
476,190&nbsp;shares of common stock were purchased concurrently
with the initial public offering by Pfizer for $10&nbsp;million
as part of its commitment under Pfizer&#146;s collaboration with
the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We issued 5,073,435 warrants in connection with
original issuances of preferred stock from April 2000 to August
2002 and the in-licensing of Macugen in April 2000. Prior to the
closing of our initial public offering, 1,511,381&nbsp;shares of
preferred stock were issued in connection with warrant exercises
providing $10.4&nbsp;million in aggregate proceeds during the
quarter ended March&nbsp;31, 2004. Included in this amount were
73,581&nbsp;shares issued pursuant to conditional exercises
received during the quarter ended December&nbsp;31, 2003 for
proceeds of $0.5&nbsp;million. An additional
1,867,124&nbsp;shares of preferred stock were issued on a
cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333&nbsp;shares
of Series&nbsp;B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March&nbsp;31, 2004 on a
cashless basis, resulting in the issuance of 680,509&nbsp;shares
of common stock in exchange for the surrender of warrants to
purchase 152,824&nbsp;shares of common stock. No warrants remain
outstanding at March&nbsp;31, 2004.
</FONT>

<P align="center"><FONT size="2">F-28
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting
    Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Basis of Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying condensed consolidated 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&nbsp;10-Q. Accordingly, they do not include all the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, the accompanying
financial statements include all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair
presentation of the Company&#146;s financial position, results
of operations, and cash flows for the periods presented.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The results of operations for the three-month
period ended March&nbsp;31, 2004 are not necessarily indicative
of the results that may be expected for the entire fiscal year
ending December&nbsp;31, 2004. These condensed consolidated
financial statements should be read in conjunction with the
audited financial statements included in the Company&#146;s
Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2003 filed with the Securities and Exchange
Commission.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reclassification</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain reclassifications have been made to the
prior year&#146;s information to conform to the 2004
presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company considers all highly-liquid
investments with an original maturity of three months or less to
be cash equivalents. At March&nbsp;31, 2004, the Company had
substantially all of its cash and cash equivalents deposited
with one financial institution.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Marketable Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketable securities are classified as
&#147;available-for-sale&#148; and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders&#146; deficit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Restricted Cash</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Restricted cash of $5.6&nbsp;million at
March&nbsp;31, 2004 collateralizes $5.6&nbsp;million of
outstanding letters of credit associated with the leases of the
Company&#146;s office and laboratory facilities. The funds are
invested in certificates of deposit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Concentration of Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allow the Company to manage risk.
</FONT>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues associated with the Company&#146;s
collaboration with Pfizer consist of non-refundable, up-front
license fees, reimbursement of development expenses and costs
associated with the validation of the manufacturing process. The
Company expects to record revenues and expenses in future
periods related to equipment purchased which, under the terms of
our agreement, Pfizer will reimburse to the Company a portion of
the total cost of the equipment which will be recognized over
the life of the equipment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin No.&nbsp;101,
&#147;Revenue Recognition in Financial Statements&#148; and
Emerging Issues Task Force (&#147;EITF&#148;) Issue&nbsp;00-21,
&#147;Revenue Arrangements with Multiple Deliverables&#148;
(&#147;EITF&nbsp;00-21&#148;). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue&nbsp;99-19, &#147;Reporting Revenue
Gross as a Principal Versus Net as an Agent&#148;
(&#147;EITF&nbsp;99-19&#148;), and EITF Issue&nbsp;01-14,
&#147;Income Statement Characterization of Reimbursements
Received For &#147;Out-of-Pocket&#148; Expenses Incurred&#148;
(&#147;EITF&nbsp;01-14&#148;). According to the criteria
established by these EITF Issues, in transactions where the
Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Research and Development
    Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Research and development costs are expensed as
incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-Based Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, the Financial Accounting
Standards Board (&#147;FASB&#148;) issued Statement of Financial
Accounting Standard No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation&nbsp;&#151; Transition and
Disclosure&nbsp;&#151; an amendment of FASB Statement
No.&nbsp;123&#148; (&#147;SFAS&nbsp;148&#148;). SFAS&nbsp;148
provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based employee compensation from the intrinsic value-based
method of accounting prescribed by Accounting Principles Board
Opinion No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees&#148; (&#147;APB&nbsp;25&#148;). In addition,
SFAS&nbsp;148 amends the disclosure requirements of
SFAS&nbsp;No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation&#148; (&#147;SFAS&nbsp;123&#148;). The Company
adopted the disclosure requirements of SFAS&nbsp;148 effective
December&nbsp;31, 2002. As allowed by SFAS&nbsp;123, the Company
has elected to continue to apply the intrinsic value-based
method of accounting prescribed in APB&nbsp;25 and, accordingly,
does not recognize compensation expense for stock option grants
made at an exercise price equal to or in excess of the fair
market value of the stock at the date of grant.
</FONT>

<P align="center"><FONT size="2">F-30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Had compensation cost for the Company&#146;s
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS&nbsp;123, the Company&#146;s net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders, as
    reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,681,135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,827,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: Non-cash employee compensation as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,141,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(166,477</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,777,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SFAS&nbsp;123 pro forma net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,847,612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,464,210</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted loss attributable to common
    stockholders per share, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted loss attributable to common
    stockholders per share, SFAS&nbsp;123 pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.09</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.60</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS&nbsp;123 pro forma information regarding net
loss is required by SFAS&nbsp;123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS&nbsp;123. The fair value of the options prior to completion
of the Company&#146;s initial public offering was estimated at
the date of grant using the minimum value pricing model. Upon
completion of the initial public offering in February, 2004, the
Company began using the Black-Scholes model to estimate fair
value. The following assumptions were utilized for the
calculations during each period:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk-free interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.80%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.86%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5 years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Volatility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The effects of applying SFAS&nbsp;123 in this pro
forma disclosure are not indicative of future amounts. Pro forma
compensation related to stock option grants is expensed over
their respective vesting periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for options issued to
nonemployees under SFAS&nbsp;123 and EITF Issue&nbsp;96-18
&#147;Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services&#148; (&#147;EITF&nbsp;96-18&#148;). As such,
the value of such unvested options is periodically remeasured
and income or expense is recognized during their vesting terms.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets
and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred tax asset
will not be realized.
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recently Issued Accounting
    Pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the FASB issued
SFAS&nbsp;No.&nbsp;146, &#147;Accounting for Costs Associated
with Exit or Disposal Activities&#148;
&#147;SFAS&nbsp;No.&nbsp;146&#148;). This standard addresses
financial accounting and reporting for costs associated with an
exit or disposal activities and requires companies to recognize
costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or
disposal plan. This standard nullifies EITF Issue&nbsp;94-3,
&#147;Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring.&#148; This Standard is
effective for exit or disposal activities initiated after
December&nbsp;31, 2002. The adoption of this statement did not
have a material effect on the Company&#146;s results of
operations, cash flows or financial position during the quarter
ended March&nbsp;31, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, the FASB issued various accounting
standards and interpretations, including SFAS&nbsp;No.&nbsp;150,
&#147;Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity&#148;
(&#147;SFAS&nbsp;150&#148;),&nbsp;Interpretation No.&nbsp;46
(&#147;FIN&nbsp;46&#148;), &#147;Consolidation of Variable
Interest Entities, an interpretation of ARB&nbsp;51&#148; and
Interpretation No.&nbsp;46-R &#147;Consolidation of Variable
Interest Entities&#148; (&#147;FIN&nbsp;46-R&#148;). Adoption of
these standards and interpretations has not had a material
effect on the Company&#146;s financial condition, results of
operations or liquidity. There have been no other accounting
pronouncements made through March&nbsp;31, 2004 that the Company
expects will have a material effect on its results of
operations, cash flows or financial position.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Net Loss Per Share</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards&nbsp;128, &#147;Earnings per Share&#148;
(&#147;SFAS&nbsp;No.&nbsp;128&#148;). Under the provisions of
SFAS&nbsp;128, basic net loss per common share (&#147;Basic
EPS&#148;) is computed by dividing net loss by the
weighted-average number of common shares outstanding. Diluted
net loss per common share (&#147;Diluted EPS&#148;) is computed
by dividing net loss by the weighted-average number of common
shares and dilutive common share equivalents then outstanding.
Common equivalent shares consist of the incremental common
shares issuable upon the conversion of preferred stock, shares
issuable upon the exercise of stock options and the conversion
of preferred stock upon the exercise of warrants. Diluted EPS is
identical to Basic EPS since common equivalent shares are
excluded from the calculation, as their effect is anti-dilutive.
</FONT>

<P align="center"><FONT size="2">F-32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the computation of
basic and diluted net loss per share for the three-month period
ended March&nbsp;31, 2003 and 2004:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,422,172</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,011,745</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock accretion
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,258,963</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(816,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Numerator for basic and diluted net loss
    attributable to common stockholders per share&nbsp;&#151; net
    loss attributable to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,681,135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,827,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator for basic and dilutive net loss
    attributable to common stockholders per share&nbsp;&#151;
    weighted-average shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,760,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,529,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net loss attributable to common
    stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share&nbsp;&#151; weighted average shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,863,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,782,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pro forma basic and diluted net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock into
shares of the Company&#146;s common stock effective upon the
closing of the Company&#146;s initial public offering, as if
such conversion had occurred at the date of the original
issuance. Accordingly, pro forma basic and diluted net loss per
common share has been calculated assuming the preferred stock
was converted as of the original date of issuance of the
preferred stock
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows dilutive common share
equivalents outstanding on a weighted average basis, which are
not included in the above historical calculations, as the effect
of their inclusion is anti-dilutive during each period:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,102,406</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,252,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,553,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,717,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,073,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,845,521</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,728,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,815,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Comprehensive Loss</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comprehensive losses are primarily comprised of
net losses, unrealized gains and losses on available for sales
securities and currency translation adjustments. Comprehensive
losses for the three months ended March&nbsp;31, 2003 and 2004
were $5.4&nbsp;million and $15.0&nbsp;million, respectively.
</FONT>

<P align="center"><FONT size="2">F-33
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED UNAUDITED
CONSOLIDATED</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(CONTINUED)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stockholders&#146; Equity</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;4, 2004, the Company
successfully completed an initial public offering of its common
stock. The initial public offering consisted of the sale of
6,500,000&nbsp;shares of common stock at a price of
$21.00&nbsp;per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000&nbsp;shares within 30&nbsp;days of the initial public
offering to cover over-allotments. This option was exercised in
February 2004. Net proceeds from our initial public offering
after deducting underwriter&#146;s discounts and expenses were
$142.9&nbsp;million. In addition, 476,190&nbsp;shares of common
stock were purchased concurrently with the initial public
offering by Pfizer for $10&nbsp;million as part of its
commitment under our collaboration with Pfizer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the closing of the Company&#146;s
initial public offering, 469,360&nbsp;shares of preferred stock
were issued in connection with warrant exercises providing
$2.6&nbsp;million in proceeds during the quarter ended
March&nbsp;31, 2004. Included in this amount were
73,581&nbsp;shares issued pursuant to conditional exercises
received during the quarter ended December&nbsp;31, 2003 for
proceeds of $0.5&nbsp;million. An additional
1,867,124&nbsp;shares of preferred stock were issued on a
cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333&nbsp;shares
of Series&nbsp;B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March&nbsp;31, 2004 on a
cashless basis, resulting in the issuance of 680,509&nbsp;shares
of common stock in exchange for the surrender of warrants to
purchase 152,824&nbsp;shares of common stock. No warrants remain
outstanding at March&nbsp;31, 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Pfizer Collaboration</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February&nbsp;3, 2003 when government approval
was obtained, Pfizer made initial payments of $100&nbsp;million
which included the purchase of 2,747,253&nbsp;shares of the
Company&#146;s Series&nbsp;D preferred stock for
$24.7&nbsp;million, net of issuance costs and a $75&nbsp;million
initial license fee which is being amortized over the expected
term of the agreement (estimated at 15&nbsp;years). In addition,
the Company has agreed to sell to Pfizer and Pfizer has agreed
to purchase from the Company, up to an additional
$25&nbsp;million of the Company&#146;s capital stock at the then
current market price upon the completion of certain events.
Pursuant to this agreement, concurrent with the initial public
offering, Pfizer purchased 476,190&nbsp;shares of common stock
at $21.00&nbsp;per share, resulting in gross proceeds to the
Company of approximately $10&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company&#146;s share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$6.5&nbsp;million in revenue during the three month period ended
March&nbsp;31, 2003 and $10.5&nbsp;million in revenue and
$0.7&nbsp;million in research and development and marketing
expenses during the three month period ended March&nbsp;31,
2004. At March&nbsp;31, 2004, the Company has recorded a
collaboration receivable in the amount of $4.5&nbsp;million. In
addition, the Company recognized $0.8&nbsp;million and
$1.3&nbsp;million in connection with the amortization of the
$75&nbsp;million initial license fee paid by Pfizer for the
three month periods ending March&nbsp;31, 2003 and 2004,
respectively.
</FONT>

<P align="center"><FONT size="2">F-34
</FONT>

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<P align="center">
<B><FONT size="2">PART&nbsp;II</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;13.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Other Expenses of Issuance and
    Distribution</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table indicates the expenses to be
incurred in connection with the offering described in this
Registration Statement, other than underwriting discounts and
commissions, all of which will be paid by the Registrant. All
amounts are estimated except the Securities and Exchange
Commission registration fee and the National Association of
Securities Dealers Inc. filing fee.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities and Exchange Commission registration
    fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">National Association of Securities Dealers Inc.
    fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accountants&#146; fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Blue Sky fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer Agent&#146;s fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Printing and engraving expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;14.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Indemnification of Directors and
    Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;102 of the General Corporation Law
of the State of Delaware permits a corporation to eliminate the
personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an
improper personal benefit. The Registrant&#146;s certificate of
incorporation provides that no director of the Registrant shall
be personally liable to it or its stockholders for monetary
damages for any breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability,
except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of
liability of directors for breaches of fiduciary duty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;145 of the General Corporation Law
of the State of Delaware provides that a corporation has the
power to indemnify a director, officer, employee, or agent of
the corporation and certain other persons serving at the request
of the corporation in related capacities against expenses
(including attorneys&#146; fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he is or is threatened to be made a party by reason of such
position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful, except that, in the case of actions brought by or in
the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or
other adjudicating court determines that, despite the
adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Registrant&#146;s certificate of
incorporation provides that the Registrant will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Registrant) by
reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Registrant, or is or was
serving, or has agreed to serve, at the Registrant&#146;s
request as a director, officer, partner, employee or trustee of,
or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise(all such
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>
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<DIV align="left">
<FONT size="2">persons being referred to as an
&#147;Indemnitee&#148;), or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys&#146; fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding and any appeal
therefrom, if such Indemnitee acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed
to, the Registrant&#146;s best interests, and, with respect to
any criminal action or proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful. The
Registrant&#146;s certificate of incorporation provides that the
Registrant will indemnify any Indemnitee who was or in a party
to an action or suit by or in the right of the Registrant to
procure a judgment in its favor by reason of the fact that the
Indemnitee is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed
to serve, at the Registrant&#146;s request as a director,
officer, partner, employee or trustee of, or in a similar
capacity with, another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys&#146; fees) and, to the extent
permitted by law, amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Registrant,
except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant, unless a court
determines that, despite such adjudication but in view of all of
the circumstances, he or she is entitled to indemnification of
such expenses. Notwithstanding the foregoing, to the extent that
any Indemnitee has been successful, on the merits or otherwise,
he or she will be indemnified by the Registrant against all
expenses (including attorneys&#146; fees) actually and
reasonably incurred in connection therewith. Expenses must be
advanced to an Indemnitee under certain circumstances.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below is information regarding shares
of common stock and preferred stock issued, and options and
warrants granted, by the Registrant within the past three years.
Also included is the consideration, if any, received by the
Registrant for such shares, options and warrants and information
relating to the section of the Securities Act, or rule of the
Securities and Exchange Commission, under which exemption from
registration was claimed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Issuances of Capital Stock
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">1.&nbsp;In July and August 2001, the Registrant
    issued an aggregate of 7,964,229&nbsp;shares of series&nbsp;C-1
    convertible preferred stock at a price per share of $6.80,
    together with warrants to purchase an aggregate of
    1,592,846&nbsp;shares of series&nbsp;C-1 convertible preferred
    stock at an exercise price of $6.80&nbsp;per share to individual
    and institutional investors, including J.P.&nbsp;Morgan Partners
    (BHCA),&nbsp;L.P., Biotech Growth, N.V. (BB Biotech), MPM
    Capital,&nbsp;LP, Merrill Lynch Entities, Lakeview
    EyeTech&nbsp;II,&nbsp;L.P. and Schroder Ventures Entities for
    aggregate cash proceeds of approximately $54,160,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">2.&nbsp;In August 2002, the Registrant issued an
    aggregate of 7,521,777&nbsp;shares of series&nbsp;C-2
    convertible preferred stock at a price per share of $7.20,
    together with warrants to purchase an aggregate of
    1,504,354&nbsp;shares of series&nbsp;C-2 convertible preferred
    stock at an exercise price of $7.20&nbsp;per share to existing
    investors, including J.P.&nbsp;Morgan Partners
    (BHCA),&nbsp;L.P., Biotech Growth,&nbsp;N.V. (BB Biotech), MPM
    Capital,&nbsp;LP, Merrill Lynch Entities, Lakeview
    EyeTech&nbsp;II,&nbsp;L.P. and Schroder Ventures Entities for
    aggregate cash proceeds of approximately $54,160,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">3.&nbsp;In February 2003, the Registrant issued
    2,747,253&nbsp;shares of series&nbsp;D convertible preferred
    stock to an affiliate of Pfizer&nbsp;Inc. at a price per share
    of $9.10 for aggregate cash proceeds of approximately
    $25.0&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">4.&nbsp;In September, October, November and
    December 2003, upon the exercise of warrants, the Registrant
    issued an aggregate of 532,560&nbsp;shares of series&nbsp;C-1
    convertible preferred stock at a price
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-2
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">per share of $6.80 to MPM Capital,&nbsp;LP,
    Biotech Growth&nbsp;N.V. and individual investors for aggregate
    cash proceeds of approximately $3,620,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">5.&nbsp;In September, October, November and
    December 2003, upon the exercise of warrants, the Registrant
    issued an aggregate of 507,557&nbsp;shares of series&nbsp;C-2
    convertible preferred stock at a price per share of $7.20 to MPM
    Capital,&nbsp;LP, Biotech Growth,&nbsp;N.V. and individual
    investors for aggregate cash proceeds of approximately
    $3,650,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">6.&nbsp;In October 2003, upon the exercise of a
    warrant, the Registrant issued an aggregate of 3,333&nbsp;shares
    of series&nbsp;B convertible preferred stock at a price per
    share of $6.00 to an individual investor for aggregate cash
    proceeds of approximately $20,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 2004,
    the Registrant issued 476,190&nbsp;shares of common stock to an
    affiliate of Pfizer Inc. at a price per share of $21.00 for
    aggregate cash proceeds of approximately $10.0&nbsp;million.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2004,
    upon the exercise of warrants for aggregate cash proceeds of
    $0.8&nbsp;million, the Registrant issued 146,233&nbsp;shares of
    series B redeemable convertible preferred stock at
    $6.00&nbsp;per share to existing investors. Also in January
    2004, upon the cashless exercise of warrants, the Registrant
    issued 709,517&nbsp;shares of series&nbsp;B redeemable
    convertible preferred stock to holders of 993,336 warrants to
    purchase shares of series&nbsp;B redeemable convertible
    preferred stock. The 709,517&nbsp;shares were issued in exchange
    for the surrender of 283,819 warrants to purchase shares of
    series&nbsp;B redeemable convertible preferred stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2004,
    upon the exercise of warrants for aggregate cash proceeds of
    $1.1&nbsp;million, the Registrant issued 156,309&nbsp;shares of
    series&nbsp;C-1 redeemable convertible preferred stock at
    $6.80&nbsp;per share to existing investors. Also in January
    2004, upon the cashless exercise of warrants, the Registrant
    issued 611,746&nbsp;shares of series&nbsp;C-1 redeemable
    convertible preferred stock to holders of 904,712 warrants to
    purchase shares of series&nbsp;C-1 redeemable convertible
    preferred stock. The 611,746&nbsp;shares were issued in exchange
    for the surrender of 292,966 warrants to purchase shares of
    series&nbsp;C-1 redeemable convertible preferred stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">10.&nbsp;In January 2004, upon the exercise of
    warrants for aggregate cash proceeds of $1.2&nbsp;million, the
    Registrant issued 166,818&nbsp;shares of series&nbsp;C-2
    redeemable convertible preferred stock at $7.20&nbsp;per share
    to existing investors. Also in January 2004, upon the cashless
    exercise of warrants, the Registrant issued 545,861&nbsp;shares
    of series&nbsp;C-2 redeemable convertible preferred stock to
    holders of 830,673 warrants to purchase shares of
    series&nbsp;C-2 redeemable convertible preferred stock. The
    545,861&nbsp;shares were issued in exchange for the surrender of
    284,812 warrants to purchase shares of series&nbsp;C-1
    redeemable convertible preferred stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">11.&nbsp;In February and March 2004, upon the
    cashless exercise of warrants, the Registrant issued an
    aggregate of 680,509&nbsp;shares of common stock to holders of
    833,333 warrants to purchase 833,333&nbsp;shares of common
    stock. The 680,509&nbsp;shares were issued in exchange for the
    surrender of 152,824 warrants to purchase shares of common stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No underwriters were involved in the foregoing
sales of securities. The securities described in this
paragraph&nbsp;(a) of Item&nbsp;15 were issued to a combination
of foreign and U.S.&nbsp;investors in reliance upon the
exemption from the registration requirements of the Securities
Act, as set forth in Section&nbsp;4(2) under the Securities Act
and Rule&nbsp;506 of Regulation&nbsp;D promulgated thereunder
relative to sales by an issuer not involving any public
offering, to the extent an exemption from such registration was
required. All purchasers of shares of the Registrant&#146;s
convertible preferred stock described above represented to the
Registrant in connection with their purchase that they were
accredited investors and were acquiring the shares for
investment and not distribution, that they could bear the risks
of the investment and could hold the securities for an
indefinite period of time. The purchasers received written
disclosures that the securities had not been registered under
the Securities Act and that any resale must be made pursuant to
a registration or an available exemption from such registration.
</FONT>

<P align="center"><FONT size="2">II-3
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Stock Option Grants
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, the Registrant had
issued to employees, directors and consultants
1,527,736&nbsp;shares of common stock upon the exercise of stock
options at a weighted average exercise price of $0.64&nbsp;per
share and 75,000&nbsp;shares of restricted common stock at a
purchase price of $1.36&nbsp;per share. In addition, options to
purchase 3,639,416&nbsp;shares of common stock were outstanding
under the Registrant&#146;s 2001 Stock Plan, and options to
purchase 1,057,500&nbsp;shares of common stock were outstanding
outside the Registrant&#146;s 2001 Stock Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the three months ended March 2004, the
Registrant issued to employees and consultants
83,912&nbsp;shares of common stock upon the exercise of stock
options at a weighted average exercise price of $1.05&nbsp;per
share. During the same period, the Registrant granted options to
purchase 1,178,660&nbsp;shares of common stock at a weighted
average exercise price of $27.50&nbsp;per share. In addition,
the Registrant also granted 37,501&nbsp;shares of restricted
stock to employees for cash proceeds of $375.00.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The issuance of stock options and the common
stock issuable upon the exercise of such options as described in
this paragraph&nbsp;(b) of Item&nbsp;15 were issued pursuant to
written compensatory plans or arrangements with the
Registrant&#146;s employees, directors and consultants, in
reliance on the exemption provided by Rule&nbsp;701 promulgated
under the Securities Act. All recipients either received
adequate information about the Registrant or had access, through
employment or other relationships, to such information.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act. All
certificates representing the issued shares of common stock
described in this Item&nbsp;15 included appropriate legends
setting forth that the securities had not been registered and
the applicable restrictions on transfer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;16.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Exhibits</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Bylaws of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Certificate evidencing shares of common
    stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated as of March&nbsp;31,
    2000, by and between the Registrant and Gilead
    Sciences,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement Amendment, dated as of
    September&nbsp;4, 2003, by and among the Registrant, Gilead
    Sciences,&nbsp;Inc. and University License Equity
    Holdings,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Series&nbsp;D Preferred Stock Purchase Agreement,
    dated as of December&nbsp;17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Investors&#146; Rights
    Agreement, dated as of February&nbsp;7, 2003, by and among the
    Registrant and the parties listed therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Morrison&nbsp;&#38; Foerster LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2001 Stock Plan, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Employee Stock Purchase Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;17,
    2002, by and between Pfizer Inc. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Collaboration Agreement, dated as of
    December&nbsp;17, 2002, by and between Pfizer Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License, Manufacturing and Supply Agreement,
    dated February&nbsp;5, 2002, by and between Shearwater
    Corporation and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Licensing Agreement, dated as of March&nbsp;30,
    2000 and amended on May&nbsp;9, 2000, December&nbsp;4, 2001 and
    April&nbsp;12, 2002, by and between Gilead Sciences,&nbsp;Inc.
    and the Registrant
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;31,
    2001, by and between Isis Pharmaceuticals,&nbsp;Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated as of
    November&nbsp;1, 2001, by and between the Registrant and Samir
    Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Employment Agreement, dated as of
    April&nbsp;12, 2000, by and between the Registrant and
    David&nbsp;R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Executive Employment Agreement,
    dated as of August&nbsp;25, 2003, by and between the Registrant
    and David&nbsp;R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Paul Chaney and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    February&nbsp;1, 2002, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as of
    October&nbsp;17, 2003, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of April&nbsp;12,
    2002, by and between the Registrant and Anthony&nbsp;P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as of
    October&nbsp;20, 2003, by and between the Registrant and Anthony
    P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.17(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Douglas&nbsp;H. Altschuler and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.18(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Promissory Note, dated
    July&nbsp;1, 2002, issued by Anthony&nbsp;P. Adamis to the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.19(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated July&nbsp;1, 2002,
    by and between Anthony&nbsp;P. Adamis and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.20(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sublease Agreement, dated as of December&nbsp;19,
    2001 and amended as of February&nbsp;22, 2002, by and between
    AnswerThink,&nbsp;Inc., successor in interest to AnswerThink
    Consulting Group,&nbsp;Inc., and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.21(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lease Agreement, dated March&nbsp;14, 2002, by
    and between First Industrial, L.P. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.22(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Commercial Lease, dated March&nbsp;27, 2002, by
    and between Cummings Properties, LLC and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.23&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Manufacturing and Supply Agreement, dated as of
    November&nbsp;11, 2003, by and between Raylo
    Chemicals,&nbsp;Inc., a subsidiary of Degussa
    Chemicals,&nbsp;Inc., and the Registrant.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.24&#134;(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter of Understanding, effective as of
    September&nbsp;1, 2003, by and between the Registrant and Raylo
    Chemicals,&nbsp;Inc., , a subsidiary of Degussa
    Chemicals,&nbsp;Inc., as Amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.25&#134;(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Manufacturing and Supply Agreement, dated as of
    November&nbsp;26, 2003 by and between the Registrant and Gilead
    Sciences,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.26(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sub-Sublease Agreement, dated December&nbsp;19,
    2003, by and between Instinet Global Holdings,&nbsp;Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.27(7)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1, dated May&nbsp;4, 2004, to
    Consulting Agreement, dated November&nbsp;1, 2001, between the
    Registrant and Samir Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Morrison&nbsp;&#38; Foerster LLP
    (included in Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included on signature page)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on October&nbsp;21, 2003
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on September&nbsp;12, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on January&nbsp;22, 2004
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on December&nbsp;18, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on January&nbsp;27, 2001
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Annual Report on Form&nbsp;10-K for the year
    ended December&nbsp;31, 2003 filed on March&nbsp;24, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2004, filed on May&nbsp;12, 2004.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="3%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#134;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment granted as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;17.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Undertakings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule&nbsp;430A and contained in the
    form of prospectus filed by the registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of the registration statement as
    of the time it was declared effective.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;For purposes of determining any
    liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-6
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
New&nbsp;York, New&nbsp;York on May&nbsp;12, 2004.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">EYETECH PHARMACEUTICALS,&nbsp;INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="center">
    <FONT size="2">/s/ DAVID R. GUYER
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">David R. Guyer,&nbsp;M.D.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Chief Executive Officer, Director</FONT></I></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">POWER OF ATTORNEY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the undersigned directors and officers of
Eyetech Pharmaceuticals,&nbsp;Inc. hereby severally constitute
and appoint David A Guyer, Glenn P. Sblendorio and Douglas H.
Altschuler, and each of them, his/her true and lawful
attorneys-in-fact and agents, with full power of substitution
and re-substitution for him/her and in his/her name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration
Statement, and any subsequent registration statements pursuant
to Rule&nbsp;462 of the Securities Act of 1933, as amended and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and
confirming all that each of said attorney-in-fact or his/her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ DAVID R. GUYER<BR>
    <HR size="1" noshade>David R. Guyer,&nbsp;M.D.&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Executive Officer, Director (Principal
    Executive Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ GLENN P. SBLENDORIO<BR>
    <HR size="1" noshade>Glenn P. Sblendorio
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Financial Officer (Principal Financial and
    Accounting Officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ JOHN P. MCLAUGHLIN<BR>
    <HR size="1" noshade>John P. McLaughlin
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chairman of the Board of Directors
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ SRINIVAS AKKARAJU<BR>
    <HR size="1" noshade>Srinivas
    Akkaraju,&nbsp;M.D.,&nbsp;Ph.D.&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ MARTY GLICK<BR>
    <HR size="1" noshade>Marty Glick
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ MICHAEL G. MULLEN<BR>
    <HR size="1" noshade>Michael G. Mullen, CFA
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ SAMIR PATEL<BR>
    <HR size="1" noshade>Samir Patel,&nbsp;M.D.&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ EDWARD PENHOET<BR>
    <HR size="1" noshade>Edward Penhoet,&nbsp;Ph.D.&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ HENRY SIMON<BR>
    <HR size="1" noshade>Henry Simon
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ DAMION E. WICKER<BR>
    <HR size="1" noshade>Damion E. Wicker,&nbsp;M.D.&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">May&nbsp;13, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Bylaws of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Certificate evidencing shares of common
    stock
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated as of March&nbsp;31,
    2000, by and between the Registrant and Gilead
    Sciences,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement Amendment, dated as of
    September&nbsp;4, 2003, by and among the Registrant, Gilead
    Sciences,&nbsp;Inc. and University License Equity
    Holdings,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Series&nbsp;D Preferred Stock Purchase Agreement,
    dated as of December&nbsp;17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Investors&#146; Rights
    Agreement, dated as of February&nbsp;7, 2003, by and among the
    Registrant and the parties listed therein
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Morrison&nbsp;&#38; Foerster LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2001 Stock Plan, as amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2003 Employee Stock Purchase Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;17,
    2002, by and between Pfizer Inc. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Collaboration Agreement, dated as of
    December&nbsp;17, 2002, by and between Pfizer Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License, Manufacturing and Supply Agreement,
    dated February&nbsp;5, 2002, by and between Shearwater
    Corporation and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Licensing Agreement, dated as of March&nbsp;30,
    2000 and amended on May&nbsp;9, 2000, December&nbsp;4, 2001 and
    April&nbsp;12, 2002, by and between Gilead Sciences,&nbsp;Inc.
    and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">License Agreement, dated as of December&nbsp;31,
    2001, by and between Isis Pharmaceuticals,&nbsp;Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.9(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated as of
    November&nbsp;1, 2001, by and between the Registrant and Samir
    Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.10(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Employment Agreement, dated as of
    April&nbsp;12, 2000, by and between the Registrant and David R.
    Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.11(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Executive Employment Agreement,
    dated as of August&nbsp;25, 2003, by and between the Registrant
    and David R. Guyer
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.12(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Paul Chaney and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.13(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of
    February&nbsp;1, 2002, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.14(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as of
    October&nbsp;17, 2003, by and between the Registrant and Glenn
    Sblendorio
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.15(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of April&nbsp;12,
    2002, by and between the Registrant and Anthony P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.16(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement, dated as of
    October&nbsp;20, 2003, by and between the Registrant and Anthony
    P. Adamis
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.17(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated as of August&nbsp;25,
    2003, by and between Douglas H. Altschuler and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.18(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Promissory Note, dated
    July&nbsp;1, 2002, issued by Anthony P. Adamis to the Registrant
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.19(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated July&nbsp;1, 2002,
    by and between Anthony P. Adamis and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.20(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sublease Agreement, dated as of December&nbsp;19,
    2001 and amended as of February&nbsp;22, 2002, by and between
    AnswerThink,&nbsp;Inc., successor in interest to AnswerThink
    Consulting Group,&nbsp;Inc., and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.21(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lease Agreement, dated March&nbsp;14, 2002, by
    and between First Industrial, L.P. and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.22(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Commercial Lease, dated March&nbsp;27, 2002, by
    and between Cummings Properties, LLC and the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.23&#134;(3)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Manufacturing and Supply Agreement, dated as of
    November&nbsp;11, 2003, by and between Raylo
    Chemicals,&nbsp;Inc., a subsidiary of Degussa
    Chemicals,&nbsp;Inc., and the Registrant.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.24&#134;(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter of Understanding, effective as of
    September&nbsp;1, 2003, by and between the Registrant and Raylo
    Chemicals,&nbsp;Inc., a subsidiary of Degussa
    Chemicals,&nbsp;Inc., as Amended
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.25&#134;(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Manufacturing and Supply Agreement, dated as of
    November&nbsp;26, 2003 by and between the Registrant and Gilead
    Sciences,&nbsp;Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.26(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sub-Sublease Agreement, dated December&nbsp;19,
    2003, by and between Instinet Global Holdings,&nbsp;Inc. and the
    Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.27(7)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment No.&nbsp;1, dated May&nbsp;4, 2004, to
    Consulting Agreement, dated November&nbsp;1, 2001, between the
    Registrant and Samir Patel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Morrison&nbsp;&#38; Foerster LLP
    (included in Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (included on signature page)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on October&nbsp;21, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on September&nbsp;12, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on January&nbsp;22, 2004
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on December&nbsp;18, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Registration Statement on Form&nbsp;S-1 (SEC
    File No.&nbsp;333-108781) filed on January&nbsp;27, 2004
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Annual Report on Form&nbsp;10-K for the year
    ended December&nbsp;31, 2003 filed on March&nbsp;24, 2004.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Incorporated by reference to the
    Registrant&#146;s Quarterly Report on Form&nbsp;10-Q for the
    quarter ended March&nbsp;31, 2004, filed on May&nbsp;12, 2004.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment granted as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y97374sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1554675}]
{"company-data": {"conformed-name": "EYETECH PHARMACEUTICALS INC", "cik": "0001115285", "assigned-sic": "2834", "irs-number": "134104684", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-115441", "film-number": "04800765"}, "business-address": {"street1": "500 SEVENTH AVE 18TH FL", "city": "NEW YORK", "state": "NY", "zip": "10018", "phone": "2129979241"}, "mail-address": {"street1": "500 SEVENTH AVE 18TH FL", "city": "NEW YORK", "state": "NY", "zip": "10018"}}
FORM S-1
Table of Contents
As filed with the Securities and Exchange
Commission on May 13, 2004
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Eyetech Pharmaceuticals, Inc.
(Exact name of registrant as specified in its
charter)
Delaware
2834
13-4104684
(State or other jurisdiction
of incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
3 Times Square, 12th Floor
New York, New York 10036
(212) 824-3100
(Address, including zip code, and telephone
number,
including area code, of registrant's
principal executive offices)
David R. Guyer, M.D.
Chief Executive Officer
Eyetech Pharmaceuticals, Inc.
3 Times Square, 12th Floor
New York, New York 10036
(212) 824-3100
(Name, address, including zip code and
telephone number,
including area code, of agent for
service)
Copies to:
James R. Tanenbaum, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
(212) 468-8000
Douglas H. Altschuler, Esq.
Eyetech Pharmaceuticals, Inc.
3 Times Square, 12th Floor
New York, New York 10036
(212) 824-3100
Patrick O'Brien, Esq.
Ropes & Gray LLP
One International Place
Boston, Massachusetts 02110
(617) 951-7000
Approximate
date of commencement of proposed sale to the
public:
As soon as practicable after
this Registration Statement is declared effective.
If
any of the securities being registered on this Form are offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended (the "Securities
Act") please check the following
box.
o
If
this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If
this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If
this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Proposed Maximum
Amount of
Title of Each Class of
Amount to
Offering Price
Aggregate Offering
Registration
Securities to be Registered
be Registered
Per Share(2)
Price(2)
Fee
Common Stock, $0.01 par value per share(1)
4,600,000
$36.01
$165,646,000
$20,987.35
(1)
All the shares of common stock will be sold by
    selling stockholders.
(2)
Estimated solely for the purpose of computing the
    registration fee, based on the average of the high and low sales
    prices of the common stock as reported by the Nasdaq National
    Market on May 11, 2004 in accordance with Rule 457
    under the Securities Act of 1933.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until Registrant shall file a further amendment
which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
Table of Contents
The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the
offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued May 13, 2004
4,000,000 Shares
Common Stock
The selling stockholders named in this prospectus
are offering 4,000,000 shares of Eyetech
Pharmaceuticals, Inc. common stock. We will not receive any
of the proceeds from the sale of common stock in this offering.
Shares of our common stock are quoted on the
Nasdaq National Market under the symbol "EYET." On
May 11, 2004, the last sale price of the common stock as
reported on the Nasdaq National Market was $35.95 per share.
Investing in the common stock involves risks. See "Risk
Factors" beginning on page 7.
PRICE
$            A
SHARE
Underwriting
Proceeds
Discounts and
to Selling
Price to Public
Commissions
Stockholders
Per Share
$
$
$
Total
$
$
$
The selling stockholders have granted the
underwriters the right to purchase up to an additional
600,000 shares to cover overallotments.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to
purchasers
on                     ,
2004.
Merrill Lynch & Co.
Morgan Stanley
Bear, Stearns & Co. Inc.
,
2004
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
7
Special Note Regarding
    Forward-Looking Statements
23
Notices to Investors
23
Use of Proceeds
24
Price Range of Common
    Stock
24
Dividend Policy
24
Capitalization
25
Selected Financial
    Information
26
Management's Discussion
    and Analysis of Financial Condition and Results of Operations
27
Business
36
Management
66
Certain Relationships and
    Related Party Transactions
81
Principal and Selling
    Stockholders
84
Description of Capital
    Stock
89
Underwriters
92
Legal Matters
96
Experts
96
Where You Can Find More
    Information
96
Index to Consolidated
    Financial Statements
F-1
CONSENT OF ERNST & YOUNG LLP
Table of Contents
PROSPECTUS SUMMARY
This summary does not contain all of the
information you should consider before buying shares of our
common stock. You should read the entire prospectus carefully,
especially the "Risk Factors" section and our
consolidated financial statements and the related notes
appearing at the end of this prospectus, before deciding to
invest in shares of our common stock.
Eyetech Pharmaceuticals, Inc.
We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology.
Our most advanced product candidate is
Macugen
TM
(pegaptanib sodium injection), which we are
developing for the treatment of the wet form of age-related
macular degeneration, known as AMD, and for the treatment of
diabetic macular edema, known as DME. Both AMD and DME are
serious diseases of the retina that can lead to severe vision
loss and blindness. We have entered into a collaboration with
Pfizer Inc. to develop and commercialize Macugen for the
prevention and treatment of diseases of the eye. Based on the
results from the first year of our two Phase 2/3 pivotal
clinical trials of Macugen, we and Pfizer are in the process of
filing a new drug application, or NDA, with the United States
Food and Drug Administration, or FDA, seeking marketing approval
for the 0.3 mg dose of Macugen for the treatment of all
subtypes of wet AMD. We plan to complete the filing in the third
quarter of 2004. The FDA has given "fast track"
designation to Macugen for the treatment of both wet AMD and
DME. If approved by the FDA, Macugen would be our only
commercially available product. In the near term, we anticipate
that our ability to generate product revenues will depend solely
on the successful development and commercialization of Macugen
for the treatment of wet AMD.
AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. In the United States, we estimate that there are more
than 1.6 million cases of wet AMD, with approximately
200,000 new cases arising each year. Because AMD generally
affects adults over 50 years of age, we expect the
incidence of AMD to increase significantly as the baby boom
generation ages and overall life expectancy increases. Diabetic
retinopathy is the leading cause of blindness in working age
adults and a leading cause of vision loss in diabetics. DME is a
common complication of diabetic retinopathy and often results in
severe vision loss and blindness. In the United States, there
are approximately 500,000 people suffering from DME, with
approximately 75,000 new cases each year. We expect the
incidence of DME to increase as the number of people with
diabetes increases. Because the existing treatments for both wet
AMD and DME have significant limitations, there is a significant
unmet medical need for a new therapy for these diseases.
Macugen.
We
believe that Macugen may provide considerable benefits over the
existing therapies for wet AMD and DME because it addresses the
abnormal blood vessel growth and blood vessel leakage associated
with wet AMD and the blood vessel leakage associated with DME.
Abnormal blood vessel growth and blood vessel leakage are
associated with elevated levels of a protein known as vascular
endothelial growth factor, or VEGF, in the eye. The active
ingredient in Macugen is a chemically synthesized aptamer, which
is a single strand of oligonucleotide that binds with
specificity to a particular target. Based on animal tests that
we conducted, we believe that Macugen binds with high
specificity to VEGF and prevents VEGF from binding to its
natural receptor, thereby inhibiting abnormal blood vessel
growth and blood vessel leakage. The FDA has not approved
Macugen for marketing.
Clinical
Trials.
We are conducting one of
our two Phase 2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD in North America with 578
enrolled patients and one primarily outside North America with
612 enrolled patients. We also are conducting and recently
announced positive preliminary data from our Phase 2
clinical trial for the use of Macugen in the treatment of DME.
1
Table of Contents
Wet AMD.
For the
first year of our Phase 2/3 pivotal clinical trials for the
use of Macugen in the treatment of wet AMD, we randomly divided
the participants into four groups. Three groups were treated
with Macugen. The fourth group served as the control group. The
three treated groups received different doses of Macugen via an
injection to the back of the eye known as an intravitreal
injection. The dose levels were 0.3 mg per injection,
1 mg per injection or 3 mg per injection. The control
group received a sham injection designed to mimic an
intravitreal injection. Patients received a treatment every six
weeks during the first year. The primary efficacy endpoint in
these trials was the proportion of patients losing less than
15 letters of visual acuity from baseline after
54 weeks. On the eye chart used in these clinical trials,
15 letters equates to three lines.
The following table summarizes the primary
efficacy endpoint data from the combined patient populations of
both trials, and indicates that this endpoint was met with
statistical significance for all three doses of Macugen. For
purposes of our analysis of the combined patient data, a p-value
of 0.05 or less represents statistical significance.
Patients Losing Less
Than 15 Letters
Dose
Individuals
Percentage
p-value
0.3 mg
206/294
70
%
0.0001
1 mg
213/300
71
%
0.0003
3 mg
193/296
65
%
0.0310
Control
164/296
55
%
—
Based on the data from the combined patient
populations of both trials, the 0.3 mg dose of Macugen was
the lowest effective dose of the three doses tested. In
addition, based on our preliminary analysis of the safety data
from these trials, each of the three dose levels tested in the
trials appears to have a favorable safety profile. To address
statistical and other regulatory requirements, we plan to seek
approval for the 0.3 mg dose of Macugen in our NDA for wet
AMD. For the 0.3 mg Macugen dose, the primary clinical
endpoint was achieved with statistical significance in both the
North American and international trials using a more stringent
statistical methodology required for regulatory purposes for
clinical trials in which multiple doses of a drug are tested
against a single control group.
There are three subtypes of wet AMD that are
characterized by the pattern of the abnormal blood vessels
associated with this disease. These subtypes are known as
predominantly classic, minimally classic and occult. The
combined data from the two trials demonstrate that the treatment
effect of Macugen is consistent across the three subtypes of wet
AMD. Accordingly, in our NDA filing, we intend to seek approval
for the use of the 0.3 mg dose of Macugen in the treatment
of patients with all three subtypes of wet AMD.
Based on the results of the first year of our
Phase 2/3 pivotal clinical trials, we and Pfizer are filing
our NDA with the FDA for the use of Macugen in the treatment of
all subtypes of wet AMD as a rolling submission. The FDA has
accepted for review the preclinical and clinical study report
sections of our NDA filing. We plan to complete our NDA filing
in the third quarter of 2004. Upon acceptance, the FDA will then
review our NDA to determine whether Macugen is safe and
effective for the treatment of wet AMD. In connection with its
review, the FDA may request additional information from us,
including data from additional clinical trials, and, ultimately,
may not grant marketing approval for Macugen. We will not be
able to begin marketing and sales of Macugen unless the product
is approved by the FDA.
DME.
In July 2003,
we completed enrollment of our second Phase 2 clinical
trial for the use of Macugen in the treatment of DME. The
169 patients enrolled in this study were required to have
been eligible for laser therapy for DME. In this randomized,
double-masked, placebo-controlled trial, patients treated with
Macugen receive 0.3 mg, 1 mg or 3 mg doses via
intravitreal injection every six weeks for at least
12 weeks and then up to 30 weeks at the discretion of
the investigators. The control group receives a sham injection
designed to mimic an intravitreal injection.
2
Table of Contents
We recently announced preliminary results from
this Phase 2 clinical trial. Based on the preliminary
results, the lowest effective dose of Macugen of the three doses
tested was 0.3 mg, which is the same as the lowest
effective dose observed in our Phase 2/3 pivotal clinical
trials for the use of Macugen in the treatment of wet AMD and
the dose for which we plan to seek approval in our NDA for wet
AMD. The following table summarizes the results through
36 weeks for patients treated with the 0.3 mg dose of
Macugen and patients in the control group.
Proportion of Patients
Macugen 0.3 mg
Control
p-value
Maintenance of or gain in vision:
>0 line vision gain
73
%
51
%
0.02
Gain in vision:
>1 line vision gain
59
%
34
%
0.01
>2 line vision gain
34
%
10
%
0.003
>3 line vision gain
18
%
7
%
—
The results shown in the table with respect to
the proportion of patients gaining 0 or greater, 1 or greater
and 2 or greater lines of vision at 36 weeks were
statistically significant using the Hochberg statistical
methodology. As shown in the table, the proportion of patients
gaining 3 or greater lines of vision was higher for the group
receiving 0.3 mg of Macugen than for the control group, but
the number of patients was not sufficient to demonstrate
statistical significance.
Collaboration with
Pfizer.
In December 2002, we
entered into our collaboration with Pfizer. In February 2003,
Pfizer paid us $100 million, consisting of a
$75 million up-front license fee and a $25 million
equity investment. Concurrently with the closing of our initial
public offering in February 2004, Pfizer made an additional
equity investment of $10 million. Pfizer's future
financial obligations to us include equity investments of up to
an additional $15 million, funding of a majority of the
ongoing development costs for Macugen, payments of up to
$195.5 million based on regulatory milestones and payments
of up to $450 million based on sales milestones. We and
Pfizer have agreed to co-promote Macugen in the United States
and to share in profits and losses. We have granted Pfizer the
exclusive right to develop and commercialize Macugen outside the
United States pursuant to a royalty-bearing license. Under the
collaboration, we are entitled to participate in the United
States in selling activities, or detailing, of Pfizer's
product Xalatan® for the treatment of glaucoma.
Business
Strategy.
Our mission is to
develop and commercialize novel therapeutics to treat diseases
of the eye, with an initial focus on diseases of the back of the
eye. The key elements of our strategy are to:
•
Maximize Commercial Potential of
    Macugen.
We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product
    for the treatment of wet AMD. We are also exploring the
    application of Macugen to a range of additional ophthalmic
    indications, including DME and retinal vein occlusion.
•
Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.
We are in the
    process of establishing focused domestic sales and marketing
    capabilities that will primarily target the approximately 1,400
    retinal specialists in the United States who perform most of the
    medical procedures involving back of the eye diseases.
•
Develop Alternative Drug Delivery
    Technologies.
We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye that could
    facilitate the use of Macugen and other drugs as chronic or even
    preventative treatments for various back of the eye diseases.
3
Table of Contents
•
Identify New Ophthalmic
    Products.
We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease. For example, in April 2004, we announced an
    agreement with Archemix Corp. to collaborate on the research and
    development of aptamers for ophthalmic indications.
•
Explore Additional Non-Ophthalmic Indications
    for Macugen.
We are using our
    preclinical research expertise to evaluate whether the anti-VEGF
    characteristics of Macugen may make it an attractive local
    treatment for cancer, psoriasis and other diseases.
In order to realize these objectives, we must,
among other things, obtain marketing approval for Macugen from
the FDA and similar foreign regulatory authorities, recruit our
domestic sales force and internally develop, license or
otherwise acquire alternative drug delivery technologies and new
therapies for the treatment of ophthalmic disease.
Management
Team.
We are led by a team of
experienced pharmaceutical industry executives and recognized
experts in ophthalmology and vision research. We believe that
this team provides us with a significant complement of
capabilities in the discovery, development and commercialization
of novel therapeutics to treat diseases of the eye.
Early-Stage
Company.
We have a limited
operating history and have not yet commercialized any products.
To date, we have focused primarily on the development of
Macugen. We have not been profitable in any quarter since
inception. For the year ended December 31, 2003 and the
quarter ended March 31, 2004, our net loss was
$40.7 million and $15.0 million, respectively, and, as
of March 31, 2004, we had an accumulated deficit of
$153.3 million. We do not know whether or when we will
become profitable.
We were incorporated under the laws of the State
of Delaware in February 2000. Our principal executive offices
are located at 3 Times Square, 12th Floor,
New York, New York 10036, and our telephone number is
(212) 824-3100. Our website address is
www.eyetech.com.
The information on our website is not a
part of this prospectus. We have included our website address in
this document as an inactive textual reference only.
Eyetech
TM
, Eyetech
Pharmaceuticals
TM
and Macugen
TM
are our
trademarks. Each of the other trademarks, trade names or service
marks appearing in this prospectus belongs to its respective
holder.
In this prospectus, unless otherwise stated or
the context otherwise requires, references to
"Eyetech," "we," "us,"
"our" and similar references refer to Eyetech
Pharmaceuticals, Inc.
4
Table of Contents
THE OFFERING
Common stock offered by the selling stockholders
4,000,000 shares
Shares of common stock outstanding after the
    offering
40,337,109 shares
Use of proceeds
We will not receive any of the proceeds from this
    sale of common stock by the selling stockholders.
Risk factors
You should read the "Risk Factors"
    section of this prospectus for a discussion of factors to
    consider carefully before deciding to invest in shares of our
    common stock.
Nasdaq National Market symbol
EYET
The number of shares of our common stock to be
outstanding after this offering is based on
40,337,109 shares outstanding as of March 31, 2004.
The number of shares of common stock to be
outstanding after this offering does not take into account:
•
5,729,664 shares of common stock issuable
    upon the exercise of stock options outstanding as of
    March 31, 2004 at a weighted average exercise price of
    $7.49 per share;
•
an aggregate of 3,833,839 shares of common
    stock that are reserved for future issuance under our 2003 stock
    incentive plan and our 2003 employee stock purchase
    plan; and
•
the grant of 37,501 shares of restricted
    common stock to our employees for cash proceeds of $375, which
    shares had not been issued as of March 31, 2004.
Unless otherwise noted, the information in this
prospectus assumes that the underwriters do not exercise their
over-allotment option.
5
Table of Contents
SUMMARY FINANCIAL INFORMATION
The following is a summary of our financial
information. You should read this information together with our
consolidated financial statements and the related notes
appearing at the end of this prospectus and the
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this
prospectus.
The pro forma net loss attributable to common
stockholders per share information is computed using the
weighted average number of common shares outstanding, after
giving pro forma effect to the automatic conversion of all
outstanding shares of our convertible preferred stock into
shares of our common stock effective upon the completion of our
initial public offering in February 2004, as if the conversion
had occurred at the date of the original issuance. This pro
forma information for the year ended December 31, 2003 does
not give effect to the exercise of then outstanding warrants and
options as their effect would be antidilutive.
Period from
February 9, 2000
Year Ended December 31,
Three Months Ended
(Date of
Inception) to
March 31,
March 31,
December 31, 2000
2001
2002
2003
2003
2004
(Unaudited)
(In thousands, except share and per share information)
Statement of Operations Information:
Collaboration revenue:
License fees
$
—
$
—
$
—
$
4,583
$
833
$
1,250
Reimbursement of development costs
—
—
—
36,836
6,476
10,463
Total collaboration revenue
—
—
—
41,419
7,309
11,713
Operating expenses:
Research and development
10,879
22,157
39,663
70,932
11,617
21,931
Sales and marketing
—
—
—
4,599
568
3,799
General and administrative
1,413
4,338
5,319
6,822
1,103
1,643
Total operating expenses
12,292
26,495
44,982
82,353
13,288
27,373
Loss from operations
(12,292
)
(26,495
)
(44,982
)
(40,934
)
(5,979
)
(15,660
)
Interest income
1,181
1,815
1,809
2,171
618
695
Interest expense
—
—
—
(248
)
(62
)
(47
)
Loss before income taxes
(11,111
)
(24,680
)
(43,173
)
(39,011
)
(5,422
)
(15,012
)
Provision for income taxes
—
—
—
(1,688
)
—
—
Net loss
(11,111
)
(24,680
)
(43,173
)
(40,699
)
(5,422
)
(15,012
)
Preferred stock accretion
(1,080
)
(2,494
)
(5,096
)
(9,160
)
(2,259
)
(816
)
Net loss attributable to common stockholders
$
(12,191
)
$
(27,174
)
$
(48,270
)
$
(49,860
)
$
(7,681
)
$
(15,828
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(12.62
)
$
(2.04
)
$
(0.57
)
Weighted average shares outstanding —
    basic and diluted
2,219,178
3,659,422
3,697,192
2,950,481
3,760,796
27,529,863
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(1.77
)
$
(0.29
)
$
(0.44
)
Unaudited pro forma weighted average shares
    outstanding — basic and diluted
28,094,165
26,863,202
35,782,390
As of March 31, 2004
(Unaudited)
(In thousands)
Balance Sheet Information:
Cash, cash equivalents and marketable securities
$
266,915
Total assets
288,478
Long-term capital lease obligations
874
Accumulated deficit
(153,323
)
Total stockholders' equity
205,570
6
Table of Contents
RISK FACTORS
This offering involves a high degree of risk.
You should consider carefully the risks and uncertainties
described below and the other information in this prospectus,
including the consolidated financial statements and the related
notes appearing at the end of this prospectus, before deciding
to invest in shares of our common stock. If any of the following
risks or uncertainties actually occurs, our business, prospects,
financial condition and operating results would likely suffer,
possibly materially. In that event, the market price of our
common stock could decline and you could lose all or part of
your investment.
Risks Relating to Our Business
We
depend heavily on the success of our lead product candidate,
Macugen, which is still under development and with respect to
which pivotal clinical trial data became available only
recently. If we are unable to commercialize Macugen, or
experience significant delays in doing so, our business will be
materially harmed.
We have invested a significant portion of our
time and financial resources since our inception in the
development of Macugen. We anticipate that in the near term our
ability to generate revenues will depend solely on the
successful development and commercialization of Macugen. The
commercial success of Macugen will depend on several factors,
including the following:
•
successful completion of clinical trials;
•
producing batches of the active pharmaceutical
    ingredient used in Macugen as well as finished drug product in
    sufficient commercial quantities through a validated process;
•
receipt of marketing approvals from the FDA and
    similar foreign regulatory authorities;
•
launching commercial sales of the product in
    collaboration with Pfizer;
•
successfully building and sustaining
    manufacturing capacity to meet anticipated future market
    demand; and
•
acceptance of the product in the medical
    community and with third party payors.
Based on the results from the first year of our
ongoing Phase 2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD, we and Pfizer are filing a
new drug application with the FDA as a rolling submission to
seek marketing approval for the 0.3 mg dose of Macugen for
the treatment of all subtypes of wet AMD. The FDA has accepted
for review the preclinical and clinical study report sections of
our NDA. However, new information may arise from our continuing
analysis of the data that may be less favorable than currently
anticipated. Clinical data often is susceptible to varying
interpretations and many companies that have believed that their
products performed satisfactorily in clinical trials have
nonetheless failed to obtain FDA approval for their products. We
may not complete the filing of our NDA for the use of Macugen in
the treatment of wet AMD in the third quarter of 2004, our
anticipated time frame. Furthermore, even after we complete the
filing, the FDA may not accept our submission as complete, may
request additional information from us, including data from
additional clinical trials, and, ultimately, may not grant
marketing approval for Macugen. If we are not successful in
commercializing Macugen, or are significantly delayed in doing
so, our business will be materially harmed and we may need to
curtail or cease operations.
The
success of Macugen depends heavily on our collaboration with
Pfizer, which was established in December 2002 and involves a
complex sharing of control over decisions, responsibilities and
costs and benefits. Any loss of Pfizer as a collaborator, or
adverse development in the collaboration, would materially harm
our business.
In December 2002, we entered into our
collaboration with Pfizer to develop and commercialize Macugen
for the prevention and treatment of diseases of the eye. The
collaboration involves a complex sharing of control over
decisions, responsibilities and costs and benefits. For example,
with respect to the
7
Table of Contents
sharing of costs and benefits, Pfizer will
co-promote Macugen with us in the United States and will share
with us in profits and losses. Outside the United States, Pfizer
will commercialize Macugen pursuant to an exclusive license and
pay us a royalty on net sales. In addition, Pfizer generally is
required to fund a majority of ongoing development costs
incurred pursuant to an agreed upon development plan. With
respect to control over decisions and responsibilities, the
collaboration is governed by a joint operating committee,
consisting of an equal number of representatives of Pfizer and
us. There are also subcommittees with equal representation from
both parties that have responsibility over development,
regulatory, manufacturing and commercialization matters.
Ultimate decision-making authority is vested in
us as to some matters and in Pfizer as to other matters. A third
category of decisions requires the approval of both Pfizer and
us. Outside the United States, ultimate decision-making
authority as to most matters is vested in Pfizer. Pfizer may
terminate the collaboration relationship without cause upon six
to twelve months' prior notice, depending on when such
notice is given. Any loss of Pfizer as a collaborator in the
development or commercialization of Macugen, dispute over the
terms of, or decisions regarding, the collaboration or other
adverse development in our relationship with Pfizer would
materially harm our business and might accelerate our need for
additional capital.
If
our clinical trials are unsuccessful, or if we experience
significant delays in these trials, our ability to commercialize
Macugen and our future product candidates will be
impaired.
We must provide the FDA and similar foreign
regulatory authorities with preclinical and clinical data that
demonstrate that our product candidates are safe and effective
for each target indication before they can be approved for
commercial distribution. The preclinical testing and clinical
trials of any product candidates that we develop must comply
with regulations by numerous federal, state and local government
authorities in the United States, principally the FDA, and by
similar agencies in other countries. Clinical development is a
long, expensive and uncertain process and is subject to delays.
We may encounter delays or rejections based on our inability to
enroll enough patients to complete our clinical trials. Patient
enrollment depends on many factors, including the size of the
patient population, the nature of the trial protocol, the
proximity of patients to clinical sites and the eligibility
criteria for the study.
Our ongoing Phase 2/3 pivotal clinical trial
for the use of Macugen in the treatment of wet AMD and
Phase 2 clinical trial for use of Macugen in the treatment
of DME are currently fully enrolled. We expect to commence a
Phase 2 clinical trial for the use of Macugen in the
treatment of retinal vein occlusion in the second quarter of
2004. We also may commence additional clinical trials in the
future. Although we have not to date experienced any significant
delays in enrolling clinical trial patients for our ongoing
clinical trials, delays in patient enrollment for future trials
may result in increased costs and delays, which could have a
harmful effect on our ability to develop products.
It may take several years to complete the testing
of a product, and failure can occur at any stage of testing. For
example:
•
interim results of preclinical or clinical
    studies do not necessarily predict their final results, and
    acceptable results in early studies might not be seen in later
    studies, in large part because earlier phases of studies are
    often conducted on smaller groups of patients than later
    studies, and without the same trial design features, such as
    randomized controls and long-term patient follow-up and analysis;
•
potential products that appear promising at early
    stages of development may ultimately fail for a number of
    reasons, including the possibility that the products may be
    ineffective, less effective than products of our competitors or
    cause harmful side effects;
•
any preclinical or clinical test may fail to
    produce results satisfactory to the FDA or foreign regulatory
    authorities;
•
preclinical and clinical data can be interpreted
    in different ways, which could delay, limit or prevent
    regulatory approval;
8
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•
negative or inconclusive results from a
    preclinical study or clinical trial or adverse medical events
    during a clinical trial could cause a preclinical study or
    clinical trial to be repeated or a program to be terminated,
    even if other studies or trials relating to the program are
    successful;
•
the FDA can place a hold on a clinical trial if,
    among other reasons, it finds that patients enrolled in the
    trial are or would be exposed to an unreasonable and significant
    risk of illness or injury;
•
we may encounter delays or rejections based on
    changes in regulatory agency policies during the period in which
    we develop a drug or the period required for review of any
    application for regulatory agency approval; and
•
our clinical trials may not demonstrate the
    safety and efficacy needed for our products to receive
    regulatory approval.
We have completed the first year of our
Phase 2/3 pivotal clinical trials for the use of Macugen in
the treatment of wet AMD. Based on results from the first year
of these trials, we and Pfizer are filing sections of our NDA
with the FDA for the use of Macugen in the treatment of all
subtypes of wet AMD as a rolling submission. The FDA has
accepted for review the preclinical and clinical study report
sections of our NDA filing. We plan to complete our NDA filing
in the third quarter of 2004. We are currently conducting a
second year of these trials. We have also fully enrolled a
Phase 2 clinical trial for the use of Macugen in the
treatment of DME. To obtain marketing approval, we may decide
to, or the FDA or other regulatory authorities may require us
to, pursue additional clinical trials or other studies of
Macugen. For example, in addition to our Phase 2 clinical
trial for the use of Macugen in the treatment of DME, we
anticipate that we need to conduct Phase 3 clinical trials
for DME before filing a new drug application or supplemental new
drug application, as the case may be, for this second indication.
In addition, as part of the drug approval
process, we must conduct a comprehensive assessment of the
carcinogenic, or cancer causing, potential of our product
candidates. Our testing of Macugen to date indicates that the
product's carcinogenic potential is low. In one test for
carcinogenicity risk, two potential Macugen metabolites showed,
in one out of five bacterial strains tested, a small increase in
the number of altered bacteria, a potential indicator of
carcinogenicity risk. However, because this elevated proportion
of altered bacteria did not increase further as we increased the
dose of the metabolites, we do not believe the results from
these tests indicate carcinogenicity potential. Furthermore, no
other test, including animal studies, of Macugen and its
metabolites showed carcinogenic potential. We have requested
that the FDA grant us a waiver from the requirement to perform
full animal carcinogenicity studies for the treatment of wet AMD
based primarily on the unmet medical need presented by wet AMD,
low overall systemic exposure to Macugen and the fact that this
disease generally affects older populations. However, the FDA
may require us to conduct additional carcinogenicity testing of
Macugen. Based on our discussions with the FDA to date, if we
are required to conduct further carcinogenicity testing of
Macugen in connection with its use in the treatment of wet AMD,
we believe that the FDA will allow us to conduct any such
testing as a post-NDA approval study. However, we will not be
certain of this until the NDA review process of Macugen for this
indication is completed. We expect that the FDA may require us
to complete satisfactory carcinogenicity testing of Macugen
prior to any approval of the use of Macugen in the treatment of
DME.
If we are required to conduct additional clinical
trials or other studies of Macugen beyond those that we
currently contemplate, if we are unable to successfully complete
our clinical trials or other studies or if the results of these
trials or studies are not positive or are only modestly
positive, we may be delayed in obtaining marketing approval for
Macugen, we may not be able to obtain marketing approval or we
may obtain approval for indications that are not as broad as
intended. Our product development costs will also increase if we
experience delays in testing or approvals. Significant clinical
trial delays could allow our competitors to bring products to
market before we do and impair our ability to commercialize our
products or potential products. If any of this occurs, our
business will be materially harmed.
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We
face substantial competition, which may result in others
discovering, developing or commercializing products before or
more successfully than we do.
The development and commercialization of new
drugs is highly competitive. We will face competition with
respect to Macugen and any products we may develop or
commercialize in the future from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide. Our competitors may develop products or other novel
technologies that are more effective, safer or less costly than
any that we are developing. Our competitors may also obtain FDA
or other regulatory approval for their products more rapidly
than we may obtain approval for ours.
The two therapies currently available for the
treatment of wet AMD are photodynamic therapy, which was
developed by QLT, Inc. and is marketed by Novartis AG,
and thermal laser treatment. In the United States, photodynamic
therapy is FDA-approved only for the predominantly classic
subtype of wet AMD. In the European Union, there is an approved
therapy only for the predominantly classic and occult subtypes.
In the United States, however, the Centers for
Medicare & Medicaid Services implemented a decision in
April 2004 to provide coverage for photodynamic therapy to
patients with wet AMD who have occult and minimally classic
lesions that are four disc areas or less in size and show
evidence of recent disease progression even though the FDA has
not approved photodynamic therapy for such treatment.
The current therapies for the treatment of DME
are thermal laser treatment and steroid treatment administered
by physicians on an off-label basis. Unless additional therapies
are approved, these existing therapies will represent the
principal competition for Macugen if Macugen is approved for
marketing.
Additional treatments for AMD and DME are in
various stages of preclinical or clinical testing. If approved,
these treatments would also compete with Macugen. Potential
treatments in late stage clinical trials include drugs sponsored
by a collaboration of Genentech, Inc. and Novartis,
Alcon, Inc., Allergan, Inc. through its recent
acquisition of Oculex Pharmaceuticals, Inc., Eli Lilly
and Co., Bausch & Lomb Incorporated, a
collaboration of Regeneron Pharmaceuticals, Inc. and
Aventis S.A., Miravant Medical Technologies, and Genaera
Corporation. Some of the sponsors of these potential products
have recently announced favorable results from Phase 1 or
Phase 2 clinical trials. The Genentech/Novartis
collaboration is developing an anti-VEGF humanized antibody
fragment for intravitreal injection. This product candidate may
be viewed as particularly competitive with Macugen because of
the similarity of its mechanism of action. In addition, Alcon
expects to announce results of its Phase 3 clinical trial
of anecortave acetate, an angiostatic steroid, for the treatment
of wet AMD patients, that features a less invasive injectable
delivery that requires less frequent administration (every six
months), in the fourth quarter of 2004 and to file an NDA
thereafter for the predominantly classic subtype of wet AMD.
Further, Alcon is enrolling patients in two Phase 3
clinical trials, one in South America and one in Europe,
comparing the safety and efficacy of Alcon's steroid
against placebo in patients with all subtypes of wet AMD. Other
laser, surgical or pharmaceutical treatments for AMD and DME may
also compete against Macugen. These competitive therapies may
result in pricing pressure if we receive marketing approval for
Macugen even if Macugen is otherwise viewed as a preferable
therapy.
Many of our competitors have substantially
greater financial, technical and human resources than we have.
Additional mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources being
concentrated by our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of technologies and greater availability of
capital for investment in these fields.
We may not be successful in our efforts to
    expand our portfolio of products.
A key element of our strategy is to commercialize
a portfolio of new ophthalmic drugs in addition to Macugen. We
are seeking to do so through our internal research programs and
through licensing or otherwise acquiring the rights to potential
new drugs and drug targets for the treatment of ophthalmic
disease.
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A significant portion of the research that we are
conducting involves new and unproven technologies. Research
programs to identify new disease targets and product candidates
require substantial technical, financial and human resources
whether or not we ultimately identify any candidates. Our
research programs may initially show promise in identifying
potential product candidates, yet fail to yield product
candidates for clinical development for a number of reasons,
including:
•
the research methodology used may not be
    successful in identifying potential product candidates; or
•
potential product candidates may on further study
    be shown to have harmful side effects or other characteristics
    that indicate they are unlikely to be effective drugs.
We may be unable to license or acquire suitable
product candidates or products from third parties for a number
of reasons. In particular, the licensing and acquisition of
pharmaceutical products is a competitive area. A number of more
established companies are also pursuing strategies to license or
acquire products in the ophthalmic field. These established
companies may have a competitive advantage over us due to their
size, cash resources and greater clinical development and
commercialization capabilities. Other factors that may prevent
us from licensing or otherwise acquiring suitable product
candidates include the following:
•
we may be unable to license or acquire the
    relevant technology on terms that would allow us to make an
    appropriate return from the product;
•
companies that perceive us to be their
    competitors may be unwilling to assign or license their product
    rights to us; or
•
we may be unable to identify suitable products or
    product candidates within our areas of expertise.
If we are unable to develop suitable potential
product candidates through internal research programs or by
obtaining rights to novel therapeutics from third parties, our
business will suffer.
Market
acceptance of Macugen and other products we develop in the
future that are based on new technologies may be
limited.
The commercial success of the products for which
we may obtain marketing approval from the FDA or other
regulatory authorities will depend upon the acceptance of these
products by the medical community and third party payors as
clinically useful, cost-effective and safe. Even if a potential
product displays a favorable efficacy and safety profile in
clinical trials, market acceptance of the product will not be
known until after it is commercially launched. We expect that
many of the products that we develop will be based upon new
technologies. For example, Macugen is an aptamer, which is a
type of nucleic acid. To date, no aptamer has been approved as a
pharmaceutical by the FDA. As a result, it may be more difficult
for us to achieve market acceptance of our products,
particularly the first products that we introduce to the market
based on new technologies. Our efforts to educate the medical
community about these potentially unique approaches may require
greater resources than would be typically required for products
based on conventional technologies. The safety, efficacy,
convenience and cost-effectiveness of our products as compared
to competitive products will also affect market acceptance.
We are in the process of establishing our
    sales and marketing capabilities. We will need to successfully
    recruit sales personnel and build a sales infrastructure to
    successfully commercialize Macugen and other products that we
    develop, acquire or license.
We have limited experience in selling products
and are in the process of establishing our sales capabilities.
While we have personnel with significant marketing experience
and have been collaborating with our partner, Pfizer, we have
limited experience as a company marketing products. To achieve
commercial success for any approved product, we must develop an
effective sales and marketing organization. We are beginning to
recruit a specialty sales force to participate in detailing
Xalatan and, assuming regulatory approval, to market and sell
Macugen in the United States in collaboration with Pfizer. If we
are not successful in recruiting sales personnel or in building
a sales and marketing
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infrastructure, our business will materially
suffer. Moreover, if the commercial launch of Macugen is delayed
as a result of FDA requirements or other reasons, we may
establish sales and marketing capabilities too early relative to
the launch of Macugen. This may be expensive, and our investment
would be lost if we cannot retain our sales and marketing
personnel.
We
expect to depend on collaborations with third parties to develop
and commercialize our products.
Our business strategy includes entering into
collaborations with corporate and academic collaborators for the
research, development and commercialization of additional
product candidates, such as our collaboration with Pfizer. These
arrangements may not be scientifically or commercially
successful. The termination of any of these arrangements might
adversely affect our ability to develop, commercialize and
market our products.
The success of our collaboration arrangements
will depend heavily on the efforts and activities of our
collaborators. Our collaborators will have significant
discretion in determining the efforts and resources that they
will apply to these collaborations. The risks that we face in
connection with these collaborations, including our
collaboration with Pfizer, include the following:
•
our collaboration agreements are, or are expected
    to be, for fixed terms and subject to termination under various
    circumstances, including, in many cases, on short notice without
    cause;
•
we expect to be required in our collaboration
    agreements not to conduct specified types of research and
    development in the field that is the subject of the
    collaboration. These agreements may have the effect of limiting
    the areas of research and development that we may pursue, either
    alone or in cooperation with third parties;
•
our collaborators may develop and commercialize,
    either alone or with others, products and services that are
    similar to or competitive with our products that are the subject
    of the collaboration with us; and
•
our collaborators may change the focus of their
    development and commercialization efforts. Pharmaceutical and
    biotechnology companies historically have re-evaluated their
    priorities following mergers and consolidations, which have been
    common in recent years in these industries. The ability of our
    products to reach their potential could be limited if our
    collaborators decrease or fail to increase spending relating to
    such products.
Collaborations with pharmaceutical companies and
other third parties often are terminated or allowed to expire by
the other party. Such terminations or expirations can adversely
affect us financially as well as harm our business reputation.
We
may not be successful in establishing additional collaborations,
which could adversely affect our ability to develop and
commercialize products and services.
An important element of our business strategy is
entering into collaborations for the development and
commercialization of products when we believe that doing so will
maximize product value. If we are unable to reach agreements
with suitable collaborators, we may fail to meet our business
objectives for the affected product or program. We face
significant competition in seeking appropriate collaborators.
Moreover, these collaboration arrangements are complex to
negotiate and time consuming to document. We may not be
successful in our efforts to establish additional collaborations
or other alternative arrangements. The terms of any additional
collaborations or other arrangements that we establish may not
be favorable to us. Moreover, these collaborations or other
arrangements may not be successful.
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We have no manufacturing facilities and
    limited manufacturing personnel. We will depend on third parties
    to manufacture Macugen and future products. If these
    manufacturers fail to meet our requirements, our product
    development and commercialization efforts may be materially
    harmed.
We have limited personnel with experience in, and
we do not own facilities for, manufacturing any products. We
will depend on third parties to manufacture Macugen and any
future products that we may develop.
For our clinical trials of Macugen, we engaged a
third party manufacturer to produce the active pharmaceutical
ingredient used in Macugen. We have entered into an agreement
with an affiliate of this third party for commercial supply of
the active pharmaceutical ingredient. For our clinical trials of
Macugen, we also engaged a separate fill and finish manufacturer
for the finished drug product to formulate the active
pharmaceutical ingredient from a solid into a solution and to
fill the solution into syringes. We have entered into an
agreement with this manufacturer to provide these finished
product services for commercial supply. These manufacturers of
Macugen will be single source suppliers to us for a significant
period of time. We also expect to continue to rely on a single
source of supply for the PEGylation reagent used in the
manufacture of Macugen.
We believe we currently have sufficient capacity
to supply the active pharmaceutical ingredient of Macugen to
meet anticipated demand for Macugen if the product is approved
based on a 0.3 mg dose for approximately 24 months
after approval. However, in order to sustain Macugen supply at
the quantities we believe will be necessary to meet anticipated
future market demand, we and our contract manufacturer will need
to increase the manufacturing capacity for the active
pharmaceutical ingredient. We initially intend to increase
manufacturing capacity for the active pharmaceutical ingredient
by duplicating a portion of our manufacturing lines at the
contract manufacturer's facility. We are also exploring
other alternatives for increasing manufacturing capacity. If we
are unable to increase our manufacturing capacity, or if the
cost of this increased capacity is uneconomic to us, we may not
be able to produce Macugen in a sufficient quantity to meet
future requirements to sustain supply of the product to meet
anticipated future demand. In addition, our revenues and gross
margins could be adversely affected.
Reliance on third party manufacturers entails
risks to which we would not be subject if we manufactured
products ourselves, including:
•
reliance on the third party for regulatory
    compliance and quality assurance;
•
the possible breach of the manufacturing
    agreement by the third party because of factors beyond our
    control; and
•
the possibility of termination or non-renewal of
    the agreement by the third party, based on its own business
    priorities, at a time that is costly or inconvenient for us.
We may in the future elect to establish our own
manufacturing facilities to manufacture some of our products. We
would need to invest substantial additional funds and recruit
qualified personnel in order to build or lease and operate any
manufacturing facilities.
The
manufacture and packaging of pharmaceutical products such as
Macugen are subject to the requirements of the FDA and similar
foreign regulatory bodies. If we or our third party
manufacturers fail to satisfy these requirements, our product
development and commercialization efforts may be materially
harmed.
The manufacture and packaging of pharmaceutical
products, such as Macugen and our future product candidates, are
regulated by the FDA and similar foreign regulatory bodies and
must be conducted in accordance with the FDA's current good
manufacturing practices and comparable requirements of foreign
regulatory bodies. There are a limited number of manufacturers
that operate under these current good manufacturing practices
regulations who are both capable of manufacturing Macugen and
willing to do so. Failure by us or our third party manufacturers
to comply with applicable regulations, requirements, or
guidelines could result in sanctions being imposed on us,
including fines, injunctions, civil penalties, failure
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of regulatory authorities to grant marketing
approval of our products, delays, suspension or withdrawal of
approvals, license revocation, seizures or recalls of product,
operating restrictions and criminal prosecutions, any of which
could significantly and adversely affect our business.
Changes in the manufacturing process or
procedure, including a change in the location where the product
is manufactured or a change of a third party manufacturer, may
require prior FDA review and/or approval of the manufacturing
process and procedures in accordance with the FDA's current
good manufacturing practices. There are comparable foreign
requirements. This review may be costly and time consuming and
could delay or prevent the launch of a product. For example, our
third party contract manufacturer changed the site used to
manufacture the active pharmaceutical ingredient of Macugen. We
have completed the transfer of the relevant manufacturing
technology to the new site, have used the new site to supply the
active pharmaceutical ingredient of Macugen for use in our
clinical trials and plan to continue to use this site to produce
commercial quantities of the active pharmaceutical ingredient of
Macugen. We are performing analytical tests to demonstrate
comparability of our active pharmaceutical ingredient following
the site change. If we cannot establish that the products
manufactured at the new site are comparable to the satisfaction
of the FDA, we may not obtain or may be delayed in obtaining
approval to launch Macugen. In addition, if we elect to
manufacture products in our own facility or at the facility of
another third party, we would need to ensure that the new
facility and the manufacturing process are in substantial
compliance with current good manufacturing practices. Any such
new facility would be subject to a pre-approval inspection by
FDA.
Furthermore, in order to obtain approval of our
products, including Macugen, by the FDA and foreign regulatory
agencies, we need to complete testing on both the active
pharmaceutical ingredient and on the finished product in the
packaging we propose for commercial sales. This includes testing
of stability, identification of impurities and testing of other
product specifications by validated test methods. In addition,
we will be required to consistently produce the active
pharmaceutical ingredient in commercial quantities and of
specified quality on a repeated basis and document our ability
to do so. This requirement is referred to as process validation.
With respect to Macugen, although we have manufactured Macugen
at commercial scale, we have started, but not yet completed,
this process validation requirement. If the required testing or
process validation is delayed or produces unfavorable results,
we may not obtain approval to launch the product or approval may
be delayed.
The FDA and similar foreign regulatory bodies may
also implement new standards, or change their interpretation and
enforcement of existing standards and requirements, for
manufacture, packaging, or testing of products at any time. If
we are unable to comply, we may be subject to regulatory, civil
actions or penalties which could significantly and adversely
affect our business.
Macugen
and our other potential products may not be commercially viable
if we fail to obtain an adequate level of reimbursement for
these products by Medicare and other third party payors. The
markets for our products may also be limited by the indications
for which their use may be reimbursed or the frequency in which
they may be administered.
The availability and levels of reimbursement by
governmental and other third party payors affect the market for
products such as Macugen and others that we may develop. These
third party payors continually attempt to contain or reduce the
costs of healthcare by challenging the prices charged for
medical products and services. In some foreign countries,
particularly Canada and the countries of the European Union, the
pricing of prescription pharmaceuticals is subject to
governmental control. In these countries, pricing negotiations
with governmental authorities can take six to twelve months or
longer after the receipt of regulatory marketing approval for a
product. To obtain reimbursement or pricing approval in some
countries, we may be required to conduct a clinical trial that
compares the cost-effectiveness of our products, including
Macugen, to other available therapies. If reimbursement for our
products is unavailable or limited in scope or amount or if
pricing is set at unsatisfactory levels, our business could be
materially harmed.
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Because most persons suffering from wet AMD are
elderly, we expect that coverage for Macugen in the United
States will be primarily through the Medicare program. Although
drugs that are not usually self-administered are ordinarily
covered by Medicare, the Medicare program has taken the position
that it can decide not to cover particular drugs if it
determines that they are not "reasonable and
necessary" for Medicare beneficiaries. Limitations on
coverage could also be imposed at the local Medicare carrier
level or by fiscal intermediaries. Our business could be
materially adversely affected if the Medicare program, local
Medicare carriers or fiscal intermediaries were to make such a
determination and deny or limit the reimbursement of Macugen.
Our business also could be adversely affected if physicians are
not reimbursed by Medicare for the cost of the procedure in
which they administer Macugen on a basis satisfactory to the
administering physicians. If the local contractors that
administer the Medicare program are slow to reimburse physicians
for Macugen, the physicians may pay us more slowly, which would
adversely affect our working capital requirements.
We also will need to obtain approvals for payment
for Macugen from private insurers, including managed care
organizations. We expect that private insurers will consider the
efficacy, cost-effectiveness and safety of Macugen in
determining whether to approve reimbursement for Macugen therapy
and at what level. Obtaining these approvals can be a time
consuming and expensive process. Our business would be
materially adversely affected if we do not receive approval for
reimbursement of Macugen from private insurers on a satisfactory
basis.
Our business could also be adversely affected if
the Medicare program or other reimbursing bodies or payors limit
the indications for which Macugen will be reimbursed to a
smaller set than we believe it is effective in treating or
establish a limitation on the frequency with which Macugen may
be administered that is less often than we believe would be
effective.
We expect to experience pricing pressures in
connection with the sale of Macugen and our future products due
to the trend toward programs aimed at reducing healthcare costs,
the increasing influence of health maintenance organizations and
additional legislative proposals.
The
recent Medicare prescription drug coverage legislation and
future legislative or regulatory reform of the healthcare system
may affect our ability to sell our products
profitably.
In both the United States and some non-U.S.
jurisdictions, there have been a number of legislative and
regulatory proposals to change the healthcare system in ways
that could affect our ability to sell our products profitably.
In the United States, new legislation has been proposed at the
federal and state levels that would result in significant
changes to the healthcare system, either nationally or at the
state level. In particular, in December 2003, President Bush
signed into law new Medicare prescription drug coverage
legislation. Effective January 2004, the legislation changed the
methodology used to calculate reimbursement for drugs such as
Macugen that are administered in physicians' offices in a
manner intended to reduce the amount that is subject to
reimbursement. In addition, beginning in January 2006, the
legislation directs the Secretary of Health and Human Services
to contract with procurement organizations to purchase
physician-administered drugs from the manufacturers and provides
physicians with the option to obtain drugs through these
organizations as an alternative to purchasing from the
manufacturers, which some physicians may find advantageous.
These changes may also cause private insurers to reduce the
amounts that they will pay for physician-administered drugs. In
addition, the Centers for Medicare & Medicaid Services,
or CMS, the agency within the Department of Health and Human
Services that administers Medicare and will be responsible for
reimbursement of the cost of Macugen, has asserted the authority
of Medicare not to cover particular drugs if it determines that
they are not "reasonable and necessary" for Medicare
beneficiaries or to cover them at a lesser rate, comparable to
that for drugs already reimbursed that CMS considers to be
therapeutically comparable. Further federal and state proposals
and healthcare reforms are likely. Our results of operations
could be materially adversely affected by the Medicare
prescription drug coverage legislation, by the possible effect
of this legislation on amounts that private insurers will pay
and by other healthcare reforms that may be enacted or adopted
in the future.
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We face the risk of product liability
    claims and may not be able to obtain insurance.
Our business exposes us to the risk of product
liability claims that is inherent in the manufacturing, testing
and marketing of drugs and related products. If the use of one
or more of our products harms people, we may be subject to
costly and damaging product liability claims. We have product
liability insurance that covers our clinical trials up to a
$10 million annual aggregate limit. We intend to expand our
insurance coverage to include the sale of commercial products if
we obtain marketing approval for any of the products that we may
develop. Insurance coverage is increasingly expensive. We may
not be able to obtain or maintain adequate protection against
potential liabilities. If we are unable to obtain insurance at
acceptable cost or otherwise protect against potential product
liability claims, we will be exposed to significant liabilities,
which may materially and adversely affect our business and
financial position. These liabilities could prevent or interfere
with our product development and commercialization efforts.
We
depend on our key personnel. If we are not able to retain them
or recruit additional technical personnel, our business will
suffer.
We are highly dependent on the principal members
of our management and scientific staff, particularly
Dr. David R. Guyer, our co-founder and Chief Executive
Officer, and Dr. Anthony P. Adamis, our scientific pioneer,
Chief Scientific Officer and Senior Vice President, Research.
Our employment agreements with these and our other executive
officers are terminable on short or no notice. We do not carry
key man life insurance on any of our key personnel. The loss of
service of any of our key employees could harm our business.
In addition, our growth will require us to hire a
significant number of qualified technical, commercial and
administrative personnel. There is intense competition from
other companies and research and academic institutions for
qualified personnel in the areas of our activities. If we cannot
continue to attract and retain, on acceptable terms, the
qualified personnel necessary for the continued development of
our business, we may not be able to sustain our operations or
grow.
We
depend on third parties in the conduct of our clinical trials
for Macugen and any failure of those parties to fulfill their
obligations could adversely affect our development and
commercialization plans.
We depend on independent clinical investigators,
contract research organizations and other third party service
providers in the conduct of our clinical trials for Macugen and
expect to do so with respect to other product candidates. We
rely heavily on these parties for successful execution of our
clinical trials, but do not control many aspects of their
activities. For example, the investigators are not our
employees. However, we are responsible for ensuring that each of
our clinical trials is conducted in accordance with the general
investigational plan and protocols for the trial. Third parties
may not complete activities on schedule, or may not conduct our
clinical trials in accordance with regulatory requirements or
our stated protocols. The failure of these third parties to
carry out their obligations could delay or prevent the
development, approval and commercialization of Macugen and
future product candidates.
Regulatory Risks
We
may not be able to obtain marketing approval for any of the
products resulting from our development efforts, including
Macugen. Failure to obtain these approvals could materially harm
our business.
Although we may not require additional research
and development for the approval of Macugen for the treatment of
wet AMD, the use of Macugen for the treatment of other
indications and other products that we are developing or may
develop in the future will require additional research and
development. The research and development work that we must
perform will include extensive preclinical studies and clinical
trials. We will be required to obtain an investigational new
drug application, or IND, prior to initiating human clinical
trials in the United States and must obtain regulatory approval
prior to any commercial distribution. This process is expensive,
uncertain and lengthy, often taking a number of years until a
product is approved for commercial distribution. We have only
one product, Macugen, that has advanced
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to clinical trials. We have not received
regulatory approval to market Macugen in any jurisdiction.
Failure to obtain required regulatory approvals could materially
harm our business.
We may need to successfully address a number of
technological challenges in order to complete the development of
Macugen or any of our future products. For example, to obtain
marketing approval for Macugen, we will be required to
consistently produce the active pharmaceutical ingredient in
commercial quantities and of specified quality on a repeated
basis and document our ability to do so. We have not yet
completed this process validation requirement and, if we are
unable to do so, our business will be materially adversely
affected.
In addition, administration of a drug via
intravitreal injection is a new method for the potentially
long-term treatment of chronic eye disease. As a result, the FDA
and other regulatory agencies may apply new standards for
safety, manufacturing, packaging and distribution of drugs using
this mode of administration, including Macugen. We are working
with the FDA in connection with its development of appropriate
standards for drugs using this mode of administration. As part
of this process, we also support efforts by the United States
Pharmacopoeia, which works with the FDA to establish standards,
to devise a particulate limit and a standard to measure
particulate matter appropriate for ophthalmologic treatments
administered as ultra low-volume injectables. It may be time
consuming or expensive for us to comply with these standards.
This could result in delays in our obtaining marketing approval
for Macugen, or possibly preclude us from obtaining such
approval. This could also increase our commercialization costs,
possibly materially.
Furthermore, Macugen and any of our future
products may not be effective, may be only moderately effective
or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may preclude our
obtaining regulatory approval or prevent or limit commercial
use, which could have a material adverse effect on our business.
The FDA and other regulatory authorities may not approve any
product that we develop.
The "fast track" designation for
    development of Macugen may not actually lead to a faster
    development or regulatory review or approval
    process.
If a drug is intended for the treatment of a
serious or life-threatening condition and the drug demonstrates
the potential to address unmet medical needs for this condition,
the drug sponsor may apply for FDA "fast track"
designation. The fast track classification does not apply to the
product alone, but applies to the combination of the product and
the specific indication or indications for which it is being
studied. The FDA's fast track programs are designed to
facilitate the clinical development and evaluation of the
drug's safety and efficacy for the fast track indication or
indications. Marketing applications filed by sponsors of
products in fast track development may qualify for expedited
review under policies or procedures offered by the FDA, but the
fast track designation does not assure such qualification.
Although we have obtained a fast track designation from the FDA
for Macugen for the treatment of both wet AMD and DME, we may
not experience a faster development process, review or approval
compared to conventional FDA procedures. Our fast track
designation may be withdrawn by the FDA if it believes that the
designation is no longer supported by data from our clinical
development program. Our fast track designation does not
guarantee that we will qualify for or be able to take advantage
of the expedited review procedures.
Our
products could be subject to restrictions or withdrawal from the
market and we may be subject to penalties if we fail to comply
with regulatory requirements, or if we experience unanticipated
problems with our products, when and if any of them are
approved.
Any product for which we obtain marketing
approval, along with the manufacturing processes, post-approval
clinical data, advertising and promotional activities for such
product, will be subject to continual requirements, review and
periodic inspections by the FDA and other regulatory bodies.
Even if regulatory approval of a product is granted, the
approval may be subject to limitations on the indicated uses for
which the product may be marketed or to the conditions of
approval, or contain requirements for costly
17
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post-marketing testing and surveillance to
monitor the safety or efficacy of the product. Later discovery
of previously unknown problems with our products, manufacturer
or manufacturing processes, or failure to comply with regulatory
requirements, may result in:
•
restrictions on such products or manufacturing
    processes;
•
withdrawal of the products from the market;
•
voluntary or mandatory recall;
•
fines;
•
suspension of regulatory approvals;
•
product seizure; and
•
injunctions or the imposition of civil or
    criminal penalties.
We may be slow to adapt, or we may never adapt,
to changes in existing regulatory requirements or adoption of
new regulatory requirements or policies.
Failure
to obtain regulatory approval in foreign jurisdictions would
prevent us from marketing our products abroad.
We intend to have our products marketed outside
the United States. In order to market our products in the
European Union and many other non-U.S. jurisdictions, we must
obtain separate regulatory approvals and comply with numerous
and varying regulatory requirements. In the case of Macugen,
Pfizer has responsibility to obtain regulatory approvals outside
the United States, and we will depend on Pfizer to obtain these
approvals. The approval procedure varies among countries and can
involve additional testing. The time required to obtain approval
may differ from that required to obtain FDA approval. The
foreign regulatory approval process may include all of the risks
associated with obtaining FDA approval. We may not obtain
foreign regulatory approvals on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory
authorities in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory
authorities in other foreign countries or by the FDA. We and our
collaborators may not be able to file for regulatory approvals
and may not receive necessary approvals to commercialize our
products in any market. The failure to obtain these approvals
could materially adversely affect our business, financial
condition and results of operations.
We
have only limited experience in regulatory affairs, and some of
our products may be based on new technologies. These factors may
affect our ability or the time we require to obtain necessary
regulatory approvals.
We have only limited experience as a company in
filing and prosecuting the applications necessary to gain
regulatory approvals. Moreover, some of the products that are
likely to result from our product development, licensing and
acquisition programs may be based on new technologies that have
not been extensively tested in humans. The regulatory
requirements governing these types of products may be less well
defined or more rigorous than for conventional products. As a
result, we may experience a longer regulatory review in
connection with obtaining regulatory approvals of any products
that we develop, license or acquire.
Risks Relating to Intellectual
Property
If
we are unable to obtain and maintain protection for the
intellectual property incorporated into our products, the value
of our technology and products will be adversely
affected.
Our success will depend in large part on our
ability or the ability of our licensors to obtain and maintain
protection in the United States and other countries for the
intellectual property incorporated into our products. The patent
situation in the field of biotechnology and pharmaceuticals
generally is highly uncertain and involves complex legal and
scientific questions. Neither we nor our licensors may be able to
18
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obtain additional issued patents relating to our
technology. Even if issued, patents may be challenged, narrowed,
invalidated, or circumvented, which could limit our ability to
stop competitors from marketing similar products or limit the
length of term of patent protection we may have for our
products. In addition, our patents and our licensors'
patents also may not afford us protection against competitors
with similar technology. Because patent applications in the
United States and many foreign jurisdictions are typically not
published until 18 months after filing, or in some cases
not at all, and because publications of discoveries in the
scientific literature often lag behind actual discoveries,
neither we nor our licensors can be certain that we or they were
the first to make the inventions claimed in issued patents or
pending patent applications, or that we or they were the first
to file for protection of the inventions set forth in these
patent applications.
If
we fail to comply with our obligations in the agreements under
which we license development or commercialization rights to
products or technology from third parties, we could lose license
rights that are important to our business.
We are a party to a number of technology licenses
that are important to our business and expect to enter into
additional licenses in the future. For example, we hold licenses
from Gilead, Nektar Therapeutics and Isis Pharmaceuticals under
patents relating to Macugen. These licenses impose various
commercialization, milestone payment, royalty, insurance, and
other obligations on us. If we fail to comply with these
obligations, the licensor may have the right to terminate the
license, in which event we would not be able to market products,
such as Macugen, that may be covered by the license.
If we are unable to protect the
    confidentiality of our proprietary information and know-how, the
    value of our technology and products could be adversely
    affected.
In addition to patented technology, we rely upon
unpatented proprietary technology, processes, and know-how. We
seek to protect this information in part by confidentiality
agreements with our employees, consultants and third parties.
These agreements may be breached, and we may not have adequate
remedies for any such breach. In addition, our trade secrets may
otherwise become known or be independently developed by
competitors.
Third
parties may own or control patents or patent applications that
would be infringed by our technologies, drug targets or
potential products. This could cause us to become involved in
expensive patent litigation or other proceedings, which could
result in our incurring substantial costs and expenses and
liability for damages. This could also require us to seek
licenses, which could increase our development and
commercialization costs. In either case, this could require us
to stop some of our development and commercialization
efforts.
We may not have rights under some patents or
patent applications that would be infringed by technologies that
we use in our research, drug targets that we select or product
candidates that we seek to develop and commercialize. Third
parties may own or control these patents and patent applications
in the United States and abroad. These third parties could bring
claims against us or our collaborators that would cause us to
incur substantial expenses and, if successful against us, could
cause us to pay substantial damages. Further, if a patent
infringement suit were brought against us or our collaborators,
we or they could be forced to stop or delay research,
development, manufacturing or sales of the product or product
candidate that is the subject of the suit.
As a result of patent infringement claims, or in
order to avoid potential claims, we or our collaborators may
choose to seek, or be required to seek, a license from the third
party and would most likely be required to pay license fees or
royalties or both. These licenses may not be available on
acceptable terms, or at all. Even if we or our collaborators
were able to obtain a license, the rights may be nonexclusive,
which would give our competitors access to the same intellectual
property. Ultimately, we could be prevented from commercializing
a product, or be forced to cease some aspect of our business
operations if, as a result of actual or threatened patent
infringement claims, we or our collaborators are unable to enter
into licenses on acceptable terms. This could harm our business
significantly.
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There has been substantial litigation and other
proceedings regarding the patent and other intellectual property
rights in the pharmaceutical and biotechnology industries. In
addition to infringement claims against us, we may become a
party to other patent litigation and other proceedings,
including interference proceedings declared by the United States
Patent and Trademark Office and opposition proceedings in the
European Patent Office, regarding intellectual property rights
with respect to our products and technology. The cost to us of
any patent litigation or other proceeding, even if resolved in
our favor, could be substantial. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater
financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the
marketplace. Patent litigation and other proceedings may also
absorb significant management time.
Risks Relating to Our Financial Results and
Need for Financing
We
have a limited operating history and have incurred losses since
inception. If we do not generate significant revenues, we will
not be able to achieve profitability.
We have no current source of product revenue. We
have a limited operating history and have not yet commercialized
any products. To date, we have focused primarily on the
development of Macugen. We began operations in 2000, and we have
not been profitable in any quarter since inception. As of
March 31, 2004, we had an accumulated deficit of
approximately $153.3 million. We expect to increase our
spending significantly as we continue to expand our
infrastructure, development programs and commercialization
activities. As a result, we will need to generate significant
revenues to pay these costs and achieve profitability. We do not
know whether or when we will become profitable because of the
significant uncertainties with respect to our ability to
generate revenues from the sale of our products and from our
existing and potential future collaborations.
We
may need additional financing, which may be difficult to obtain.
Our failure to obtain necessary financing or doing so on
unattractive terms could adversely affect our development
programs and other operations.
We will require substantial funds to conduct
development, including preclinical testing and clinical trials,
of our potential products. We will also require substantial
funds to meet our obligations to our licensors and maximize the
prospective benefits to us from our licensors, and manufacture
and market products that are approved for commercial sale in the
future, including Macugen.
We currently believe that our available cash,
cash equivalents and marketable securities, expected milestone
payments and reimbursements from Pfizer under our collaboration
and interest income will be sufficient to fund our anticipated
levels of operations through at least the end of 2005. However,
our future capital requirements will depend on many factors,
including:
•
the success of our collaboration with Pfizer to
    develop and commercialize Macugen;
•
the scope and results of our clinical trials;
•
advancement of other product candidates into
    development;
•
potential acquisition or in-licensing of other
    products or technologies;
•
the timing of, and the costs involved in,
    obtaining regulatory approvals;
•
the cost of manufacturing activities;
•
the cost of commercialization activities,
    including product marketing, sales and distribution;
•
the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation;
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•
our ability to establish and maintain additional
    collaborative arrangements; and
•
the success of our detailing agreement with
    Pfizer relating to Xalatan.
Additional financing may not be available to us
when we need it or it may not be available on favorable terms.
If we are unable to obtain adequate financing on a timely basis,
we may be required to significantly curtail one or more of our
development, licensing or acquisition programs. We could be
required to seek funds through arrangements with collaborators
or others that may require us to relinquish rights to some of
our technologies, product candidates or products that we would
otherwise pursue on our own. If we raise additional funds by
issuing equity securities, our then-existing stockholders will
experience dilution and the terms of any new equity securities
may have preferences over our common stock.
After this offering, our executive
    officers, directors and major stockholders will maintain the
    ability to control all matters submitted to stockholders for
    approval.
When this offering is completed, our executive
officers, directors and stockholders who own more than 5% of our
outstanding common stock, will, in the aggregate, beneficially
own shares representing
approximately      % of our capital
stock. As a result, if these stockholders were to choose to act
together, they would be able to control all matters submitted to
our stockholders for approval, as well as our management and
affairs. For example, these persons, if they choose to act
together, will control the election of directors and approval of
any merger, consolidation or sale of all or substantially all of
our assets. This concentration of voting power could delay or
prevent an acquisition of our company on terms that other
stockholders may desire.
Provisions in our charter documents and
    under Delaware law may prevent or frustrate attempts by our
    stockholders to change our management and hinder efforts to
    acquire a controlling interest in us.
Provisions of our corporate charter and bylaws
may discourage, delay or prevent a merger, acquisition or other
change in control that stockholders may consider favorable,
including transactions in which you might otherwise receive a
premium for your shares. These provisions may also prevent or
frustrate attempts by our stockholders to replace or remove our
management. These provisions include:
•
a classified board of directors;
•
limitations on the removal of directors;
•
advance notice requirements for stockholder
    proposals and nominations;
•
the inability of stockholders to act by written
    consent or to call special meetings; and
•
the ability of our board of directors to
    designate the terms of and issue new series of preferred stock
    without stockholder approval.
The affirmative vote of the holders of at least
75% of our shares of capital stock entitled to vote is necessary
to amend or repeal the above provisions of our certificate of
incorporation. In addition, absent approval of our board of
directors, our bylaws may only be amended or repealed by the
affirmative vote of the holders of at least 75% of our shares of
capital stock entitled to vote.
In addition, Section 203 of the Delaware
General Corporation Law prohibits a publicly held Delaware
corporation from engaging in a business combination with an
interested stockholder, generally a person which together with
its affiliates owns or within the last three years has owned 15%
of our voting stock, for a period of three years after the date
of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a
prescribed manner. Accordingly, Section 203 may discourage,
delay or prevent a change in control of our company.
If our stock price is volatile, purchasers
    of our common stock could incur substantial
    losses.
Our stock price has been, and is likely to
continue to be, volatile. The stock market in general and the
market for biotechnology companies in particular have
experienced extreme volatility that has often been
21
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unrelated to the operating performance of
particular companies. As a result of this volatility, investors
may not be able to sell their common stock at or above the
public offering price. The market price for our common stock may
be influenced by many factors, including:
•
results of our clinical trials or those of our
    competitors;
•
the regulatory status of Macugen and our other
    potential products;
•
failure of any of our product candidates, if
    approved, to achieve commercial success;
•
developments concerning our collaborators,
    including Pfizer;
•
regulatory developments in, and outside of, the
    United States;
•
developments or disputes concerning patents or
    other proprietary rights;
•
our ability to manufacture products to commercial
    standards;
•
public concern over our drugs;
•
litigation;
•
the departure of key personnel;
•
future sales of our common stock;
•
variations in our financial results or those of
    companies that are perceived to be similar to us;
•
changes in the structure of healthcare payment
    systems;
•
investors' perceptions of us; and
•
general economic, industry and market conditions.
If there are substantial sales of our
    common stock, our stock price could decline.
If our existing stockholders sell a large number
of shares of our common stock or the public market perceives
that existing stockholders might sell shares of common stock,
the market price of our common stock could decline
significantly. All of the shares sold in our initial public
offering were, and the shares sold in this offering will be,
freely tradable without restriction or further registration
under the federal securities laws, unless purchased by our
"affiliates" as that term is defined in Rule 144
under the Securities Act.
Approximately                      shares
will be eligible for sale pursuant to Rule 144 upon the
expiration of 180-day lock-up agreements on July 28, 2004,
and
approximately                     additional
shares will be eligible for sale pursuant to Rule 144 upon
the expiration of lock-up agreements expiring 90 days after
the date of this prospectus.
Upon completion of this offering, holders of an
aggregate of
approximately            million
shares (or
approximately            million
shares, if the underwriters exercise their overallotment option
in full) of common stock will have rights with respect to the
registration of their shares of common stock with the Securities
and Exchange Commission. If we register their shares of common
stock following the expiration of the applicable lock-up
agreements, they can sell those shares in the public market.
We have registered approximately
9,543,000 shares of common stock that are authorized for
issuance under our stock plans. As of March 31, 2004,
5,729,664 shares were subject to outstanding options,
4,701,004 of which were immediately exercisable, but with
respect to which we had the right to repurchase at the initial
exercise price all but 2,014,929 of the shares issuable upon
exercise of these options. Because they are registered, the
shares authorized for issuance under our stock plans can be
freely sold in the public market upon issuance, subject to our
repurchase rights, the lock-up agreements referred to above and
the restrictions imposed on our affiliates under Rule 144.
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SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking
statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, included
in this prospectus regarding our strategy, future operations,
future financial position, future revenues, projected costs,
prospects, plans and objectives of management are
forward-looking statements. The words "anticipates,"
"believes," "estimates,"
"expects," "intends," "may,"
"plans," "projects," "will,"
"would" and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We
may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the
cautionary statements included in this prospectus, particularly
in the "Risk Factors" section, that we believe could
cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or
investments we may make. We do not assume any obligation to
update any forward-looking statements.
NOTICES TO INVESTORS
You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell shares of common stock and
seeking offers to buy shares of common stock only in
jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the common stock.
For investors outside the United States: Neither
we nor any of the underwriters have done anything that would
permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. You are required to
inform yourselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus.
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USE OF PROCEEDS
The selling stockholders are offering all
4,000,000 shares to be sold in this offering, along with an
additional 600,000 shares to be sold if the underwriters
exercise their overallotment option in full. We will not receive
any proceeds from the sale of shares in this offering.
PRICE RANGE OF COMMON STOCK
Shares of our common stock have traded on the
Nasdaq National Market under the symbol "EYET." The
following table sets forth the range of the high and low sales
prices as reported by the Nasdaq National Market for shares of
our common stock since inception of trading on January 30,
2004.
Price Range
High
Low
Year Ending December 31, 2004
January 30 through March 31
$
37.15
$
29.25
Second Quarter (through May 11, 2004)
$
40.25
$
30.08
As of March 31, 2004, there were 269
registered holders of record of shares of our common stock.
DIVIDEND POLICY
We have never declared or paid cash dividends on
either our common stock or preferred stock. We currently intend
to retain all of our future earnings to finance the growth and
development of our business. We do not intend to pay cash
dividends to our stockholders in the foreseeable future.
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CAPITALIZATION
The following table sets forth our capitalization
as of March 31, 2004. You should read this table together
with our consolidated financial statements and the related notes
appearing at the end of this prospectus and the
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this
prospectus.
As of March 31, 2004
(Unaudited)
(In thousands)
Long-term capital lease obligations, net of
    current portion
$
874
Stockholders' equity
Preferred stock, par value $0.01 per share;
    5,000,000 shares authorized, none issued and outstanding
—
Common stock, par value $0.01 per share;
    125,000,000 shares authorized; 40,762,109 issued and
    40,337,109 outstanding
408
Additional paid in capital
373,845
Loans to stockholders
(431
)
Deferred compensation
(14,841
)
Treasury stock, 425,000 shares, at cost
(255
)
Accumulated other comprehensive income
166
Accumulated deficit
(153,322
)
Total stockholders' equity
205,570
Total capitalization
$
206,444
The above share data exclude the following:
•
5,729,664 shares of common stock issuable
    upon the exercise of stock options outstanding as of
    March 31, 2004 at a weighted average exercise price of
    $7.49 per share;
•
an aggregate of 3,833,839 shares of common
    stock reserved for future issuance under our 2003 stock
    incentive plan and our 2003 employee stock purchase
    plan; and
•
the grant of 37,501 shares of restricted
    common stock to our employees for cash proceeds of $375, which
    shares had not been issued as of March 31, 2004.
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SELECTED FINANCIAL INFORMATION
You should read the following selected financial
information together with our consolidated financial statements
and the related notes appearing at the end of this prospectus
and the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of
this prospectus. We have derived the statement of operations
information for the years ended December 31, 2001, 2002 and
2003 and the balance sheet information as of December 31,
2001, 2002 and 2003 from our audited consolidated financial
statements that are included in this prospectus. We have derived
the statement of operations information for the period from our
inception to December 31, 2000, and the balance sheet
information as of December 31, 2000 and 2001 from our
audited consolidated financial statements that are not included
in this prospectus. We have derived the statement of operations
information for the three months ended March 31, 2003 and
2004 and the balance sheet information as of March 31, 2004
from our unaudited condensed consolidated financial statements
that are included in this prospectus. Our unaudited condensed
consolidated financial statements include, in the opinion of our
management, all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of those
statements. Our historical results for any prior or interim
period are not necessarily indicative of results to be expected
for a full fiscal year or for any future period. The pro forma
net loss attributable to common stockholders per share
information is computed using the weighted average number of
common shares outstanding, after giving pro forma effect to the
automatic conversion of all outstanding shares of our
convertible preferred stock into shares of our common stock
effective upon the completion of our initial public offering in
February 2004, as if the conversion had occurred at the date of
the original issuance. This pro forma information does not give
effect to the exercise of then outstanding warrants and options
as their effect would be antidilutive.
Period from
February 9, 2000
Year Ended December 31,
Three Months Ended
(Date of
Inception) to
March 31,
March 31,
December 31, 2000
2001
2002
2003
2003
2004
(Unaudited)
(In thousands, except share and per share information)
Statement of Operations Information:
Collaboration revenue:
License fees
$
—
$
—
$
—
$
4,583
$
833
$
1,250
Reimbursement of development costs
—
—
—
36,836
6,476
10,463
Total collaboration revenue
—
—
—
41,419
7,309
11,713
Operating expenses:
Research and development
10,879
22,157
39,663
70,932
11,617
21,931
Sales and marketing
—
—
—
4,599
568
3,799
General and administrative
1,413
4,338
5,319
6,822
1,103
1,643
Total operating expenses
12,292
26,495
44,982
82,353
13,288
27,373
Loss from operations
(12,292
)
(26,495
)
(44,982
)
(40,934
)
(5,979
)
(15,660
)
Interest income
1,181
1,815
1,809
2,171
618
695
Interest expense
—
—
—
(248
)
(62
)
(47
)
Loss before income taxes
(11,111
)
(24,680
)
(43,173
)
(39,011
)
(5,422
)
(15,012
)
Provision for income taxes
—
—
—
(1,688
)
—
—
Net loss
(11,111
)
(24,680
)
(43,173
)
(40,699
)
(5,422
)
(15,012
)
Preferred stock accretion
(1,080
)
(2,494
)
(5,096
)
(9,160
)
(2,259
)
(816
)
Net loss attributable to common stockholders
$
(12,191
)
$
(27,174
)
$
(48,270
)
$
(49,860
)
$
(7,681
)
$
(15,828
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(5.49
)
$
(7.43
)
$
(13.06
)
$
(12.62
)
$
(2.04
)
$
(0.57
)
Weighted average shares outstanding —
    basic and diluted
2,219,178
3,659,422
3,697,192
2,950,481
3,760,796
27,529,863
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(1.77
)
$
(0.29
)
$
(0.44
)
Unaudited pro forma weighted average shares
    outstanding — basic and diluted
28,094,165
26,863,202
35,782,390
As of December 31,
As of
March 31,
2000
2001
2002
2003
2004
(Unaudited)
(In thousands)
Balance Sheet Information:
Cash, cash equivalents and marketable securities
$
24,012
$
57,019
$
69,151
$
131,374
$
266,915
Total assets
25,252
60,090
76,589
149,480
288,478
Long-term capital lease obligations and
    redeemable convertible preferred stock
(33,433
)
(88,458
)
(145,980
)
(186,545
)
874
Accumulated deficit
(11,111
)
(39,365
)
(87,635
)
(137,495
)
(153,322
)
Total stockholders' (deficit) equity
(8,981
)
(34,327
)
(78,036
)
(123,006
)
205,570
26
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and
analysis of our financial condition and results of operations
together with our consolidated financial statements and the
related notes appearing at the end of this prospectus. Some of
the information contained in this discussion and analysis are
set forth elsewhere in this prospectus, including information
with respect to our plans and strategy for our business and
related financing and includes forward-looking statements that
involve risks and uncertainties. You should review the
"Risk Factors" section of this prospectus for a
discussion of important factors that could cause actual results
to differ materially from the results described in or implied by
the forward-looking statements contained in the following
discussion and analysis.
Overview
We are a biotechnology company with our first
product candidate, Macugen, currently in two Phase 2/3
pivotal clinical trials for use in the treatment of wet AMD. We
are also conducting a Phase 2 clinical trial for the use of
Macugen in the treatment of DME, from which we recently released
preliminary positive clinical results. Our revenue for the year
ended December 31, 2003 and the quarter ended
March 31, 2004 was $41.4 million and
$11.7 million, respectively, consisting of amortization of
the initial non-refundable, up-front, license payment that we
received from Pfizer under our collaboration with Pfizer and
reimbursement to us by Pfizer of a portion of the ongoing
development costs for Macugen. As a result of our collaboration
with Pfizer, we ceased to be a development-stage company in
February 2003. We have had no other income since inception other
than interest on short-term investments.
We commenced operations in April 2000. Since our
inception, we have generated significant losses. As of
March 31, 2004, we had an accumulated deficit of
$153.3 million. We expect to continue to spend significant
amounts on the development of Macugen and our other programs. We
expect to incur significantly greater commercialization costs as
we are beginning to recruit a domestic ophthalmic sales force.
We expect to begin to participate in detailing Pfizer's
product, Xalatan, for the treatment of glaucoma together with
Pfizer three to six months prior to our planned commercial
launch of Macugen. We also plan to continue to invest in
research for additional applications of Macugen and to develop
new drugs and drug delivery technologies. Additionally, we plan
to continue to evaluate possible acquisitions or licenses of
rights to potential new drugs, drug targets and drug delivery
technologies that would fit within our growth strategy.
Accordingly, we will need to generate significant revenues to
achieve and then maintain profitability.
Most of our expenditures to date have been for
research and development activities and general and
administrative expenses. Research and development expenses
represent costs incurred for product acquisition, clinical
trials and activities relating to regulatory filings and
manufacturing development efforts. We outsource our foreign
clinical trials and our global manufacturing development
activities to third parties to maximize efficiency and minimize
our internal overhead. We expense our research and development
costs as they are incurred.
Our research and development expenses incurred
through March 31, 2004 were expenses related primarily to
the development of Macugen. We expect to incur additional
research and development expenses of approximately
$17 million to $27 million relating to Macugen prior
to its commercial launch in the United States for use in the
treatment of wet AMD. These additional expenses are subject to
the risks and uncertainties associated with clinical trials and
the FDA and foreign regulatory review and approval process. As a
result, these additional expenses could exceed our estimated
amounts, possibly materially. Under our agreements with Pfizer,
Pfizer is obligated to fund specified percentages of the ongoing
development costs incurred pursuant to an agreed upon
development plan.
Sales and marketing and general and
administrative expenses consist primarily of salaries and
related expenses, general corporate activities and costs
associated with building a commercial infrastructure to market
and sell Macugen and to detail Xalatan. We anticipate that
general and administrative expenses will increase as a result of
the expected expansion of our operations, facilities and other
activities
27
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associated with the planned expansion of our
business, together with the additional costs associated with
operating as a public company. In particular, we have recently
entered into a lease for new corporate headquarters space that
will increase our facilities expenses, which we allocate among
general and administrative, research and development and sales
and marketing expenses, by $3.2 million per year. We expect
sales and marketing expenses to increase as we build our sales
force and marketing capabilities to support detailing Xalatan
and, subject to receiving required regulatory approvals, selling
Macugen.
For the year ended December 31, 2003,
license fees paid to us by Pfizer resulted in current taxable
income to us. Net operating losses available to offset future
taxable income for federal income tax purposes were
approximately $43.3 million as of December 31, 2003.
If not utilized, federal net operating loss carryforwards will
begin to expire in 2020. To date, we have not recognized the
potential tax benefit of our net operating losses on our balance
sheets or statements of operations. The future utilization of
our net operating loss carryforwards may be limited based upon
changes in ownership pursuant to regulations promulgated under
the Internal Revenue Code.
Critical Accounting Policies and Significant
Judgments and Estimates
Our management's discussion and analysis of
our financial condition and results of operations are based on
our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in
the United States of America. 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 related to revenue
recognition. We base our estimates on historical experience and
on various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions.
While our significant accounting policies are
more fully described in Note 2 to our consolidated
financial statements appearing at the end of this prospectus, we
believe that the following accounting policies relating to
revenue recognition and stock-based compensation charges are
most critical to aid you in fully understanding and evaluating
our reported financial results.
Revenue Recognition
In connection with our collaboration with Pfizer,
we recognize revenue from non-refundable, up-front, license and
milestone payments not specifically tied to a separate earnings
process ratably over the term of the collaboration, license and
related agreements. When the period of deferral cannot be
specifically identified from the agreement, our management
estimates the period based upon other critical factors contained
within the agreement. We continually review these estimates,
which could result in a change in the deferral period and which
might impact the timing and the amount of revenue recognized.
When payments are specifically tied to a separate earnings
process, we will recognize revenue when the specific performance
obligation associated with the payment is completed. Performance
obligations typically consist of significant milestones in the
development life cycle of the related technology, such as
initiation of clinical trials, filing for approval with
regulatory agencies and receipt of approvals by regulatory
agencies. To date, we have received $75 million as an
initial license fee from Pfizer. We will amortize this initial
license fee over 15 years, the effective life of the
agreement. In addition, under the terms of our agreement with
Pfizer, Pfizer has agreed to pay a portion of the costs
associated with the purchase of certain equipment. At
March 31, 2004, we have recorded a receivable for equipment
that we have purchased for which Pfizer will reimburse us. We
have also recorded deferred revenue in connection with this
equipment. We will amortize the deferred revenue related to this
equipment over its expected life. During the year ended
December 31, 2003 and the quarter ended March 31,
2004, we recognized $4.6 million and $1.3 million,
respectively, of license fee revenue. At March 31, 2004, we
had $5.2 million of deferred
28
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revenue related to licenses and equipment as
current and the balance of $65.5 million as long-term on
our balance sheet.
We report our revenues on a gross reporting
basis, which includes reimbursement to us from Pfizer of
Pfizer's share of our cost of development of Macugen for
the period. We have determined that our responsibilities under
our contracts with Pfizer to manage and assume responsibilities
for obtaining FDA approvals for Macugen, including our separate
contractual relationships and responsibilities to our clinical
development contractors and our interaction with monitors and
patients qualify us as principal under the criteria set forth in
Emerging Issues Task Force, or EITF, Issue 99-19,
"Reporting Gross Revenue as a Principal vs. Net as an
Agent." Additionally, under EITF Issue 01-14,
"Income Statement Characterization of Reimbursements
Received for "Out-of-Pocket" Expenses Incurred,"
in those cases where we have a primary obligation to conduct
clinical studies and bear risk for selection of and payment to
vendors, among other conditions, we recognize reimbursements of
those costs to us by Pfizer as revenue, instead of as an offset
to the expense incurred. We record as expenses costs incurred by
Pfizer for which we are contractually liable. In future periods
we may be liable for costs incurred where we do not meet the
criteria to be considered as the principal. We would record
these costs as expenses, and we may be required to reimburse
Pfizer.
Stock-based Compensation
    Charges
Stock-based compensation charges represent the
difference between the exercise price of options granted to
employees and directors and the fair value of our common stock
on the date of grant for financial statement purposes in
accordance with Accounting Principles Board Opinion No. 25
and its related interpretations. We recognize this compensation
charge over the vesting periods of the shares purchasable upon
exercise of options or the lapsing of restrictions on restricted
shares granted.
We recorded deferred stock-based compensation
related to stock options and restricted stock awards granted to
employees and directors through March 31, 2004 of
$14.8 million, net of related amortization expense of
$1.1 million for the quarter ended March 31, 2004. We
expect to amortize deferred stock-based compensation with
respect to stock options and restricted stock awards granted
through March 31, 2004 in future periods, including
$3.5 million during the remainder of 2004,
$4.6 million during 2005, $4.4 million during 2006,
$2.2 million during 2007 and $0.1 million during 2008.
Accounting Pronouncements
In June 2002, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 146,
"Accounting for Costs Associated with Exit or Disposal
Activities." This standard addresses financial accounting
and reporting for costs associated with an exit or disposal
activities and requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan.
This standard nullifies EITF Issue 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This standard is effective for exit or
disposal activities initiated after December 31, 2002. Our
adoption of this statement did not have a material effect on our
results of operations, cash flows or financial position during
the quarter ended March 31, 2004, but may result in losses
in future periods.
During the year ended December 31, 2003, the
FASB issued various accounting standards and interpretations,
including FASB Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liability and Equity" ("SFAS 150"),
Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an
interpretation of ARB 51," and Interpretation
No. 46-R "Consolidation of Variable Interest
Entities" ("FIN 46-R"). We believe that our
adoption of these standards and interpretations has not had a
material effect on our financial condition, results of
operations or liquidity. There have been no other accounting
pronouncements made through March 31, 2004 that we expect
will have a material effect on our results of operations, cash
flows or financial position.
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Results of Operations
Three Months Ended March 31, 2004 and
    2003
Revenue.
Collaboration revenue increased 60% from $7.3 million for
the quarter ended March 31, 2003 to $11.7 million for
the quarter ended March 31, 2004. Revenue from the
amortization of license fees increased by $0.4 million and
revenue from reimbursement of development costs increased by
$4.0 million. The increase in license fee amortization
represents an additional month of amortization in 2004 versus
2003. Increases in development costs resulted primarily from
increases in reimbursable costs related to manufacturing
activities.
Research and Development
Expenses.
Research and development
expenses increased 88% from $11.6 million for the quarter
ended March 31, 2003 to $21.9 million for the quarter
ended March 31, 2004. The increase in research and
development expenses of $10.3 million was attributable to a
$2.3 million increase in ongoing expenditures during 2004
in connection with our Phase 2/3 pivotal clinical trials
for the use of Macugen in the treatment of wet AMD and related
costs, an increase of $7.1 million relating to the
continued development of manufacturing capabilities and related
costs and an increase of $1.6 million relating to
additional hiring of research and development staff. These
increases in cost were offset by a $0.7 million decrease
associated with the development of drug delivery technologies
and related costs. We anticipate that research and development
expenses will continue to increase as we further advance Macugen
to commercialization and begin to devote additional resources to
other research and development projects.
Sales and Marketing
Expenses.
Sales and marketing expenses
increased 575% from $0.6 million for the quarter ended
March 31, 2003 to $3.8 million for the quarter ended
March 31, 2004. The increase in sales and marketing
expenses of $3.2 million was primarily related to
$1.9 million in higher personnel expenses, relating to the
hiring and training of sales and sales management personnel, and
$1.3 million of costs related to the development of the
Macugen brand and the infrastructure necessary to prepare for
the commercial launch of Macugen and the detailing of Xalatan as
part of the Pfizer agreement.
General and Administrative
Expenses.
General and administrative
expenses increased 49% from $1.1 million for the quarter
ended March 31, 2003 to $1.6 million for the quarter
ended March 31, 2004. The increase of $0.5 million
resulted from a $0.7 million increase in expenses related
to facilities and infrastructure needed to support our growth
and our Pfizer collaboration, which was offset by a
$0.2 million decrease in professional fees and related
costs.
Interest Income.
Interest income increased from $0.6 million in the quarter
ended March 31, 2003 to $0.7 million in the quarter
ended March 31, 2004 as a result of higher levels of cash
and marketable securities available for investment during 2004
compared to 2003, which was partially offset by lower interest
rates.
Years Ended December 31, 2003 and
    2002
Revenue.
We
recognized revenue of $41.4 million during 2003, consisting
of $36.8 million from reimbursement of development costs
and $4.6 million from the amortization of the initial
non-refundable, up-front license payment that we received from
Pfizer in connection with our collaboration. 2003 was the first
year in which we generated revenue.
Research and Development
Expenses.
Research and development
expenses increased 79% from $39.7 million for 2002 to
$70.9 million for 2003. The increase in research and
development expenses of $31.2 million was attributable to a
$14.9 million increase from the expansion during 2003 of
our Phase 2/3 pivotal clinical trials for the use of
Macugen in the treatment of wet AMD, which became fully enrolled
in August 2002 and related costs, an increase of
$10.2 million relating to the continued development of
manufacturing capabilities and related costs, an increase of
$3.9 million relating to the addition of 51 research and
development staff, an increase of $3.3 million relating to
the opening of our laboratory facilities in Cedar Knolls, New
Jersey and Woburn, Massachusetts, and an increase of
$0.9 million associated with the development of drug
delivery technologies and related costs. These increases in cost
30
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were offset by a $2.0 million decrease in
licensing fees and expenses related to development of drug
delivery and manufacturing technologies. We anticipate that
research and development expenses will continue to increase as
we further advance Macugen to commercialization and begin to
devote additional resources to other research and development
projects.
Sales and Marketing
Expenses.
Sales and marketing expenses
were $4.6 million for 2003. We had no sales and marketing
expenses in 2002 or 2001. The sales and marketing expenses in
2003 reflect market research expenses and personnel expenses
relating to Macugen.
General and Administrative
Expenses.
General and administrative
expenses increased 29% from $5.3 million for 2002 to
$6.8 million for 2003. The increase resulted from increased
management and personnel expenses and increases in facilities
and infrastructure needed to support our Pfizer collaboration
and further development efforts.
Interest Income.
Interest income increased from $1.8 million in 2002 to
$2.2 million in 2003 as a result of a higher level of cash
and marketable securities available for investment during 2003
compared to 2002.
Years Ended December 31, 2002 and
    2001
Research and Development
Expenses.
Research and development
expenses increased 79% from $22.2 million in 2001 to
$39.7 million in 2002. The $17.5 million increase was
attributable principally to an increase of $10.7 million
from the expansion in 2002 of our clinical development programs
relating to Macugen and related costs, primarily our
Phase 2/3 pivotal clinical trials of Macugen as a treatment
for wet AMD, which became fully enrolled in August 2002, to an
increase of $5.4 million relating to the opening of our
laboratory facilities in Cedar Knolls, New Jersey and Woburn,
Massachusetts and the addition of 34 research and development
staff and to an increase of $3.9 million associated with
the development of manufacturing capabilities, drug delivery
technology and related costs, which were partially offset by a
$2.5 million decrease in technology license fees.
General and Administrative
Expenses.
General and administrative
expenses increased 23% from $4.3 million in 2001 to
$5.3 million in 2002. The increase of $1.0 million
resulted principally from an increase in rent related to the
opening of our laboratory facilities in Cedar Knolls, New Jersey
and Woburn, Massachusetts and from an increase in professional
fees arising from the negotiation of the Pfizer collaboration.
Interest Income.
Interest income remained constant at $1.8 million for 2002
and 2001.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have financed our
operations through public sales and private placements of our
capital stock, the initial up-front license fee that we received
from Pfizer as part of our Macugen collaboration, reimbursement
of development costs from Pfizer, and the receipt of interest
income. Through March 31, 2004, we have received net
proceeds of $332.4 million from the issuance of shares of
common stock, convertible preferred stock and warrants. We have
also received net proceeds from capital
31
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equipment financing of $2.4 million. The
table below summarizes our initial issuances of convertible
preferred stock and warrants.
Number of
Number of Shares
Approximate
Series
Date
Shares
Underlying Warrants
Gross Proceeds
(In thousands)
A
March 2000
120,000
—
$
150
B
April 2000
5,766,332
1,142,902
34,600
B
January 2001
20,666
—
124
C-1
July — August 2001
7,964,229
1,592,846
54,200
C-2
August 2002
7,521,777
1,504,354
54,200
D
February 2003
2,747,253
—
25,000
On February 4, 2004, we successfully
completed an initial public offering of our common stock. Our
initial public offering consisted of the sale of
6,500,000 shares of common stock at a price of
$21.00 per share. As part of the offering, we granted to
the underwriters an option to purchase an additional
975,000 shares within 30 days of the initial public
offering to cover over-allotments. This option was exercised in
full in February 2004. Net proceeds from our initial public
offering after deducting underwriters' discounts and
expenses were $142.9 million. In addition,
476,190 shares of common stock were purchased concurrently
with the initial public offering by Pfizer for $10 million
as part of its commitment under our collaboration with Pfizer.
We issued 5,073,435 warrants in connection with
original issuances of preferred stock from April 2000 to August
2002 and the in-licensing of Macugen in April 2000. Prior to the
closing of our initial public offering, 1,511,381 shares of
preferred stock were issued in connection with warrant exercises
providing $10.4 million in aggregate proceeds. An
additional 1,867,124 shares of preferred stock were issued
on a cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333 shares
of series B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March 31, 2004 on a
cashless basis, resulting in the issuance of 680,509 shares
of common stock in exchange for the surrender of warrants to
purchase 152,824 shares of common stock. No warrants remain
outstanding at March 31, 2004.
In connection with our collaboration with Pfizer,
we received the $25.0 million series D investment reflected
in the above table and a $75.0 million up-front license fee
and Pfizer has agreed generally to fund a majority of the
ongoing development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. Pfizer purchased an additional $10 million of
our common stock at the closing of our initial public offering
in February 2004 and is obligated to purchase up to an
additional $15 million of our common stock in specified
circumstances. These obligations of Pfizer are currently our
only committed external source of funds.
As of March 31, 2004, we had
$266.9 million in cash, cash equivalents and marketable
securities. Also as of that date, we had pledged
$5.6 million of restricted cash as collateral for letters
of credit for certain of our leased facilities. We believe that
our available cash, cash equivalents and marketable securities,
together with expected milestone payments and reimbursements
from Pfizer under our collaboration and interest income will be
sufficient to fund anticipated levels of operations through at
least the end of 2005.
We had no material capital expenditures during
2003 or the quarter ended March 31, 2004, and expect to
have no material capital expenditures during the remainder of
2004.
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Table of Contents
Income Taxes
As of December 31, 2003, we had net
operating loss carryforwards for federal income taxes of
$43.3 million. Our utilization of the net operating loss
and tax credit carryforwards may be subject to annual
limitations pursuant to Section 382 of the Internal Revenue
Code, and similar state provisions, as a result of changes in
our ownership structure. The annual limitations may result in
the expiration of net operating losses and credits prior to
utilization.
At December 31, 2003, we had deferred tax
assets representing the benefit of net operating loss
carryforwards and certain start up costs capitalized for tax
purposes. We did not record a benefit for the deferred tax asset
because realization of the benefit was uncertain and,
accordingly, a valuation allowance is provided to offset the
deferred tax asset.
During the year ended December 31, 2003, the
$75 million license fee paid by Pfizer resulted in current
taxable income to us. Although we have generated net operating
losses in prior years, we may be liable for payment of
alternative minimum tax in 2003. Accordingly, we have provided
$1.7 million for federal alternative minimum tax and state
income taxes for the year ended December 31, 2003. We have
not recorded any provision for taxes during the quarter ended
March 31, 2004.
Cash Flows
For the quarter ended March 31, 2004, we
used net cash of $19.3 million in operating activities.
This consisted primarily of a net loss for the period of
$15.0 million, and a reduction in accounts payable and
accrued expenses of $4.2 million. We used
$32.5 million for investing activities for the quarter
ended March 31, 2004, which consisted primarily of net
purchases of marketable securities. We received net cash of
$155.5 million from financing activities during the quarter
ended March 31, 2004, principally relating to the issuance
of common stock in our initial public offering and other
issuances of common stock, resulting in net proceeds, after
transaction costs, of $153 million and the issuance of
convertible preferred stock upon the exercise of warrants for
net proceeds of $2.6 million, offset by the repayment of
capital leases of $0.1 million.
For the year ended December 31, 2003, our
operating activities generated net cash inflows of
$39.4 million. This consisted of a net loss for the period
of $40.7 million and an increase in amounts due from Pfizer
of $2.6 million, offset by the receipt of deferred revenue
in connection with the Pfizer collaboration of
$75.0 million, $4.6 million of which was recorded as
revenue in the year ended December 31, 2003, and an
increase in accounts payable and accrued expenses of
$6.9 million. We used $51.9 million for investing
activities for the year ended December 31, 2003, which
consisted primarily of net purchases of marketable securities.
We received $31.7 million from financing activities during
the year ended December 31, 2003, principally relating to
the issuance of convertible preferred stock to Pfizer for net
proceeds, after transaction costs, of $24.7 million and the
issuance of convertible preferred stock upon the exercise of
warrants for net proceeds of $7.3 million, offset by the
repayment of capital leases of $0.6 million.
Funding Requirements
We expect to devote substantial resources to
continue our research and development efforts and to expand our
sales, marketing and manufacturing programs associated with the
commercialization and launch of Macugen and our future products.
Our funding requirements will depend on numerous factors,
including:
•
the success of our collaborative arrangement with
    Pfizer for the development and commercialization of Macugen;
•
the scope and results of our clinical trials;
•
advancement of other product candidates into
    development;
•
potential acquisition or in-licensing of other
    products or technologies;
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•
the timing of, and the costs involved in,
    obtaining regulatory approvals;
•
the cost of manufacturing activities;
•
the cost of commercialization activities,
    including product marketing, sales and distribution;
•
the costs involved in preparing, filing,
    prosecuting, maintaining and enforcing patent claims and other
    patent-related costs, including litigation costs and the results
    of such litigation; and
•
our ability to establish and maintain additional
    collaborative arrangements.
We do not expect to generate significant
additional funds, other than payments that we receive from our
collaboration with Pfizer, until we successfully obtain
marketing approval for, and begin selling, Macugen. We believe
that the key factors that will affect our internal and external
sources of cash are:
•
our ability to successfully obtain marketing
    approval for and to commercially launch Macugen;
•
the success of our other preclinical and clinical
    development programs;
•
the receptivity of the capital markets to
    financings by biotechnology companies; and
•
our ability to enter into additional strategic
    collaborations with corporate and academic collaborators and the
    success of such collaborations.
If our existing resources are insufficient to
satisfy our liquidity requirements or if we acquire or license
rights to additional product candidates, we may need to raise
additional external funds through the sale of additional equity
or debt securities. The sale of additional equity securities may
result in additional dilution to our stockholders. Additional
financing may not be available in amounts or on terms acceptable
to us or at all. If we are unable to obtain additional
financing, we may be required to reduce the scope of, delay or
eliminate some or all of our planned research, development and
commercialization activities, which could harm our financial
condition and operating results.
Contractual Obligations
Our major outstanding contractual obligations
relate to our capital leases from equipment financings,
facilities leases and obligations under a number of our
collaboration and alliance agreements to pay milestone payments
and royalties to the other parties to these agreements.
We have summarized in the table below our fixed
contractual cash obligations as of March 31, 2004.
Payments Due by Period
Less Than
One to
Four to
After
Contractual Obligations
Total
One Year
Three Years
Five Years
Five Years
Capital lease obligations, including interest
$
1,507,726
$
633,826
$
873,900
$
—
$
—
Operating leases
63,296,576
1,221,837
9,761,847
6,896,171
45,416,721
Total contractual cash obligations
$
64,804,302
$
1,855,663
$
10,635,747
$
6,896,171
$
45,416,721
Under our agreements with Gilead
Sciences, Inc., Nektar Therapeutics, and Isis
Pharmaceuticals, Inc. we are obligated to make payments
aggregating up to $36.3 million upon achieving specified
milestones relating to the development and regulatory approval
of Macugen and to pay royalties based on net sales of Macugen.
The events that trigger the milestone payments include filing of
an NDA with the FDA, making similar filings with foreign
regulatory authorities, receiving marketing approval for Macugen
by the FDA or similar foreign regulatory authorities and the
first commercial sale of Macugen in various countries. These
contingent milestone and royalty payment obligations are not
included in the above table. The above table also excludes
minimum monthly payments of approximately $0.6 million that
we are required to pay to one of our contract manufacturers
pending the validation of the manufacturing process for Macugen.
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In January 2004, we entered into a sub-sublease
arrangement for new corporate headquarters, clinical, safety and
regulatory space in New York City. Our rent under the lease
is expected to be $3.2 million for financial statement
purposes in 2004. However, due to rent abatements, we expect
cash expenditures for this property in 2004 to be
$0.1 million. As security for the sublease, we have named
the sub-landlord as beneficiary under a secured bank letter of
credit in the amount of $3.0 million.
If we are not successful in locating a tenant to
assume our sub-lease at 500 Seventh Avenue, New York,
New York, we will be required under generally accepted
accounting principles to assess the recoverability of the
carrying value of our lease. If it is determined that the
amounts due under the lease will not be recoverable, we will
record a loss in connection with this lease. The loss could be
up to approximately $2.4 million and will be recorded in
the second quarter of 2004. In connection with our cessation of
use of this facility, we have accelerated the recognition of
amortization and depreciation expenses in connection with
certain leasehold improvements and furniture and fixtures used
at this facility. This resulted in an increase of
$0.3 million to amortization and depreciation expense
during the quarter ended March 31, 2004, which fully
expensed these assets.
Disclosure About Market Risk
Our exposure to market risk is confined to our
cash, cash equivalents and marketable securities. We invest in
high-quality financial instruments, primarily money market
funds, federal agency notes, asset backed securities, corporate
debt securities and United States treasury notes, with the
effective duration of the portfolio less than nine months and no
security with an effective duration in excess of two years,
which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. Due to the
short-term nature of our investments, we do not believe that we
have any material exposure to interest rate risk arising from
our investments.
Most of our transactions are conducted in United
States dollars, although we do have some development and
commercialization agreements with vendors located outside the
United States. Transactions under certain of these agreements
are conducted in United States dollars, subject to adjustment
based on significant fluctuations in currency exchange rates.
Transactions under certain other of these agreements are
conducted in the local foreign currency. If the applicable
exchange rates undergo a change of 10%, we do not believe that
such change would have a material impact on our results of
operations or cash flows.
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BUSINESS
Overview
We are a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. Our initial focus is
on diseases affecting the back of the eye, particularly the
retina, because we believe that these diseases have the greatest
unmet medical need and represent the largest potential market
opportunities in ophthalmology. Our most advanced product
candidate is Macugen, which we are developing for the treatment
of wet AMD and DME. Both AMD and DME are serious diseases of the
retina that can lead to severe vision loss and blindness. In the
second half of 2001, we initiated two Phase 2/3 pivotal
clinical trials of Macugen for the treatment of wet AMD. In
December 2002, we entered into a collaboration with Pfizer to
develop and commercialize Macugen for the prevention and
treatment of diseases of the eye. Based on the results from the
first year of Phase 2/3 pivotal clinical trials for wet
AMD, we and Pfizer are filing our NDA with the FDA as a rolling
submission seeking marketing approval for the 0.3 mg dose
of Macugen for the treatment of all subtypes of wet AMD. The FDA
has accepted for review the preclinical and clinical study
report sections of our NDA filing. We plan to complete this NDA
filing in the third quarter of 2004. We also recently announced
preliminary data from our Phase 2 clinical trial for the
use of Macugen in the treatment of DME, showing positive visual
and anatomical outcomes. The FDA has given "fast
track" designation to Macugen for the treatment of both wet
AMD and DME.
Wet AMD and DME are two of the leading causes of
severe vision loss and blindness in the adult population. In the
United States, we estimate that as many as 15 million
people suffer from some form of AMD and that there are more than
1.6 million cases of wet AMD. Approximately 200,000 new
cases of wet AMD arise each year in the United States. Although
wet AMD represents approximately 10% of all AMD cases, it is
responsible for up to 90% of the severe vision loss associated
with AMD, with a majority of wet AMD patients experiencing
severe vision loss in the affected eye within months to two
years after diagnosis of the disease. Because AMD generally
affects adults over 50 years of age, we expect the
incidence of AMD to increase significantly as the baby boom
generation ages and overall life expectancy increases.
Diabetic retinopathy is the leading cause of
blindness in people less than 50 years of age in developed
countries. DME is the leading cause of vision loss in diabetic
retinopathy. In the United States, there are approximately
500,000 people suffering from DME, with approximately 75,000 new
cases each year. We expect the incidence of DME in the United
States to increase as the number of people with diabetes
increases. We believe that the prevalence and incidence of AMD
and DME in the European Union are similar to those in the United
States. Because the existing treatments for both wet AMD and DME
have significant limitations, there is a significant unmet
medical need for a new therapy for these diseases.
We believe that Macugen may provide considerable
benefits over the existing therapies for wet AMD and DME because
it addresses the abnormal blood vessel growth and blood vessel
leakage associated with wet AMD and the blood vessel leakage
associated with DME. Significant scientific evidence suggests
that the presence in the eye of elevated levels of a protein
known as vascular endothelial growth factor, or VEGF, plays an
important role in causing this abnormal blood vessel growth and
blood vessel leakage. Based on animal tests that we conducted,
we believe that Macugen prevents VEGF from binding to its
natural receptor, thereby inhibiting such abnormal blood vessel
growth and blood vessel leakage.
In December 2002, we entered into our
collaboration with Pfizer under which we and Pfizer are jointly
completing the development of Macugen and have agreed to
co-promote Macugen in the United States. We have granted Pfizer
the exclusive right to develop and commercialize Macugen outside
the United States pursuant to a royalty-bearing license. Under
the collaboration, we are entitled to participate in the United
States in detailing Pfizer's product Xalatan for the
treatment of glaucoma.
We are led by a team of experienced
pharmaceutical industry executives and recognized experts in
ophthalmology and vision research. We believe that this team
provides us with a significant complement of
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capabilities in the discovery, development and
commercialization of novel therapies to treat diseases of the
eye.
Our Business Strategy
Our mission is to develop and commercialize novel
therapeutics to treat diseases of the eye, with an initial focus
on diseases of the back of the eye. The key elements of our
strategy in support of this mission are to:
•
Maximize Commercial Potential of
    Macugen.
We are devoting most of our
    efforts to completing the clinical and regulatory development of
    Macugen and preparing for the commercial launch of the product.
    Based on the results of the first year of our Phase 2/3
    pivotal clinical trials, we and Pfizer are in the process of
    filing an NDA as a rolling submission with the FDA covering
    Macugen for the treatment of all subtypes of wet AMD. The FDA
    has accepted for filing the preclinical and clinical study
    report sections of our NDA filing. We plan to complete our NDA
    filing in the third quarter of 2004. We recently disclosed
    preliminary data from our Phase 2 clinical trial for the
    use of Macugen in the treatment of DME, which showed positive
    visual and anatomical outcomes. We are also exploring the
    application of Macugen to a range of additional ophthalmic
    indications, including retinal vein occlusion.
•
Establish Specialized Ophthalmic Sales and
    Marketing Capabilities.
We are in the
    process of establishing focused domestic sales and marketing
    capabilities for Macugen, Xalatan and other ophthalmic products
    that we may develop or acquire. Based on our examination of the
    membership lists of three prominent organizations for retinal
    specialists, The Macula Society, The American Society of Retina
    Specialists and the Retina Society, we estimate that there are
    approximately 1,400 retinal specialists in the United States who
    perform most of the medical procedures involving back of the eye
    diseases. We plan to target most of our sales and marketing
    efforts at these specialists. In selling and marketing Macugen
    in the United States, our personnel will collaborate with
    Pfizer, which has substantial sales and marketing capabilities
    and will have primary responsibility for promoting this product
    in the domestic market to general ophthalmologists.
•
Develop Alternative Drug Delivery
    Technologies.
We are working to
    develop or acquire alternative technologies for the
    administration of drugs to the back of the eye. We believe that
    these new drug delivery technologies could facilitate the use of
    Macugen and other drugs as chronic or even preventative
    treatments for various back of the eye diseases.
•
Identify New Ophthalmic
    Products.
We have established an
    internal research program with the goal of discovering and
    validating new ophthalmic disease targets and developing novel
    therapies for the treatment of ophthalmic diseases. We are also
    seeking to license or otherwise acquire the rights to potential
    new drugs and drug targets for the treatment of ophthalmic
    disease. For example, in April 2004, we signed a research and
    collaboration agreement with Archemix that allows us to develop
    the current pipeline of Archemix in the field of ophthalmology.
    This agreement also provides us with the ability to have
    Archemix select new aptamers against our targets included in the
    research program for further development by us in ophthalmology.
•
Explore Additional Non-Ophthalmic Indications
    for Macugen.
Third party preclinical
    and clinical research suggests that VEGF plays a key role in
    some non-ophthalmic diseases, particularly some types of cancer
    and psoriasis. We are using our preclinical research expertise
    to evaluate whether the anti-VEGF characteristics of Macugen may
    make it a suitable local treatment for these and other diseases.
    For indications outside of ophthalmology, we may seek
    collaborators or licensees for drug development and
    commercialization.
Eye Disease
The human eye possesses focusing elements in the
front, the cornea and lens, and a light-sensing element in the
back, the retina. Light falls on the photoreceptors that are
part of the retina, called rods
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and cones, and is converted into electrical
energy, which travels via the optic nerve to the brain. The
central most portion of the retina is the macula, which is the
region responsible for seeing color and the acute central vision
necessary for activities such as reading, face recognition,
watching television and driving. The brain processes the complex
signals sent from the retina into vision. The following diagram
illustrates the principal elements of the anatomy of a healthy
eye, including a detailed cross-section of the back of the eye.
Eye disease can be caused by many factors and can
affect both the front and back of the eye. In its most extreme
cases, eye disease can result in either partial or total
blindness. In the developed world, the major diseases that
result in blindness are those affecting the retina, including
AMD, diabetic retinopathy, of which DME is a manifestation, and
glaucoma. These diseases deny patients of their sight, and, as a
result, their ability to live independently and perform daily
activities.
Age-Related Macular
    Degeneration
AMD is a chronic, progressive disease of the
macula that results in the loss of central vision. The most
common symptoms are a central blurred or blank spot, distortion
of objects or simply blurred vision. Peripheral vision usually
remains intact. The disease typically affects patients initially
in one eye, with a high likelihood of it occurring in the second
eye over time. Because AMD is strongly correlated with aging, we
believe that it is likely for the disease to recur,
notwithstanding treatment, as the aging process continues. Thus,
patients who have been administered the existing therapies for
AMD frequently have required retreatment.
AMD is the leading cause of severe vision loss
and blindness in patients over the age of 50 in the developed
world. According to the Macula Vision Research Foundation, as
many as 15 million people in the United States suffer from
some form of AMD, with more than 1.6 million experiencing
the active blood vessel growth and blood vessel leakage
associated with wet AMD. In addition, AMD Alliance International
reports that approximately 200,000 new cases of wet AMD arise
each year in the United States. According to the Centers for
Disease Control and Prevention, or CDC, the rate of AMD
increases sharply with age, from 18% among people
70-74 years of age to 47% among people 85 years and
older. According to the U.S. census bureau, the number of
people in the United States aged 50 or older is approximately
80 million and is expected to increase by approximately 40%
over the next two decades. We expect that this increase in the
number of elderly people will result in a significant increase
in the number of cases of AMD in the United States.
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There are two forms of AMD, "dry" AMD
and "wet" AMD.
•
Dry AMD.
Dry AMD is
    the most common form, representing approximately 90% of all AMD
    cases. However, dry AMD accounts for only 10% of the severe
    vision loss associated with AMD. Dry AMD is characterized by the
    development of yellow-white deposits under the retina, known as
    drusen, and sometimes the deterioration of the retina, although
    without abnormal blood vessel growth and bleeding. There is no
    generally accepted treatment for dry AMD, although vitamins,
    antioxidants and zinc supplements may slow its progression. Over
    time, dry AMD cases often develop into wet AMD.
•
Wet AMD.
Wet AMD
    represents approximately 10% of all cases of AMD, but is
    responsible for up to 90% of the severe vision loss associated
    with the disease. Wet AMD occurs when new blood vessels from the
    tissue layer in the eye just beneath the retina, called the
    choroid, invade into the retinal layers through a membrane known
    as Bruch's membrane. This abnormal blood vessel growth
    generally is known as angiogenesis and, in the context of wet
    AMD, is called choroidal neovascularization. These new blood
    vessels tend to be fragile and often bleed and leak fluid into
    the macula, resulting in loss of vision. Untreated, this blood
    vessel growth and leakage can lead to scarring and, eventually,
    to the destruction of the macula. The majority of patients with
    wet AMD experience severe vision loss in the affected eye within
    months to two years after diagnosis of the disease.
The following diagram is a detailed cross-section
of the back of the eye as affected by wet AMD.
The abnormal blood vessel growth of wet AMD can
be located either directly under the area at the center of the
macula, known as the fovea, or away from the fovea. Wet AMD that
occurs directly under the fovea is known as subfoveal wet AMD.
Wet AMD that occurs elsewhere in the macula is known as either
extrafoveal or juxtafoveal wet AMD. The fovea is responsible for
the ability to see fine detail and color. More than 90% of wet
AMD cases are subfoveal.
Subfoveal wet AMD is divided into three principal
subtypes based on the pattern of the abnormal blood vessels, or
lesions, as seen in the retina through an imaging procedure
known as angiography. The classic pattern consists of
well-defined abnormal blood vessels with distinct edges. In the
occult pattern,
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the edges of the abnormal blood vessels are more
poorly demarcated and diffuse. The principal subtypes of
subfoveal wet AMD, based on the patterns of the abnormal blood
vessels, are the following:
•
Predominantly
    Classic.
In the predominantly classic
    subtype, more than 50% of the patient's abnormal blood
    vessels are of the classic pattern. We estimate that this
    subtype accounts for approximately 25% of the cases of subfoveal
    wet AMD and generally has the most aggressive disease pathology,
    leading to more rapid vision loss than the other subtypes.
•
Minimally Classic.
In the minimally classic subtype, fewer than 50% of the
    patient's abnormal blood vessels are of the classic
    pattern. We estimate that this subtype accounts for
    approximately 35% of the cases of subfoveal wet AMD and
    generally has a less rapid rate of vision loss than the
    predominantly classic subtype, but a more rapid rate than the
    occult subtype.
•
Occult.
In the
    occult subtype, all of the patient's abnormal blood vessels
    are of the occult pattern. We estimate that this subtype
    accounts for approximately 40% of the cases of subfoveal wet AMD
    and generally has a less rapid rate of vision loss.
We based the foregoing estimates of the
percentages of patients suffering from each subtype on a survey
of ophthalmologists that we conducted. This estimate is also
supported by the enrollment data from our Phase 2/3 pivotal
clinical trials.
In the United States, there is an FDA-approved
therapy only for the predominantly classic subtype of wet AMD.
In the European Union, there is an approved therapy for only the
predominantly classic and occult subtypes. As a result, we
estimate that the approved therapy is only indicated for
approximately 25% of United States patients and 65% of European
patients, thus leaving a significant unmet medical need for the
balance.
Diabetic Macular Edema
DME is a complication of diabetic retinopathy, a
disease affecting the blood vessels of the retina. Diabetic
retinopathy results in multiple abnormalities in the retina,
including retinal thickening and edema, hemorrhages, impeded
blood flow, excessive leakage of fluid from blood vessels and,
in the final stages, abnormal blood vessel growth. This blood
vessel growth can lead to large hemorrhages and severe retinal
damage. When the blood vessel leakage of diabetic retinopathy
causes swelling in the macula, it is referred to as DME. The
principal symptom of DME is a loss of central vision. Risk
factors associated with DME include poorly controlled blood
glucose levels, high blood pressure, abnormal kidney function
causing fluid retention, high cholesterol levels and other
general systemic factors.
According to the World Health Organization,
diabetic retinopathy is the leading cause of blindness in
working age adults and a leading cause of vision loss in
diabetics. The American Diabetes Association reports that there
are approximately 18 million diabetics in the United States
and approximately 1.3 million newly diagnosed cases of
diabetes in the United States each year. Prevent Blindness
America and the National Eye Institute estimate that in the
United States there are over 5.3 million people aged 18 or
older with diabetic retinopathy, including approximately 500,000
with DME. The CDC estimates that there are approximately 75,000
new cases of DME in the United States each year.
Limitations of Currently Available
    Therapies for Wet AMD
The two therapies currently available for the
treatment of wet AMD are photodynamic therapy and thermal laser
treatment.
Photodynamic
Therapy.
Photodynamic therapy involves
the use of a light-activated drug, or photosensitizer, named
Visudyne® to treat wet AMD. The therapy involves a two-step
process in which the drug is administered systemically by
intravenous infusion and then a dose of low energy light is
delivered to the target site to activate the photosensitizer and
destroy the newly grown abnormal blood vessels. Worldwide sales
of Visudyne in 2003 were approximately $357 million.
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Visudyne therapy has an important therapeutic
indication limitation in that it is approved in the United
States only for the treatment of the predominantly classic
subtype of subfoveal wet AMD and in the European Union only for
the treatment of the predominantly classic and occult subtypes
of subfoveal wet AMD. However, in April 2004, the Centers
for Medicare & Medicaid Services implemented its
decision to expand reimbursement for Visudyne therapy to include
coverage for its use in the treatment of the minimally classic
and occult subtypes, but only for patients in which the lesions
are small and when there is evidence of progression within the
three months prior to initial treatment. For this purpose, small
lesions are those of less than four disc areas.
Visudyne therapy also has a number of clinical
shortcomings, including side effects such as photosensitivity
and back pain. In the pivotal clinical trial of Visudyne,
approximately 91% of the patients who received Visudyne for the
treatment of wet AMD experienced a recurrence of the condition
within three months of treatment, necessitating retreatment.
Furthermore, the method of administering this therapy requires
the physician to invest in expensive laser equipment and retain
paramedical personnel to assist in the intravenous infusion of
the photosensitizer.
Thermal Laser
Treatment.
Thermal laser treatment,
also known as photocoagulation, for the treatment of wet AMD
entails the use of a high-energy laser to destroy the abnormal
blood vessels that are growing and leaking in the macula. This
is a surgical procedure and is not subject to FDA approval.
Because the lasered portions of the retina are irreversibly
destroyed, thermal laser treatment generally is used only for
the minority of wet AMD patients with the extrafoveal and
juxtafoveal forms of the disease, in which the abnormal blood
vessel growth and vessel leakage occur away from the center of
the macula. Thermal laser treatment is generally not used for
subfoveal wet AMD because of the risk of immediate and permanent
vision loss resulting from the laser burns to the center of the
macula. Approximately 50% of the patients who receive thermal
laser therapy for the treatment of wet AMD experience recurrence
of the condition during the ensuing year as a result of regrowth
of the abnormal blood vessels. In addition, patients treated
with thermal laser therapy frequently experience blind spots,
known as scotomas, as a result of the destruction of the area of
the retina where the treatment is administered.
Limitations of Currently Available
    Therapies for DME
There is no approved drug therapy for DME in the
United States or the European Union. The current therapies for
the treatment of DME are thermal laser treatment and steroid
treatment administered by physicians on an off-label basis.
Thermal Laser
Treatment.
Thermal laser treatment
does not result in an improvement in vision in most patients,
and some patients continue to lose vision. As discussed above,
thermal laser treatment results in focused, localized
destruction of portions of the retina. As a result, patients
treated with this procedure frequently experience scotomas.
Steroid Therapy.
Some physicians recently have begun to treat DME on an off-label
basis with injections of corticosteroids into the vitreous, the
jelly-like fluid that fills the back of the eye. This method of
administering drugs to the back of the eye is known as
intravitreal injection. The efficacy of steroid therapy for DME
is unknown. Based on the product labels for steroids and
numerous published studies, we believe that steroid therapy for
DME may have a number of significant side effects that can lead
to loss of vision, including worsening of cataracts and
steroid-induced glaucoma. The steroids typically used for this
treatment are off patent and inexpensive.
Macugen
We are developing Macugen as a novel therapy for
the treatment of wet AMD and DME. Based on research regarding
the pathologies of wet AMD and DME, our knowledge of the
mechanism of action of Macugen and the molecular and clinical
attributes of this product candidate, we believe that Macugen
will overcome many of the limitations of the existing therapies
for wet AMD and DME.
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Mechanism of Action.
The active pharmaceutical ingredient in Macugen is a chemically
synthesized aptamer that binds to and inhibits the function of
VEGF. An aptamer is a single strand of oligonucleotide that
binds with specificity to a particular target, such as VEGF.
VEGF is a protein that has been shown to play an important role
in the abnormal blood vessel growth and blood vessel leakage
associated with wet AMD and the blood vessel leakage associated
with DME. In multiple preclinical studies in animals, VEGF has
been shown to be associated with blood vessel growth and leakage
in the eye. In addition, in numerous animal species, anti-VEGF
agents have inhibited blood vessel formation and leakage in
multiple blood vessel layers of the eye, including the iris, the
retina and the choroid. In substantial human clinical research,
VEGF concentrations in eyes afflicted with wet AMD or DME were
found to correlate with the presence and severity of these
diseases.
The following diagram illustrates how we believe
VEGF is blocked from binding with its natural receptor after
Macugen binds with VEGF.
Method of
Administration.
Macugen is currently
administered by intravitreal injection. Before a physician
administers the injection of Macugen, the patient receives a
pre-injection preparation consisting of a broad-spectrum
antibiotic and/or iodine-based topical anti-bacterial followed
by topical numbing drops and/or a superficial pre-injection of a
local anesthetic to numb the eye. This procedure can be
administered by a skilled clinician and can be completed in a
typical office visit or other outpatient setting. By injecting
this medication into the vitreous, the physician delivers
Macugen directly to the affected eye tissue. Intravitreal
injections are commonly used in many other therapies for eye
disorders, including antibiotic and steroid therapies.
Specificity.
In
humans, there are at least five subtypes, or isoforms, of VEGF.
Based on preclinical
in vitro
and animal studies
that we have conducted, we believe that two of these VEGF
isoforms, isoforms 165 and 121, are present in the eye in
meaningful levels. In these studies, elevated levels of the
animal counterpart of human isoform 165 was required for
abnormal blood vessel growth in the retina. We believe that the
unique shape of the Macugen aptamer allows it to bind to VEGF
isoform 165 with high specificity through a lock and key
type mechanism. In multiple animal models of pathological ocular
vessel growth and leakage, we found that the animal counterpart
of VEGF isoform 165 was specifically increased in animals
with these conditions. In these tests, we also found that
Macugen binding with the animal counterpart of isoform 165
was highly effective in inhibiting abnormal blood vessel growth
in the retina. Macugen did not bind with the animal counterpart
of isoform 121 to any significant degree. In an animal
study conducted by us involving a direct comparison with a VEGF
inhibitor that blocks all isoforms, Macugen was as effective at
inhibiting abnormal blood vessel growth in the retina as the
other VEGF inhibitor. Conversely, in these tests, Macugen did
not affect the normal vessels of the retina, whereas the VEGF
inhibitor that inhibits all isoforms of VEGF altered their
growth and survival.
Anti-permeability.
VEGF is a very strong inducer of blood vessel permeability. For
example, in animal tests VEGF has been shown to be 50,000 times
more potent than histamine, the molecule
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commonly associated with blood vessel leakage
related to allergies. Also in animal tests, it has been shown
that VEGF is required for the blood vessel permeability
associated with wet AMD and diabetic retinopathy. In addition to
its anti-angiogenic property of inhibiting abnormal blood vessel
growth, Macugen has been shown in animal tests to inhibit blood
vessels from leaking into the retina. By preventing blood vessel
leakage as well as abnormal blood vessel growth, Macugen offers
a potential two-pronged approach to the treatment of wet AMD. By
preventing blood vessel leakage, Macugen also offers a potential
treatment for DME. In animal models of diabetes-related blood
vessel leakage, the animal counterpart of isoform 165 was
specifically increased in the retina. This is the isoform that
is selectively inhibited by Macugen in animal models.
No Observed
Immunogenicity.
Aptamers in general
tend not to trigger adverse immune responses. To date, we have
not observed any meaningful clinical immunologic reactions to
Macugen.
Stability and Attractive Pharmacokinetic
Profile.
Macugen is a PEGylated
molecule, which means that a molecule of polyethylene glycol is
attached to the strand of nucleic acid. This PEGylation
increases the half-life of the product, which in turn increases
the time that Macugen actively targets the disease site. This
may allow for less frequent dosing. The unPEGylated Macugen
aptamer also demonstrates high stability under various
temperature and pH levels, which suggests that the aptamer may
be suitable for administration via different delivery methods.
Clinical Development of Macugen
We are conducting two Phase 2/3 pivotal
clinical trials for the use of Macugen in the treatment of wet
AMD and a Phase 2 clinical trial of Macugen for the use of
Macugen in the treatment of DME. We are also conducting or
planning to conduct a number of additional trials of Macugen.
The following table summarizes our material ongoing and planned
clinical trials of Macugen.
First Patient
Number of
Enrollment
Indication
Trial Name
Phase
Objectives
Geography
Enrolled
Patients
Status
AMD
EOP 1003
2/3
(Pivotal)
Safety
Dose finding
Efficacy
International
(including U.S.)
October 2001
612
Year one
complete;
continuation
study ongoing
EOP 1004
2/3 (Pivotal)
Safety
Dose finding
Efficacy
North America
August 2001
578
Year one complete; continuation study ongoing
EOP 1006
2
Pharmacokinetics Safety Efficacy
North America
January 2003
147
Fully Enrolled
DME
EOP 1005
2
Dose finding Safety
Proof of concept
International (including U.S.)
October 2002
169
Fully Enrolled
Retinal Vein Occlusion
EOP 1011
2
Safety
Dose finding
Proof of concept
North America
Planned Q2 2004
50-100
Pending
Clinical Trials for the Treatment of Wet
    AMD
Phase 2/3 Pivotal Clinical
    Trials
Trial Design.
In the
second half of 2001, we initiated two Phase 2/3 pivotal
clinical trials for the use of Macugen in the treatment of
subfoveal wet AMD. We are conducting one of these trials in
North America and one primarily outside North America. We have
enrolled 578 patients in the North American trial and
612 patients in the international trial. Retinal
specialists at 117 leading medical centers are
participating in these two Phase 2/3 clinical trials.
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We designed the enrollment criteria for the
trials to assess the treatment effect of Macugen in a broad
patient population. Both trials enrolled patients with subfoveal
wet AMD of all three lesion subtypes, with a wide range of
lesion sizes and with a variety of other lesion characteristics.
Patients who had previously received subfoveal thermal laser
therapy or who had significant subfoveal scarring or atrophy
were not eligible to participate in the trials.
Prior to enrollment in the studies, we measured
each patient's visual acuity to establish a baseline.
Patients with a broad range of baseline visual acuity were
included in both trials. To qualify for enrollment, the visual
acuity in the patient's study eye had to be between 20/40
and 20/320. Visual acuity in the patient's other eye had to
be better than or equal to 20/800. In these trials, visual
acuity is measured as the number of letters that the patient can
read on the Early Treatment Diabetic Retinopathy Study, or
ETDRS, eye chart. This is the standard eye chart used in these
types of trials. Five letters on the ETDRS eye chart equates to
one line of visual acuity.
To ensure that uniform criteria were applied in
characterizing patients' lesions, we engaged the Wilmer
Technology Assessment Program, part of the Wilmer Eye Institute
at Johns Hopkins University School of Medicine, to review the
angiogram of each patient's affected eye. Through the use
of this centralized reading center, we were able to confirm
patient eligibility and properly classify patients by wet AMD
subtype before enrolling them in the study.
In these pivotal trials, we randomly assigned
patients to one of four groups. Three groups were treated with
an intravitreal injection of Macugen. The fourth group served as
the control group and received a sham injection. In the first
54 weeks of the trials, the three treated groups received
different doses of Macugen: 0.3 mg per injection, 1 mg
per injection or 3 mg per injection. To reduce potential
bias, both trials use a double-masked study design so that
neither the patient nor the investigational staff involved with
assessing the vision of the patient knows to which group each
patient belongs. The sham injection included all steps involved
in the intravitreal treatment injections with the exception that
patients in the control group had an empty syringe pressed
against their eye walls without a needle. This procedure mimics
an intravitreal injection and helps to maintain proper masking.
Patients received a treatment every six weeks during the first
54 weeks. At the discretion of the treating physician,
patients with predominantly classic subfoveal wet AMD who were
eligible for photodynamic therapy could receive Visudyne
treatment before enrollment on up to one occasion between 8 and
13 weeks prior to enrollment, at baseline and during the
trials. Thus, Macugen's safety and efficacy was tested
against a control group in which some patients received an
active therapy, photodynamic therapy using Visudyne. In
contrast, photodynamic therapy using Visudyne was tested against
a control group of patients receiving no active therapy in its
Phase 3 trials.
In North America, we are conducting the trials
ourselves. We have engaged a clinical research organization to
conduct the clinical trials in Europe, South America, Australia
and Israel.
First-Year Clinical Trial
Results.
Of the 1,208 patients
who were enrolled in these trials, the 1,186 patients who
received at least one injection and were tested for changes in
visual acuity constituted the intent-to-treat population for
purposes of analysis of efficacy data. The two trials are
scheduled to continue for 154 weeks. However, the primary
efficacy endpoint was based on this intent-to-treat patient
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population at 54 weeks. The following table
describes the combined safety patient populations from the two
trials.
Treated with
Macugen
Control
Number of patients
892
298
Male/ Female (%)
42/58
40/60
Average age at baseline
76.0
75.7
Mean baseline visual acuity score (letters):
Treated eye
51.5
52.7
Non-treated eye
55.6
57.1
Wet AMD subtype (%):
Predominantly classic
26.0
26.0
Minimally classic
36.0
34.0
Occult
38.0
40.0
Patient characteristics such as gender, age and
baseline vision were balanced across the treatment and control
groups. Patients also were randomized to establish balanced
representation of each subtype of subfoveal wet AMD across the
treatment and control groups.
There was a high compliance rate in the first
54 weeks of these trials. For the patients who had at least
one study treatment, the combined average number of treatments
for trial participants was approximately 8.5 out of
9 possible treatments. Further, the completion rate across
both trials was also high, with over 90% of all patients
remaining in the trials for the full 54 weeks.
Primary Efficacy
Endpoint.
The primary efficacy
endpoint in these trials was the proportion of patients losing
less than 15 letters, or three lines, of visual acuity on the
ETDRS eye chart from baseline after 54 weeks. This is the
same primary clinical endpoint that was used in the pivotal
clinical trials for Visudyne. We discussed our trial protocols
and statistical analysis plan with the FDA prior to unmasking
the data.
Based on our analysis of the data from the
combined patient populations of both trials, the primary
efficacy endpoint was met with statistical significance for all
three doses of Macugen. In connection with our analysis of the
combined patient data, we determined statistical significance
based on a widely used, conventional statistical method that
establishes the p-value of clinical results. Under this method,
a p-value of 0.05 or less represents statistical significance.
The following table summarizes the combined trial results.
Patients Losing Less
Than 15 Letters
Dose
Individuals
Percentage
p-value
0.3 mg Macugen
206/294
70
%
0.0001
1 mg Macugen
213/300
71
%
0.0003
3 mg Macugen
193/296
65
%
0.0310
Control
164/296
55
%
—
Based on the data from the combined patient
populations of both trials, the 0.3 mg dose of Macugen was
the lowest effective dose of the three doses tested. On a
combined basis, 70% of the patients treated with the 0.3 mg
dose of Macugen lost fewer than 15 letters of visual acuity at
54 weeks compared to 55% of the patients in the control
group, resulting in a relative difference of 27% between the
treated and the control groups. This result had a p-value of
0.0001. In addition, based on our preliminary analysis of the
safety data from these trials, each of the three dose levels
tested in the trials appears to have a favorable safety profile.
To address statistical and other regulatory requirements, we
plan to seek approval for the 0.3 mg dose of Macugen in our
NDA for wet AMD.
To qualify for FDA approval, a drug candidate
typically has to demonstrate a clinically relevant treatment
effect with statistical significance in replicate trials.
Moreover, when multiple doses of a drug are tested against a
single control group, a more stringent statistical method that
accounts for multiple
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comparisons must be applied. For this purpose, we
used the Hochberg multiple comparison procedure. Under the
Hochberg procedure, in order to demonstrate statistical
significance for any particular dose, it is necessary to
establish a p-value that meets a stricter standard than the
conventional standard of a p-value of 0.05 or less. We designed
our two separate, but substantially identical, North American
and international clinical trials to meet these regulatory
requirements. For the 0.3 mg Macugen dose, the primary
clinical endpoint was achieved with statistical significance in
both the North American and international trials using the more
stringent Hochberg statistical methodology. The p-value was
0.003 in the North American trial and 0.011 in the international
trial.
Efficacy Across All Wet AMD
Subtypes.
The combined data from the
two trials demonstrate that the treatment effect of Macugen is
consistent across all three subtypes of subfoveal wet AMD with
respect to both mean vision loss and prevention of three line
loss. To assess the consistency in treatment effect across
lesion subtypes, we performed an analysis known as the
Breslow-Day test. The analysis showed no evidence of interaction
between wet AMD subtypes and Macugen treatment effect,
demonstrating that the results for any single lesion subtype did
not disproportionately contribute to the overall efficacy
observed in the trials and that the treatment effect of Macugen
is consistent across all subtypes. Accordingly, in our NDA
filing, we and Pfizer have jointly agreed to seek approval for
the use of the 0.3 mg dose of Macugen in the treatment of
patients with all three subtypes of subfoveal wet AMD. Moreover,
the following chart depicts for the combined patient populations
of both trials the mean change in visual acuity by subtype for
patients treated with the 0.3 mg dose of Macugen and for
patients in the control group. The mean change in visual acuity
is expressed as the average number of letters lost by patients
with each wet AMD subtype.
Secondary Endpoints and Other Clinical
Observations.
In addition to the
primary endpoint data described above, we analyzed the results
from the combined populations of patients from both trials
treated with the 0.3 mg dose of Macugen to assess the
degree, rate and sustainability of change in visual acuity
compared to the combined control group populations.
To assess the degree of change in visual acuity,
one of the secondary endpoints measured the proportion of
patients whose visual acuity remained at baseline or improved
over the 54-week trial period, and a second measured the
proportion of patients whose visual acuity improved by 15 or
more letters, or three or more lines, over the 54-week trial
period. Although not prospectively specified in the trial
protocols as secondary endpoints, we also assessed the
proportion of patients who gained one or more lines of visual
acuity over the 54-week trial period, the proportion of patients
who gained two or more lines of visual acuity over the 54-week
trial period and the proportion of patients who experienced
severe loss of vision, defined as a loss of 30 or more letters,
or six or more lines, of visual acuity over the 54-week trial
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period. The following table summarizes the
combined results from both trials as to these secondary
endpoints and additional analyses.
Proportion of Patients
Macugen 0.3 mg
Control
p-value
Maintenance of or gain in vision:
³
0 line vision
    gain
33
%
23
%
0.0032
Gain in vision:
³
1 line vision
    gain
22
%
12
%
0.0043
³
2 line vision
    gain
11
%
6
%
0.0239
³
3 line vision
    gain
6
%
2
%
0.0401
Severe loss of vision:
³
6 line vision
    loss
10
%
22
%
0.0001
All observations of the combined trial results
summarized in the above table were statistically significant
using the conventional p-value method, including the results
from the two pre-specified secondary endpoints.
Additional secondary endpoints measured the rate
and sustainability of Macugen's clinical effect.
Specifically, these endpoints compared the mean change in visual
acuity after 6, 12 and 54 weeks between the combined
populations from both trials receiving the 0.3 mg dose of
Macugen and the combined populations from both trials in the
control group. The following table summarizes the data for these
secondary endpoints.
Mean Change in Visual
Acuity (Letters)
Observation Period
Macugen 0.3 mg
Control
p-value
6 weeks
(1.5
)
(4.0
)
0.0069
12 weeks
(3.2
)
(6.3
)
0.0037
54 weeks
(8.0
)
(15.0
)
0.0000
These data suggest that the onset of clinical
benefit for patients with wet AMD may be observed as early as
six weeks after initial treatment. At 54 weeks, the
combined population of patients from both trials receiving the
0.3 mg dose of Macugen on average continued to lose fewer
letters of vision than patients in the combined control group.
Furthermore, in the combined analysis, after 54 weeks, 62%
more patients in the control group deteriorated to 20/200 visual
acuity in the study eye than in the Macugen 0.3 mg dose
group. A person is generally considered to be legally blind if
their visual acuity is 20/200 or worse using both eyes with the
benefit of corrective measures, such as eyeglasses.
Analysis of the data suggests that the overall
efficacy is independent of lesion size and patient age.
Specifically, statistical interaction tests indicate that
efficacy is similar in small and large lesions as well as in
younger and older patients. For these tests, small lesions were
those of less than four disc areas, whereas large lesions were
those of four or more disc areas, and younger patients were
those less than 75 years of age, whereas older patients
were those of 75 years of age or more.
Visudyne Use During the
Trials.
We did not design the trials
to investigate the efficacy of Macugen treatment combined with
photodynamic therapy using Visudyne. However, patients with a
history of up to one prior administration of photodynamic
therapy using Visudyne between 8 and 13 weeks before their
first study visit were eligible for enrollment in our trials.
Also, patients with predominantly classic subfoveal wet AMD at
baseline who were eligible for Visudyne treatment could receive
such treatment at baseline and during the studies at the
discretion of the treating physician. Only 26% of all enrolled
patients in the combined trials were eligible for Visudyne
treatment at the beginning of the study. Of the 26% eligible,
only 65% actually received Visudyne treatment at any time. In
addition, a small number of patients originally classified as
minimally classic or occult converted to the predominantly
classic subtype and received Visudyne. Overall, 75% of the
patients in the trials did not receive any Visudyne treatment.
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Excluding those patients that received Visudyne
treatment prior to study enrollment, investigators administered
Visudyne treatment to approximately 50% more patients in the
control group than in the Macugen 0.3 mg group. Overall,
24% more patients in the control group than in the Macugen
0.3 mg group received photodynamic therapy at any time,
whether prior to, at or after baseline. The 0.3 mg dose of
Macugen demonstrated a statistically significant, clinically
relevant treatment benefit relative to control despite this
higher rate of Visudyne usage in the control group. Therefore,
we believe that the results of treatment with the 0.3 mg
dose of Macugen are independent of Visudyne usage.
Safety.
In the first
year of the trials, Macugen was well-tolerated at all three
doses. Our preliminary assessment of adverse event data
indicates that there is no apparent increased risk of systemic
adverse events to patients as a result of the use of Macugen.
Few patients in either the treated or control groups
discontinued their participation in the trials as a result of
adverse events. Injection-related serious adverse events were
low in number and included endophthalmitis, which is an
infection of the eye, retinal detachment and physician-induced,
or iatrogenic, traumatic cataract. During the first year of the
trial, there were 12 cases of endophthalmitis reported,
representing an incidence of 0.16% per injection or
1.3% per patient over the first year of treatment, five
cases of retinal detachment reported, representing an incidence
of 0.07% per injection or 0.6% per patient over the
first year of treatment, and five cases of traumatic cataract,
representing an incidence of 0.07% per injection or
0.6% per patient over the first year of treatment. Of the
five cases of retinal detachment, two were exudative in nature
and, we believe, attributable to the underlying disease and
three were due to a tear or hole in the retina, known as
rhegmatogenous, and may be attributable to the injection
procedure. Only four of the patients who developed
endophthalmitis experienced vision loss of 15 or more letters at
week 54 compared to their baseline vision. Only one patient who
developed endophthalmitis experienced severe vision loss of six
or more lines, which represents approximately 0.1% of the
patients treated with Macugen in the trials. The incidence of
these injection-related adverse events is well within what we
believe to be the tolerable limits for a drug that is
administered by intravitreal injection. There was no evidence of
drug-associated cataract or persistently elevated intraocular
pressure or glaucoma in patients in the trials. Furthermore, the
percentage of reported deaths was similar in the treated and
control groups. We believe that the observed death rates and the
serious adverse event profiles are consistent with those of the
general population of patients with demographic characteristics
similar to those of patients in the trials. Side effects from
clinical and preclinical trials of systemic VEGF inhibitors have
included hypertension, thromboembolic events, bleeding and
proteinuria. None of these side effects was noted to have been
observed with the use of Macugen, which is a non-systemic VEGF
inhibitor, in our trials.
Second and Third Year of the
Trials.
Because of the role of the
aging process in wet AMD, we believe that there is a significant
possibility that the disease will recur following the initial
one-year course of Macugen treatment and, therefore, that some
patients may require Macugen treatment for more than one year.
We are treating patients in a second year extension protocol of
our Phase 2/3 pivotal clinical trials to determine, among
other things, whether continued therapy with Macugen provides
additional benefits and acceptable safety. We recently added a
third year of follow-up to the trials in order to better
characterize the long-term safety of Macugen.
Phase 1 and 2 Trials
We completed a Phase 1 and two Phase 2
clinical trials for the use of Macugen in the treatment of wet
AMD prior to June 2001. These trials included patients with all
three subtypes of subfoveal wet AMD. The primary purpose of
these trials was to test for product safety. In each of the
three trials, Macugen was well tolerated, and there were no
serious adverse events determined by the clinical trial
investigators as related to the drug. Although these trials were
conducted on a relatively small number of patients and there
were no randomized controls or long-term patient follow up, we
observed encouraging effects of the drug on trial participants.
In the Phase 1 trial, 15 patients
received escalating doses of Macugen one time via an
intravitreal injection in the affected eye. The patients were
distributed into five groups of three patients. Each group
received a different dose of Macugen. In this trial, 80% of the
patients showed stabilized or improved
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vision at the end of the three-month period
following the injection. For purposes of this trial and our two
Phase 2 trials described below, we defined stabilized
vision as no loss of, or an increase in, letters of visual
acuity on the ETDRS eye chart. Approximately 27% of the patients
in this trial showed the ability to read 15 or more additional
letters on the ETDRS eye chart at the end of the three-month
period.
In the first Phase 2 trial, 10 patients
received Macugen via an intravitreal injection in the affected
eye once a month for three months. Eight of the treated patients
were tested at the end of the three-month period, with
approximately 88% of the tested group showing stabilized or
improved vision and 25% showing the ability to read 15 or more
additional letters on the ETDRS eye chart at the end of the
three-month period.
In the second Phase 2 trial,
11 patients received Macugen via intravitreal injection in
the affected eye once a month for three months. This trial
consisted solely of patients with the predominantly classic form
of subfoveal wet AMD who were also receiving photodynamic
therapy with Visudyne. Ten of the treated patients were tested
at the end of the three-month period, with 90% of the tested
group showing stabilized or improved vision and 60% showing the
ability to read 15 or more additional letters on the ETDRS eye
chart at the end of the three-month period.
Phase 2 Pharmacokinetic Study
In January 2003, we began a Phase 2 clinical
trial designed to obtain additional pharmacokinetic data from
the use of Macugen in the treatment of wet AMD. The
147 patients enrolled in this trial each receive one year
of treatment. Treatment occurs every six weeks. Entry criteria
for this trial were similar to those for our Phase 2/3
pivotal clinical trials. We conduct extensive blood sampling for
pharmacokinetic data for each patient on two occasions during
the trial. Safety endpoints are secondary endpoints of the trial.
Phase 2 Clinical Trials for the
    Treatment of DME
We have completed one Phase 2 clinical trial
for the use of Macugen in the treatment of DME. In this trial,
clinical centers enrolled 10 patients with DME. Patients
were administered an intravitreal injection in the affected eye
once a month for three months. As in the wet AMD Phase 1
and 2 studies, the therapy was well tolerated, and there were no
serious adverse events determined by the clinical trial
investigators as related to the drug or its administration.
In July 2003, we completed enrollment of a second
Phase 2 clinical trial for the use of Macugen in the
treatment of DME. The 169 patients enrolled in this study
were required to have been eligible for laser therapy for DME.
In this randomized, double-masked, placebo-controlled trial,
patients treated with Macugen receive 0.3 mg, 1 mg or
3 mg doses via intravitreal injection every six weeks for
at least 12 weeks and then up to 30 weeks at the
discretion of the investigators. The control group receives a
sham injection designed to mimic an intravitreal injection.
We recently announced preliminary results from
this Phase 2 clinical trial. Based on the preliminary
results, the lowest effective dose of Macugen of the three doses
tested was 0.3 mg, which is the same as the lowest
effective dose observed in our Phase 2/3 pivotal clinical
trials for the use of Macugen in the treatment of wet AMD and
the dose for which we plan to seek approval in our NDA for wet
AMD. The
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following table summarizes the results through 36
weeks for patients treated with the 0.3 mg dose of Macugen
and patients in the control group.
Proportion of Patients
Macugen 0.3 mg
Control
p-value
Maintenance of or gain in vision:
³
0 line vision
    gain
73
%
51
%
0.02
Gain in vision:
³
1 line vision
    gain
59
%
34
%
0.01
³
2 line vision
    gain
34
%
10
%
0.003
³
3 line vision
    gain
18
%
7
%
—
The results shown in the table with respect to
the proportion of patients gaining 0 or greater, 1 or greater
and 2 or greater lines of vision at 36 weeks were statistically
significant using the Hochberg statistical methodology. As shown
in the table, the proportion of patients gaining 3 or greater
lines of vision was higher for the group receiving 0.3 mg
of Macugen than for the control group, but the number of
patients was not sufficient to demonstrate statistical
significance.
Optical coherence tomography, an imaging
technique, that may anatomically quantify retinal thickness or
edema, showed a 300% relative reduction trend in retinal
thickness for the 0.3 mg dose of Macugen compared to
controls (50.79 microns vs. 12.68 microns). In the
geometric center of the macula, that region directly responsible
for high acuity vision, the odds of a decrease in retinal
thickness of 75 mm or more is 4 times larger for 0.3 mg
dose of Macugen group vs. controls (p-value=0.0078).
Our preliminary review of the draft safety data
from the trial suggests that Macugen is well-tolerated in
patients with DME. Further detailed analysis of the safety data
is ongoing.
Planned Retinal Vein Occlusion
    Trial
In the second quarter of 2004, we plan to
commence a Phase 2 clinical trial designed to test the
efficacy and safety of Macugen for the treatment of retinal vein
occlusion, a condition that is characterized by high VEGF
levels, abnormal blood vessel growth and blood vessel leakage.
Retinal vein occlusion occurs when the circulation of a retinal
vein becomes obstructed, causing blood vessel bleeding and
leakage in the retina. Laser therapy is sometimes used to treat
this condition, but with limited efficacy. We intend to enroll
between 50 and 100 patients and plan to treat these
patients for at least 12 to 30 weeks. We expect the
endpoints to include change in visual acuity and change in
retinal thickness.
Collaboration with Pfizer
Macugen
In December 2002, we entered into collaboration,
license and related agreements with Pfizer to develop,
manufacture and commercialize Macugen for the prevention and
treatment of diseases of the eye and related conditions. Under
the terms of the agreements:
•
Upon effectiveness of the collaboration
    arrangements in February 2003, Pfizer paid us $100 million,
    consisting of a $75 million initial license fee and a
    $25 million equity investment;
•
Pfizer purchased an additional $10 million
    of our common stock at the closing of our initial public
    offering in February 2004;
•
Pfizer is obligated to purchase up to an
    additional $15 million of our common stock in specified
    circumstances;
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•
Pfizer will co-promote Macugen with us in the
    United States and will share with us in profits and losses from
    the commercialization of Macugen in the United States, with our
    having the right to book all United States product sales;
•
Pfizer will commercialize Macugen outside the
    United States pursuant to an exclusive license and pay us a
    royalty on net sales;
•
Pfizer will fund a majority of the ongoing
    development costs incurred pursuant to an agreed upon
    development plan covering the development of Macugen for AMD,
    DME, retinal vein occlusion and other agreed upon ophthalmic
    indications;
•
Pfizer is potentially obligated to pay us up to
    $195.5 million in milestone payments based on the
    achievement of worldwide regulatory submissions and
    approvals; and
•
Pfizer is potentially obligated to pay us up to
    $450 million in milestone payments based upon attainment of
    agreed upon sales levels of Macugen.
Under the agreements, the parties' sharing
of profits and losses from the commercialization of Macugen in
the United States extends until the later of 15 years after
commercial launch in the United States and the expiration of the
United States patent rights licensed to Pfizer. The payment of
royalties to us by Pfizer based on net sales of Macugen outside
the United States extends, on a country-by-country basis, until
the later of 15 years after commercial launch and the
expiration of the patent rights licensed to Pfizer in each
particular country. The royalty rate on net sales of Macugen
outside the United States is reduced on a country-by-country
basis to the extent that the patent rights in a particular
country expire or a generic form of Macugen is marketed in that
country. The United States patent rights licensed by us to
Pfizer expire between 2010 and 2017. The corresponding foreign
rights include patents that expire between 2011 and 2017 and
patent applications which, if issued as patents, are expected to
expire between 2011 and 2020. Pfizer may terminate the
collaboration relationship without cause upon six to twelve
months' prior notice, depending on when such notice is
given. Either party may terminate the collaboration relationship
based upon material uncured breaches by the other party. In
addition, we may terminate the collaboration relationship if,
during specified periods, net sales of Macugen do not reach
specified levels. If we elect to terminate the collaboration in
this situation, we would be required to pay royalties to Pfizer
based on net sales of Macugen following such termination.
The collaboration is governed by a joint
operating committee, consisting of an equal number of
representatives of us and Pfizer. There are also subcommittees
with equal representation from both parties that have
responsibility over development and regulatory, manufacturing
and commercialization matters. In the case of unresolved
disagreement, ultimate decision-making authority is vested in us
as to some matters and in Pfizer as to other matters. A third
category of decisions requires the approval of both us and
Pfizer. Outside the United States, ultimate decision-making
authority as to most matters is vested in Pfizer.
Xalatan
In connection with the Macugen collaboration, we
entered into an agreement with Pfizer under which our sales
force is entitled to participate in selling activities, or
detailing, Pfizer's Xalatan glaucoma product on a
nonexclusive basis in the United States. Xalatan is a once-a-day
prescription eye drop marketed by Pfizer as a primary, or first
line, therapy for glaucoma, an eye disease that is associated
with the degeneration of the retinal cells responsible for
transmitting images from the eye to the brain.
Under this agreement, Pfizer is obligated to pay
us a per detail fee for our details to general ophthalmologists
and a percentage of incremental net revenues that are above a
baseline threshold for our details to retinal specialists. We
expect that our sales activities will commence three to six
months prior to our planned commercial launch of Macugen and
will continue for a period of three years after we start
detailing Xalatan. The agreement automatically terminates upon a
termination of the Macugen collaboration or upon Pfizer's
sale, assignment, exclusive license or other disposition of the
Xalatan product. In addition, we may terminate the agreement
upon four months' prior notice. Either party may terminate
the agreement based upon material uncured breaches by the other
party.
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By participating in the detailing of Xalatan, we
expect that our domestic sales force will be able to access and
form relationships with retinal specialists and general
ophthalmologists prior to commercial launch of Macugen. We view
the Xalatan agreement as primarily a strategic arrangement and
anticipate only a modest economic impact.
Pipeline Initiatives
In order to expand our pipeline of products to
treat diseases of the eye with unmet medical need, we are
actively pursuing a strategy to develop new drugs internally and
to license or otherwise acquire rights to potential new drugs
from third parties. We are also seeking to develop internally
and acquire rights to alternative mechanisms for delivering
ophthalmic drugs to the back of the eye. For example, in
April 2004, we signed a research and collaboration
agreement with Archemix that allows us to develop the current
pipeline of Archemix in the field of ophthalmology. This
agreement also provides us with the ability to have Archemix
select new aptamers against our targets included in the research
program for further development by us in ophthalmology.
We conduct our internal research and development
activities at our Eyetech Research Center located in Woburn,
Massachusetts. We had 42 full-time employees at this
facility, including a total of 17 employees who hold M.D.
or Ph.D. degrees as of March 31, 2004. We are conducting
research into the causes of AMD and diabetic retinopathy as well
as novel methods of drug delivery to the back of the eye. We
also are investigating the use of Macugen for non-ophthalmic
indications. We have developed proprietary models that
accelerate the study of disease processes and the identification
and validation of attractive molecular targets for ophthalmic
drug development. We have also developed tools for studying the
basic disease processes involved in the degeneration of retinal
cells associated with glaucoma.
Our current pipeline initiatives include the
following:
Additional Ophthalmic Indications for
    Macugen
In addition to wet AMD, DME and retinal vein
occlusion, there are a number of ophthalmic conditions with
medical need for which the VEGF inhibition of Macugen may prove
beneficial. We are conducting preclinical animal tests to assess
the potential therapeutic benefit and/or drug delivery
applications of Macugen for the treatment of the following
indications:
•
"High risk" dry
    AMD,
in which the patient is at risk
    of developing wet AMD more rapidly than other dry AMD patients.
    It is possible to identify this form of dry AMD through a
    routine eye examination. We believe that these high risk
    patients may benefit from treatment with Macugen to control the
    progression of high risk dry AMD to wet AMD.
•
Proliferative diabetic
    retinopathy,
the most severe stage of
    diabetic retinopathy. The disease is characterized by
    angiogenesis and blood vessel leakage. The new vessels
    frequently bleed and damage the retina. Although laser therapy
    is effective at lowering the rate of blindness associated with
    the disease, the destruction of the retina resulting from the
    treatment leads to adverse side effects, including night
    blindness and visual field loss.
•
Uveitis,
an
    inflammatory condition of the eye that often leads to macular
    edema. The swelling is largely a function of increased blood
    vessel leakage. Steroids are effective in some cases as a
    treatment for this condition, although their use is often
    complicated by the formation of cataracts and glaucoma.
•
Cystoid macular edema
following cataract surgery, a
    condition that results from the inflammation caused by surgery.
    Steroid treatment is effective in some patients, but carries the
    risk of cataracts and glaucoma.
•
Myopic macular degeneration,
a condition in which a patient with a
    high degree of nearsightedness develops choroidal
    neovascularization. The blood vessel growth and leakage in this
    condition closely mirrors that seen in wet AMD.
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•
Inflammatory macular
    degeneration,
a condition in which a
    patient with inflammation in the macular area from infections or
    other causes develops choroidal neovascularization. The blood
    vessel growth and leakage in this condition is similar to that
    seen in wet AMD.
•
Iris
    neovascularization,
a serious
    complication of diabetic retinopathy or retinal vein occlusion
    involving new blood vessel growth on the surface of the colored
    part of the eye, or iris. This process leads to an intractable
    type of glaucoma that often leads to blindness. Animal testing
    has revealed that this process requires VEGF.
Alternate Delivery
    Technologies
We believe that technologies for the long-term
administration of drugs to the back of the eye which are more
convenient for physicians and patients than existing methods may
expand the potential markets for Macugen and other ophthalmic
therapies. We are working to develop alternative, more
convenient long-term drug delivery technologies. In particular,
we are developing a number of alternative delivery methods and
are testing them in preclinical tests. The approaches that we
are exploring include alternative drug formulations that may
permit less frequent administration of Macugen.
Other Ophthalmic Drugs
Through our research activities, we are seeking
to develop other novel drugs to treat other ophthalmic diseases,
including drugs that may enhance the efficacy of Macugen. We
have identified distinct molecular targets in addition to VEGF
that we believe are attractive sites for pharmaceutical
intervention to treat ophthalmic blood vessel disease. One of
these targets is involved in the formation of new blood vessels
through a process that is independent of the activity of VEGF. A
second target affects blood borne cells involved in the
formation of new vessels and abnormal vessel leakage. This
second target also plays a role in the development and
progression of diabetic retinopathy. In animal studies, the
second target was operative at all stages of diabetic
retinopathy and the inhibition of this target both prevented and
reversed diabetic retinopathy. Human correlative data also
support the role of this target in human diabetic retinopathy.
In April 2004, we entered into an exclusive
agreement with Archemix to collaborate on the research and
development of aptamers for ophthalmic indications. Included in
the collaboration are optimized aptamers in the existing
Archemix pipeline portfolio directed at ophthalmology targets,
as well as new aptamers discovered through the use of
Archemix's proprietary SELEX process in the research
program. Archemix also has the option to propose future aptamers
discovered outside of this collaboration for inclusion in the
program for the treatment of ophthalmic indications. Through the
collaboration, we will gain access to a major proprietary
research platform for generating future optimized lead compounds
for development in ophthalmology. We will have the
responsibility for all clinical development activities, and will
have the right to commercialize all program aptamers for
ophthalmologic indications. Archemix received an initial payment
from us and will also receive payments for achievement of
certain research and development milestones, and royalties on
net sales of all products resulting from the collaboration. We
also will provide support for efforts carried out by Archemix in
support of the collaboration.
We are directing our research at developing drugs
against these and other targets that can be used either alone or
in combination with Macugen therapy for the treatment of eye
diseases. We are also seeking opportunities to license or
develop drug candidates that address these and other targets.
Additional Non-Ophthalmic Indications for
    Macugen
VEGF appears to play a pivotal role in several
non-ophthalmic diseases, including cancer and psoriasis. We are
using our preclinical expertise to research the potential
application of Macugen to these diseases. Because these diseases
are outside of our core expertise in ophthalmology and are not
part of our collaboration with Pfizer, we expect to pursue
collaboration or outlicensing opportunities if our research
suggests that Macugen is a promising therapy.
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Cancer.
Solid tumors
and their metastases rely on new blood vessel growth for their
survival. VEGF has been extensively validated in numerous
preclinical trials as a drug target for the treatment of some
types of cancers. In addition, Genentech Inc. recently received
approval of its drug candidate Avastin
TM
, validating
VEGF as a drug target for renal cancer and colon cancer. In
light of the stability of the unPEGylated Macugen aptamer, we
believe that we may be able to formulate novel locally
administered, sustained release versions of Macugen for use in
the treatment of some types of solid tumors. We expect that
these formulations would be used at the time of cancer surgery
to provide therapy directly at the site of the disease. We
believe that these Macugen formulations might possess advantages
over intravenously administered drugs. For example, a locally
administered formulation of Macugen might be able to access some
types of brain tumors that are not accessible to anti-VEGF drugs
administered intravenously.
Psoriasis.
Psoriasis
is a chronic inflammatory skin condition that causes skin cells
to grow too quickly, resulting in thick white or red patches of
skin. It represents a significant underserved medical need.
Preclinical and clinical data suggest that VEGF-induced blood
vessel growth and blood vessel leakage play a role in the
development of this condition. We are researching novel topical
formulations of Macugen for the treatment of psoriasis. We
believe that the ability to treat psoriasis in this manner might
prove to be superior to or synergistic with medications that are
delivered intravenously.
Sales and Marketing
We have limited experience in selling products
and are in the process of establishing our sales capabilities.
While we have personnel with significant marketing experience
and have been collaborating with our partner, Pfizer, we have
limited experience as a company marketing products. We currently
have no distribution capabilities. We will rely on Pfizer for
distribution of Macugen if approved. We have recruited a Chief
Operating Officer, a Senior Vice President of Marketing and
Sales and other senior personnel with significant experience in
sales and marketing roles at large pharmaceutical companies. Our
plan is to develop our own specialized domestic sales and
marketing infrastructure to commercialize Macugen and other
ophthalmic products that we acquire or develop in the future and
to participate with Pfizer in selling Xalatan. We are recruiting
our domestic ophthalmic sales force and expect to begin
participating in detailing Xalatan three to six months prior to
our planned commercial launch of Macugen. By participating in
the detailing of Xalatan, we expect that our domestic sales
force will be able to access and form relationships with retinal
specialists and general ophthalmologists prior to commercial
launch of Macugen.
We expect to focus our sales and marketing
efforts on retinal specialists. The ophthalmic medical community
in the United States is relatively small. We estimate that there
are approximately 1,400 retinal specialists in the United States
who perform most of the medical procedures involving back of the
eye diseases. Because of the small size of our target provider
audience in the United States, we believe that we can best serve
this market through a dedicated specialty sales force of
approximately 50 sales specialists. Under our United States
co-promotion arrangement with Pfizer for Macugen, our domestic
sales force will have primary responsibility for promoting and
detailing Macugen to retinal specialists, and Pfizer will have
primary responsibility for promoting Macugen to general
ophthalmologists.
Outside the United States, we currently plan to
market and sell our products that receive regulatory approval
through established industry participants. However, we may
determine to establish our own sales and marketing organization
in key markets, including the European Union. We have granted
Pfizer exclusive commercialization rights with respect to
Macugen outside the United States.
We expect to distribute Macugen in the United
States through Pfizer's distribution system. Under this
arrangement, the manufacturers of the drug product would ship
the product to Pfizer's distribution warehouses, and Pfizer
would perform order entry, customer service and accounts
receivable collection services on our behalf on a contract
basis. It is possible that we will develop the capabilities in
the future to perform these services on our own behalf.
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Manufacturing
We currently have limited experience in, and we
do not own facilities for, manufacturing any products. Although
we intend to rely on contract manufacturers to produce our
products, we have recruited personnel with manufacturing
experience to oversee the production of Macugen and future
products that we may develop.
The manufacturing process of the active
pharmaceutical ingredient of Macugen consists of chemical
synthesis of the oligonucleotide, purification, PEGylation,
further purification and finally freeze drying to form a powder.
Each of these steps involves a relatively common chemical
engineering process. The chemical synthesis uses conventional
synthetic techniques for this type of molecule. The components
of the active pharmaceutical ingredient are generally available
from a number of suppliers. However, we rely on a single source
of supply for the PEGylation reagent.
In order to obtain marketing approval for
Macugen, we will be required to consistently produce the active
pharmaceutical ingredient used in Macugen in commercial
quantities and of specified quality on a repeated basis and
document our ability to do so. This is referred to as process
validation. We have started process validation, but have not yet
completed the process validation requirement. If we are
ultimately unable to satisfy the process validation requirement
or are significantly delayed in doing so, our business will be
materially adversely affected.
For our clinical trials of Macugen, we engaged a
third party manufacturer to manufacture the active
pharmaceutical ingredient used in Macugen. In November 2003, we
entered into an agreement with a subsidiary of Degussa AG, for
the commercial manufacture and supply of the active
pharmaceutical ingredient. Degussa has manufactured our clinical
supply. Under the terms of our agreement with Degussa, we are
obligated to purchase all of our requirements for the active
pharmaceutical ingredient from Degussa through 2005 and to
purchase minimum specified percentages of our requirements for
the active pharmaceutical ingredient thereafter. We are required
to provide Degussa with binding forecasts of our orders for each
calendar quarter at least two months prior to the commencement
of the calendar quarter. Degussa is obligated to timely satisfy
our orders up to 100% of our binding forecasts and to use its
best efforts to satisfy our orders in excess of these binding
forecasts. We have agreed to pay Degussa a minimum monthly fee
of approximately $0.6 million until the manufacturing
process is validated or our manufacturing relationship is
terminated. Following the validation of Degussa's
manufacturing process, the purchase price for the active
pharmaceutical ingredient will be calculated on a cost-based
formula that adjusts over time depending on a variety of
factors. We are also required to reimburse Degussa for royalties
payable to a third party for intellectual property related to
the manufacturing process. The initial term of the agreement is
five years. We have the right to extend the agreement, at our
option, for up to an additional six years. We have the right to
terminate the agreement if Degussa fails to supply at price
levels that are as low as those available to us from an
alternative supplier after December 31, 2005, if we abandon
our efforts to commercialize Macugen, if validation of
Degussa's manufacturing process has not occurred on or
before January 1, 2005, if Degussa is not able to meet
specified legal and regulatory requirements or if a change in
control of Degussa occurs. In addition, either party may
terminate the agreement if the other party materially breaches
the agreement and fails to cure the breach or in the event of
the bankruptcy, liquidation or insolvency of the other party.
Degussa plans to produce commercial quantities of
Macugen at a different site than the site initially used to
manufacture the active pharmaceutical ingredient for clinical
trial use. We and Degussa have completed the relevant
manufacturing technology transfer to the new site, have used the
new site to supply the active pharmaceutical ingredient of
Macugen for use in our clinical trials and plan to continue to
use this site to produce commercial quantities of the active
pharmaceutical ingredient of Macugen. We are performing
analytical tests to demonstrate the comparability of our active
pharmaceutical ingredient following the site change. If we
cannot establish that the products are equivalent to the
satisfaction of the FDA, we may be delayed in obtaining, or may
by unable to obtain, approval to launch Macugen.
For our clinical supply of Macugen, we also
engaged Gilead as a separate fill and finish manufacturer to
formulate the active pharmaceutical ingredient from a solid into
a solution and to fill the solution into
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syringes. In December 2003, we entered into an
agreement with Gilead to provide fill and finish services for
the commercial supply of Macugen. Under the terms of the
agreement, we are obligated to purchase all of our requirements
for these fill and finish services from Gilead through the first
anniversary of the commercial launch of Macugen in the United
States and to purchase minimum specified percentages of our
requirements through the third anniversary of the commercial
launch of Macugen in the United States. The purchase price for
the fill and finish services is based on fixed batch and
per-unit charges that vary depending on annual order volumes and
additional costs that depend on costs of materials procured from
third parties and Gilead's costs of providing specified
ancillary services not covered by the fixed batch and per-unit
charges. The term of the agreement runs through the third
anniversary of the commercial launch of Macugen in the United
States. We have the right to terminate the agreement if we
abandon our efforts to develop and commercialize Macugen, if
Gilead fails to achieve specified order fulfillment requirements
or is unable to manufacture in accordance with regulatory
requirements, if Gilead acquires, is acquired by or becomes an
affiliate of a company that is a manufacturer, supplier or
distributor of a product competitive with Macugen or in the
event of the bankruptcy or insolvency of, or appointment of a
receiver for, Gilead. In addition, either party may terminate
the agreement if the other party materially breaches the
agreement and fails to cure the breach or if either party is
prevented by a
force majeure
event from performing its
obligations under the agreement for more than three months.
We believe we currently have sufficient capacity
to supply the active pharmaceutical ingredient of Macugen to
meet anticipated demand for Macugen if the product is approved
based on a 0.3 mg dose for approximately 24 months
after approval. In order to produce Macugen in the quantities
that we expect to be required to meet anticipated market demand,
we and Degussa will need to increase the manufacturing capacity
for the active pharmaceutical ingredient. We initially intend to
increase manufacturing capacity for the active pharmaceutical
ingredient by duplicating a portion of our manufacturing lines
at Degussa's facility. We are also exploring alternatives
for increasing manufacturing capacity, including developing
alternative manufacturing methods for the active pharmaceutical
ingredient.
In the future, we plan to enter into commercial
supply arrangements with alternative active pharmaceutical
ingredient and fill and finish manufacturers. It is possible
that either we or Pfizer may perform these functions ourselves.
License Agreements
We are parties to two license agreements that we
believe are material to our business.
Gilead Sciences
In March 2000, we entered into an agreement with
Gilead and its wholly owned subsidiary NeXstar
Pharmaceuticals, Inc. for an exclusive worldwide license,
under the patents and know-how related to Macugen controlled by
Gilead and its affiliates, to develop, manufacture and
commercialize products containing Macugen. This license extends
to all therapeutic indications. Subject to a right of first
negotiation in favor of Gilead as to a limited set of
indications, we have the right to grant sublicenses under this
license.
In exchange for the rights licensed from Gilead,
we paid Gilead an up-front license fee of $7 million and
issued Gilead a warrant to purchase 833,333 shares of our
series B preferred stock at an exercise price of $6.00 per
share. We also agreed to make payments to Gilead aggregating up
to $25 million based on achieving specified development and
commercial launch milestones and to pay royalties to Gilead
based on net sales of Macugen by us or our affiliates or
sublicensees. Our royalty obligation extends on a
country-by-country basis until the later of ten years after
first commercial sale of Macugen or the expiration of the
last-to-expire patent licensed from Gilead in each particular
country. The United States patent rights relating to Macugen
licensed to us by Gilead expire between 2010 and 2017. The
corresponding foreign rights include patents that expire between
2011 and 2017 and patent applications which, if issued as
patents, are expected to expire between 2011 and 2019. Upon the
expiration of the last-to-expire royalty term, the agreement
expires and, at our option, our license from Gilead either
(1) survives and remains
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exclusive, in which case we would be obligated to
continue paying Gilead a reduced royalty on product sales or
(2) survives and converts to nonexclusive, in which case
would not have any further royalty obligation to Gilead.
The agreement obligates us to use commercially
reasonable efforts to develop, obtain regulatory approvals for
and commercialize Macugen. Each party has the right to terminate
the agreement if the other party materially breaches the
agreement.
The Gilead warrants, a portion of which was
previously assigned by Gilead to an unrelated entity, were
exercised in full during the quarter ended March 31, 2004
on a cashless basis, resulting in the issuance of
680,509 shares of common stock in exchange for the
surrender of 152,824 warrants to purchase 152,824 shares of
common stock.
Nektar Therapeutics
In February 2002, we entered into a license,
manufacturing and supply agreement with Nektar Therapeutics,
formerly Shearwater Corporation, relating to the PEGylation of
Macugen. Pursuant to that agreement, Nektar supplies us with the
reagent that we link to the aptamer to create the active
pharmaceutical ingredient. Under the terms of the agreement,
Nektar granted us various exclusive and nonexclusive worldwide
licenses, with the right to grant sublicenses, under patents and
know-how related to the reagent controlled by Nektar, to
develop, manufacture and commercialize Macugen.
In exchange for these rights, we paid Nektar an
up-front license fee of $1.5 million, agreed to make
payments to Nektar aggregating up to $4.5 million based on
achieving specified development milestones with respect to
Macugen and agreed to pay Nektar royalties based on net sales of
Macugen by us or our affiliates or sublicensees. We may credit a
portion of our potential future milestone payments to Nektar
against a portion of the royalty payments that we may be
required to make. We also agreed to purchase the PEGylation
reagent for Macugen exclusively from Nektar, subject to Nektar
meeting its supply obligations.
Unless we and Nektar agree to extend the term,
the agreement expires upon the expiration of the last-to-expire
patent licensed by us from Nektar. The United States patent
rights licensed to us by Nektar expire between 2013 and 2016.
The corresponding foreign rights include a patent that expires
in 2015 and patent applications which, if issued as patents, are
expected to expire between 2015 and 2020. The agreement imposes
development and commercialization diligence requirements on us.
Each party has the right to terminate the agreement if the other
party materially breaches the agreement and upon the occurrence
of specified bankruptcy or insolvency events as to the other
party.
Patents and Proprietary Rights
Our success depends in part on our ability to
obtain and maintain proprietary protection for our product
candidates, technology and know-how, to operate without
infringing on the proprietary rights of others and to prevent
others from infringing our proprietary rights. Our policy is to
seek to protect our proprietary position by, among other
methods, filing United States and foreign patent applications
related to our proprietary technology, inventions and
improvements that are important to the development of our
business. We also rely on trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to
develop and maintain our proprietary position.
We own or license a total of 27 United States
patents and 22 United States patent applications as well as
numerous foreign counterparts to many of these patents and
patent applications. Our patent portfolio includes patents and
patent applications with claims covering the composition of
matter and methods of manufacturing and use of Macugen, as well
as the composition of matter and method of manufacturing of both
modified and unmodified aptamers in general and modified and
unmodified VEGF aptamers in particular. In addition, we have
patent applications covering various aspects of ophthalmic drug
delivery.
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We license patent rights from other patent owners
from time to time, both on an exclusive basis and on a
nonexclusive basis. Examples of such patent licenses include the
patent rights that we have licensed from Gilead and Nektar and a
nonexclusive, royalty-bearing patent license that we entered
into with Isis Pharmaceuticals, Inc. in December 2001,
which grants us rights under patents owned or controlled by Isis
to make, have made, use and sell the Macugen compound worldwide.
In addition to the obligation to pay royalties to Isis, we paid
an initial license fee of $2 million and we agreed to make
payments to Isis aggregating up to $4 million based on
achieving specified regulatory milestones with respect to the
use of Macugen for the treatment of AMD and aggregating up to
$2.75 million based on achieving specified regulatory
milestones with respect to the use of Macugen for other
therapeutic indications.
United States patents generally have a term of
20 years from the date of filing. The patent rights
relating to Macugen owned and licensed to us by Gilead consist
of fifteen United States patents that expire between 2010 and
2017 and counterpart filings to these patents in a number of
other jurisdictions, including patents issued in several
jurisdictions and patent applications pending in a number of
other jurisdictions, including Europe and Japan. The patents
licensed to us by Nektar consist of ten United States patents
that expire between 2013 and 2016 and foreign counterpart
filings to these patents in a number of jurisdictions. The
patents licensed to us by Isis consist of two United States
patents that expire in 2010 and 2014 and foreign counterpart
filings to these patents in a number of jurisdictions.
The patent positions of companies like ours are
generally uncertain and involve complex legal and factual
questions. Our ability to maintain and solidify our proprietary
position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once
granted. We do not know whether any of our patent applications
or those patent applications that we license will result in the
issuance of any patents. Our issued patents and those that may
issue in the future, or those licensed to us, may be challenged,
invalidated or circumvented, which could limit our ability to
stop competitors from marketing related products or the length
of term of patent protection that we may have for our products.
In addition, the rights granted under any issued patents may not
provide us with proprietary protection or competitive advantages
against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or
duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any
of our products can be commercialized, any related patent may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantage of the patent.
We may rely, in some circumstances, on trade
secrets to protect our technology. However, trade secrets are
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors and other
contractors. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently
discovered by competitors. To the extent that our employees,
consultants or contractors use intellectual property owned by
others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions.
Competition
The development and commercialization of new
drugs and drug delivery technologies is highly competitive. We
will face competition with respect to Macugen and any products
we may develop or commercialize in the future from major
pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide.
If Macugen receives marketing approval, it will
compete against the currently approved therapies for the
treatment of wet AMD and DME described above under the captions
"— Eye Disease — Limitations of
Currently Available Therapies for Wet AMD" and
"— Eye Disease — Limitations of
Currently Available Therapies for DME." There are also a
number of companies working to develop new drugs and
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other therapies to treat wet AMD and DME. We
believe that the following product candidates are in
Phase 2 or Phase 3 clinical trials:
•
Genentech, Inc. and Novartis are
    collaborating to develop a humanized monoclonal antibody
    fragment, administered by intravitreal injection, that targets
    VEGF for the treatment of wet AMD.
•
Alcon, Inc. is developing a steroid for the
    treatment and prevention of wet AMD. This drug candidate is
    injected behind the eye using a customized injector inserted
    around the eye. Alcon has announced that it expects to report
    the results of its Phase 3 clinical trial of the steroid in
    the fourth quarter of 2004, with the filing an NDA for such use
    in the predominantly classic subtype of wet AMD in the fourth
    quarter of 2004. In addition, Alcon is enrolling patients in two
    Phase 3 clinical trials, one in South America and one in
    Europe, comparing Alcon's steroid against placebo in
    patients with all subtypes of wet AMD.
•
Allergan, Inc., which recently acquired
    Oculex Pharmaceuticals, is developing a bioerodable steroid
    implant for the treatment of persistent macular edema.
•
Eli Lilly & Co. is developing an orally
    administered inhibitor of an enzyme named PKC beta for the
    treatment of diabetic retinopathy.
•
Bausch & Lomb Incorporated and Control
    Delivery Systems, Inc. are developing a surgically placed
    non-erodable intraocular implant for the delivery of steroids to
    treat DME and swelling resulting from other causes.
•
Regeneron Pharmaceuticals, Inc. and
    Aventis S.A. are collaborating to develop a receptor fusion
    protein that contains portions of the extracellular domains of
    two different VEGF receptors and announced the start of a
    Phase 1 clinical trial in AMD in March 2004.
•
Miravant Medical Technologies is developing a
    photodynamic therapy that is similar to Visudyne for the
    treatment of wet AMD.
•
Genaera Corporation is developing a small
    molecule derived from the Dogfish shark and has announced plans
    to initiate Phase 2 clinical trials in the second quarter
    of 2004 and a Phase 3 trial beginning in early 2005 for the
    treatment of wet AMD.
In addition, there are a number of other
companies that are developing anti-VEGF technologies. Some of
these companies may seek to apply their technologies to AMD, DME
and other ophthalmic indications.
The key competitive factors affecting the success
of Macugen are likely to be its efficacy, safety profile, price
and method of administration. The efficacy and safety profile of
Macugen will depend upon the results of our clinical trials of
this product and experience with the product in the commercial
marketplace. Based on the results of our clinical trials to
date, we believe that Macugen will have an acceptable side
effect profile. We have not yet determined the price for Macugen
and do not expect to do so before commercial launch. The method
of administration of Macugen, intravitreal injection, is
commonly used to administer ophthalmic drugs and generally
accepted by patients facing the prospect of blindness and other
serious back of the eye complications such as DME. However, a
therapy that offers a less invasive method of administration may
have a competitive advantage over one administered by
intravitreal injection. Moreover, future competitive products
may have superior efficacy, improved safety and convenience or
reduced frequency of administration compared to Macugen.
The licensing and acquisition of pharmaceutical
products, which is part of our strategy, is a highly competitive
area. A number of more established companies also are pursuing
strategies to license or acquire products. These established
companies may have a competitive advantage over us due to their
size, cash flow and institutional experience.
Government Regulation
Government authorities in the United States, at
the federal, state and local level, and other countries
extensively regulate, among other things, the research,
development, testing, manufacture, labeling,
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promotion, advertising, distribution, marketing
and export and import of pharmaceutical products such as those
we are developing.
United States Government
    Regulation
In the United States, the FDA regulates drugs and
biologics under the Federal Food, Drug, and Cosmetic Act, and,
in the case of biologics, also under the Public Health Service
Act, and implementing regulations. If we fail to comply with the
applicable United States requirements at any time during the
product development process, approval process or after approval,
we may become subject to administrative or judicial sanctions.
These sanctions could include the FDA's refusal to approve
pending applications, license suspension or revocation,
withdrawal of an approval, a clinical hold, warning letters,
product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil
penalties or criminal prosecution. Any agency enforcement action
could have a material adverse effect on us.
The steps required before a drug or biologic may
be marketed in the United States include:
•
preclinical laboratory tests, animal studies and
    formulation studies under FDA's good laboratory practices
    regulations;
•
submission to the FDA of an Investigational New
    Drug application, or IND, for human clinical testing, which must
    become effective before human clinical trials may begin;
•
adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
•
submission to the FDA of a New Drug Application,
    or NDA, or Biologics License Application, or BLA;
•
satisfactory completion of an FDA inspection of
    the manufacturing facility or facilities at which the product is
    produced to assess compliance with current good manufacturing
    practice, or cGMP; and
•
FDA review and approval of the NDA or BLA.
Preclinical tests include laboratory evaluations
of product chemistry, toxicity, and formulation, as well as
animal studies. An IND sponsor must submit the results of the
preclinical tests, together with manufacturing information and
analytical data, to the FDA as part of the IND. The IND must
become effective before human clinical trials may begin. An IND
will automatically become effective 30 days after receipt
by the FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as
outlined in the IND. In that case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND may not result
in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the
investigational product to human subjects under the supervision
of qualified investigators. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the
study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND.
Clinical trials typically are conducted in three
sequential phases, but the phases may overlap or be combined.
Each trial must be reviewed and approved by an independent
Institutional Review Board before it can begin. Phase 1
trials usually involve the initial introduction of the
investigational drug into humans to evaluate the product's
safety, dosage tolerance and pharmacodynamics and, if possible,
to gain an early indication of its effectiveness.
Phase 2 trials usually involve controlled
trials in a limited patient population to:
•
evaluate dosage tolerance and appropriate dosage;
•
identify possible adverse effects and safety
    risks; and
•
evaluate preliminarily the efficacy of the drug
    for specific indications.
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Phase 3 trials usually further evaluate
clinical efficacy and test further for safety in an expanded
patient population. Phase 1, Phase 2 and Phase 3
testing may not be completed successfully within any specified
period, if at all. Furthermore, the FDA or we may suspend or
terminate clinical trials at any time on various grounds,
including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
Assuming successful completion of the required
clinical testing, the results of the preclinical studies and of
the clinical studies, together with other detailed information,
including information on the manufacture and composition of the
product, are submitted to the FDA in the form of an NDA or BLA
requesting approval to market the product for one or more
indications. The FDA reviews an NDA to determine, among other
things, whether a product is safe and effective for its intended
use. The FDA reviews a BLA to determine, among other things,
whether the product is safe, pure and potent and the facility in
which it is manufactured, processed, packed or held meets
standards designed to assure the product's continued
safety, purity and potency.
As part of the drug approval process, we must
conduct a comprehensive assessment of the carcinogenic potential
of our product candidates. This often requires the completion of
several
in vitro
tests and tests in laboratory
animals designed to detect compounds that may induce cancer
directly or indirectly by various mechanisms. Based on our
testing of Macugen to date and our review of the carcinogenic
potential of Macugen with an independent advisory board engaged
by us, we believe that Macugen poses a low carcinogenicity risk.
In particular, in a test of Macugen and its metabolites in the
Syrian Hamster Embryo Assay, which we performed at the request
of the FDA, the results were negative for carcinogenic
potential. In one test for carcinogenicity risk, two potential
Macugen metabolites showed, in one out of five bacterial strains
tested, a small increase in the number of altered bacteria, a
potential indicator of carcinogenicity risk. However, because
this elevated proportion of altered bacteria did not increase
further as we increased the dose of the metabolites, we do not
believe the results from these tests indicate carcinogenicity
potential. Furthermore, no other test, including animal studies,
of Macugen and its metabolites showed carcinogenic potential. We
have requested that the FDA grant us a waiver from the
requirement to perform full animal carcinogenicity studies for
the treatment of wet AMD based primarily on the unmet medical
need presented by wet AMD, low overall systemic exposure to
Macugen and the fact that this disease generally affects older
populations. However, the FDA may require us to conduct
additional carcinogenicity testing of Macugen. Based on our
discussions with the FDA to date, if we are required to conduct
further carcinogenicity testing of Macugen in connection with
its use in the treatment of wet AMD, we believe that the FDA
will allow us to conduct any such testing as a post-NDA approval
study. However, we will not be certain of this until the NDA
review process of Macugen for the treatment of wet AMD is
completed. Because patients with DME tend to be younger than
those with wet AMD, it is likely that the FDA will require us to
complete satisfactory carcinogenicity testing of Macugen prior
to any approval of its use in the treatment of DME.
Before approving an application, the FDA will
inspect the facility or the facilities at which the product is
manufactured. The FDA will not approve the product unless cGMP
compliance is satisfactory. The FDA will issue an approval
letter if it determines that the application, manufacturing
process and manufacturing facilities are acceptable. If the FDA
determines the application, manufacturing process or
manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria
for approval.
The testing and approval process requires
substantial time, effort and financial resources, and each may
take several years to complete. The FDA may not grant approval
on a timely basis, or at all. We may encounter difficulties or
unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from
marketing our products. The FDA may limit the indications for
use or place other conditions on any approvals that could
restrict the commercial application of the products. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
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After regulatory approval of a product is
obtained, we are required to comply with a number of
post-approval requirements. For example, as a condition of
approval of an application, the FDA may require post marketing
testing and surveillance to monitor the product's safety or
efficacy.
In addition, holders of an approved NDA or BLA
are required to report certain adverse reactions and production
problems to the FDA, to provide updated safety and efficacy
information and to comply with requirements concerning
advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to
conform to cGMP after approval. The FDA periodically inspects
manufacturing facilities to assess compliance with cGMP, which
imposes certain procedural and documentation requirements.
Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to
maintain compliance with cGMP and other aspects of regulatory
compliance.
We use, and will continue to use in at least the
near term, third party manufacturers to produce our products in
clinical and commercial quantities. Future FDA inspections may
identify compliance issues at our facilities or at the
facilities of our contract manufacturers that may disrupt
production or distribution, or require substantial resources to
correct. In addition, discovery of problems with a product or
the failure to comply with requirements may result in
restrictions on a product, manufacturer or holder of an approved
NDA or BLA, including withdrawal or recall of the product from
the market or other voluntary or FDA-initiated action that could
delay further marketing. Also, new government requirements may
be established that could delay or prevent regulatory approval
of our products under development.
Foreign Regulation
In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing
clinical trials and commercial sales and distribution of our
products, including Macugen. Whether or not we obtain FDA
approval for a product, we must obtain approval of a product by
the comparable regulatory authorities of foreign countries
before we can commence clinical trials or marketing of the
product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.
Under European Union regulatory systems, we may
submit marketing authorizations either under a centralized or
decentralized procedure. The centralized procedure provides for
the grant of a single marketing authorization that is valid for
all European Union member states. The decentralized procedure
provides for mutual recognition of national approval decisions.
Under this procedure, the holder of a national marketing
authorization may submit an application to the remaining member
states. Within 90 days of receiving the applications and
assessment report, each member state must decide whether to
recognize approval.
Third Party Reimbursement and Pricing
Controls
General
In the United States and elsewhere, sales of
therapeutic and other pharmaceutical products depend in
significant part on the availability of reimbursement to the
consumer from third party payors, such as government and private
insurance plans. Third party payors are increasingly challenging
the prices charged for medical products and services. It will be
time consuming and expensive for us to go through the process of
seeking reimbursement from Medicare and private payors. Our
products may not be considered cost-effective, and reimbursement
may not be available or sufficient to allow us to sell our
products on a competitive and profitable basis.
In many non-U.S. markets, including Canada
and the countries in the European Union, pricing of
pharmaceutical products is subject to governmental control. In
the United States, there have been, and we expect that there
will continue to be, a number of federal and state proposals to
implement similar governmental pricing control. While we cannot
predict whether such legislative or regulatory proposals will
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be adopted, the adoption of such proposals could
have a material adverse effect on our business, financial
condition and profitability.
Medicare
Subject to obtaining required marketing
approvals, we plan to market Macugen to physicians for use in
the treatment of conditions such as wet AMD and DME. We expect
that in the United States a majority of the patients who are
treated with Macugen for these indications will be Medicare
beneficiaries. The Centers for Medicare & Medicaid
Services, or CMS, is the agency within the Department of Health
and Human Services that administers Medicare and will be
responsible for reimbursement of the cost of Macugen when
administered to Medicare beneficiaries and for the cost of
physician services for administering the drug.
In general, Medicare makes separate payment to
the physician or other purchaser for drugs, such as Macugen,
that meet statutorily covered requirements, are not usually
self-administered and are furnished by physicians in the office
or in other outpatient settings. Prior to 2004, Medicare paid
for part of the cost of these physician-administered drugs at
the lower of the amount the physician charges for the drug or
95% of the drug's national "average wholesale
price" as published by certain data sources. Patients, or
their secondary insurer, are responsible for a coinsurance
amount. Specifically, for physician-administered drugs, Medicare
paid 80% of 95% of the average wholesale price, while patients,
or their secondary insurer, are responsible for the remaining
20%. As described below, these payment amounts will change under
the recently enacted Medicare prescription drug coverage
legislation.
If Macugen is approved for marketing by the FDA,
it will be covered by Medicare when administered in the
physician office unless CMS or a local Medicare contractor
decides not to cover it. CMS has asserted the authority of
Medicare not to cover particular drugs if it determines that
they are not "reasonable and necessary" for Medicare
beneficiaries. CMS may create a national coverage determination
for a product, which establishes on a nationwide basis the
indications that will be covered and the frequency limits for
administration of the product. However, for most new drugs that
are eligible for payment, CMS does not create a national
coverage determination and we do not know whether or not we will
obtain a national coverage determination for Macugen or our
other potential products. In these cases, the local Medicare
contractors who are responsible for administering the program on
a state by state basis have the discretion to issue local
coverage decisions. These policies can include both coverage
criteria for the drug and frequency limits for the
administration of the drug. The local contractors in different
areas of the country may establish varying coverage criteria and
frequency limits for Macugen.
In addition to payment for the drug itself, CMS
also reimburses physicians for administering the product to
Medicare beneficiaries. Medicare payment for physician services
is determined according to a prospectively set payment rate,
determined by a procedure code established by the American
Medical Association. These codes, called Current Procedural
Terminology, or CPT, codes, describe the procedure performed,
but generally are not drug specific. We believe that there is an
existing CPT code to describe the procedure for administering
Macugen and that most physicians will find this code to be
adequate to cover the cost of administration. However, if it is
determined that the existing CPT code and associated payment
amount are not applicable to Macugen, it may affect the
willingness of physicians to perform the procedure.
In December 2003, President Bush signed into law
new Medicare prescription drug coverage legislation that
includes provisions that will change Medicare payment for
physician-administered drugs effective in January 2004.
Effective January 1, 2004, the legislation reduces the
percentage of the average wholesale price reimbursed by Medicare
from 95% to 85% and grants the Secretary of Health and Human
Services the authority to further reduce the rate to 80%. New
drugs coming on the market will be allowed to retain the 95%
rate through the end of 2004. Effective January 2005,
reimbursement will be limited to a statutorily defined
manufacturer's average sale price plus 6%. The definition
of manufacturer's average sale price is intended to lead to
lower levels of reimbursement to physicians than currently
provided under the average wholesale price method. In addition,
starting in January 2006, this legislation directs the Secretary
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to contract with procurement organizations to
purchase physician-administered drugs from the manufacturers and
provides physicians with the option to obtain drugs through
these organizations as an alternative to purchasing from the
manufacturers, which some physicians may find advantageous.
These changes may reduce our potential revenues
as a result of two principal factors. First, because physicians
will likely receive lower levels of reimbursement under the
manufacturer's average sale price methodology than under
the current average wholesale price methodology, physicians may
be less likely to purchase Macugen directly and more likely to
obtain the product through procurement organizations. Second,
the negotiated payment that we receive from procurement
organizations may be less than the amount that we could
otherwise have obtained from sales to physicians. Because we
have not received marketing approval for Macugen or established
a price for the product, it is difficult to predict the effect
on us of this new legislation and the other changes to Medicare
proposed by CMS. However, this new legislation and other changes
could adversely affect our potential future revenues and results
of operations, possibly materially.
Commercial Insurers' Payment for
    Physician-Administered Drugs
Commercial insurers usually offer two types of
benefits — medical benefits and pharmacy benefits. In
most private insurance plans, physician-administered injectable
drugs, such as Macugen, are provided under the medical benefit.
If private insurers decide to cover Macugen, they will reimburse
for the drug in a variety of ways depending on the particular
insurance plan and the contract that the plan has negotiated
with physicians. Like Medicare, commercial insurers have the
authority to place coverage and utilization limits on
physician-administered drugs. In response to the recent
prescription drug coverage legislation that could result in
reduced Medicare payment for physician-administered drugs,
private insurers may adopt similar reduced payment amounts.
Employees
We believe that our success will depend greatly
on our ability to identify, attract and retain capable
employees. As of March 31, 2004, we had 161 full time
employees, including a total of 31 employees who hold M.D. or
Ph.D. degrees. Our employees are not represented by any
collective bargaining unit, and we believe our relations with
our employees are good.
Recruiting and retaining qualified scientific
personnel to perform research and development work in the future
will also be critical to our success. We face the risk that we
may not be able to attract and retain personnel on acceptable
terms given the competition among biotechnology, pharmaceutical
and health care companies, universities and non profit research
institutions. In addition we rely on member of our Scientific
Advisory Board and a significant number of consultants to assist
us in formulating our research and development strategies.
Trademarks
Eyetech
TM
, Eyetech
Pharmaceuticals
TM
and Macugen
TM
are our
trademarks. All are covered by pending applications for
registration in the United States Patent and Trademark Office.
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Facilities
As of March 31, 2004, we leased a total of
approximately 114,300 square feet of office and laboratory
space. Our leased properties are described below.
Approximate
Lease
Property Location
Square Feet
Use
Expiration Date
3 Times Square,
New York, New York
62,000
New Corporate, Clinical, Safety and Regulatory
November 2021
500 Seventh Avenue,
New York, New York
16,700
Old Corporate, Clinical, Safety and Regulatory
December 2010
Woburn, Massachusetts
10,600
Laboratory
July 2007
Cedar Knolls, New Jersey
25,000
Laboratory
April 2008
In January 2004, we entered into a lease for our
new corporate headquarters in New York City, located at
3 Times Square. We are currently seeking to sublet our old
corporate headquarters.
Legal Proceedings
We are currently not a party to any material
legal proceedings.
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MANAGEMENT
Our executive officers, directors and other
significant employees and their respective ages are as follows:
Name
Age
Position
Executive Officers and
    Directors
John P. McLaughlin(1)(3)
52
Chairman of the Board of Directors
David R. Guyer, M.D.
44
Chief Executive Officer and Director
Paul G. Chaney
45
Chief Operating Officer
Glenn P. Sblendorio
48
Chief Financial Officer and Senior Vice
    President, Finance
Anthony P. Adamis, M.D.
45
Chief Scientific Officer and Senior Vice
    President, Research
Douglas H. Altschuler
48
Senior Vice President, Legal, General Counsel and
    Secretary
Srinivas Akkaraju, M.D., Ph.D.(1)
35
Director
Marty Glick(2)
54
Director
Michael G. Mullen(2)
45
Director
Samir Patel, M.D.
44
Director
Edward Penhoet, Ph.D.(1)
63
Director
Henry Simon(2)(3)
73
Director
Damion E. Wicker, M.D.(3)
43
Director
Other Significant Employees
Denis O'Shaughnessy, Ph.D.
54
Senior Vice President, Clinical Development
Arda Ural
37
Senior Vice President, Marketing and Sales
(1)
Member of the Compensation Committee
(2)
Member of the Audit Committee
(3)
Member of the Governance and Nominations Committee
John P. McLaughlin
is a co-founder of our company and has
been our Chairman of the Board and a director since February
2000. Mr. McLaughlin has served as President and Chief
Executive Officer of Corgentech, Inc., a publicly-traded
biopharmaceutical company, since January 2000. From December
1997 to September 1999, Mr. McLaughlin was president of
Tularik, Inc., a biopharmaceutical company. From September
1987 to December 1997, Mr. McLaughlin held a number of
senior management positions at Genentech, Inc., a
biopharmaceutical company, including Executive Vice President,
with responsibility for many commercial functions.
Mr. McLaughlin served as a counsel to the United States
House of Representatives committee responsible for drafting
several of the FDA laws, including those governing orphan drugs,
generic drug approvals, patent term extensions and export of
unapproved drugs from the United States, and previously
practiced law in Washington, D.C. Mr. McLaughlin
received his J.D. from Catholic University and B.A. from the
University of Notre Dame.
David R.
Guyer, M.D.
is a co-founder of
our company and has been our Chief Executive Officer and a
director since February 2000. Dr. Guyer is also currently a
voluntary Clinical Professor of Ophthalmology at the
New York University School of Medicine. From June 2000 to
October 2002, he was also Professor and Chairman of the
Department of Ophthalmology at the New York University
School of Medicine. Dr. Guyer was Clinical Associate
Professor of Ophthalmology at Cornell University Medical Center
from July 1995 until June 2000, during which time he also served
as Director of Residency Training at Manhattan Eye,
Ear & Throat Hospital and was in private practice.
Dr. Guyer has also served as the chief medical editor of
Ophthalmology Times from July 1996 to the present. From 1992 to
2000, Dr. Guyer was the Study Co-chairman of the
Pharmacological Therapy for Macular Degeneration Study Group, a
45-center worldwide group of retinal specialists studying drug
therapy for AMD. Dr. Guyer received his M.D. from The Johns
Hopkins University School of Medicine and his
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undergraduate degree from Yale College. He was an
ophthalmology resident at The Wilmer Eye Institute, The Johns
Hopkins University School of Medicine and completed his
fellowship training in retinal surgery at the Massachusetts Eye
and Ear Infirmary, a teaching affiliate of Harvard Medical
School, where he was a Heed-Knapp Fellow. Dr. Guyer is the
author of more than 100 scientific articles concerning
ophthalmic diseases.
Paul G. Chaney
has
been our Chief Operating Officer since August 2003.
Mr. Chaney has more than 20 years of experience in the
pharmaceutical industry, including from 1996 to August 2003,
serving in various senior management positions at Pharmacia
Corporation, a pharmaceutical company acquired by Pfizer in
April 2003, where he was responsible for the launch of several
products, including Tecnis®, Xalatan and Xalcom®. More
specifically, from July 2002 to August 2003, Mr. Chaney
served as Vice President, Global Commercial Operations,
Ophthalmology Franchise; from May 2001 to June 2002, he served
as Vice President, Global Ophthalmology Business; from February
2000 to April 2001, he served as Vice President, Global
Pharmaceutical Ophthalmology; from February 1998 to February
2000, he served as Business Director, Ophthalmology, North
America; and from February 1996 to February 1998, he served as
Director, U.S. Ophthalmology Business. Mr. Chaney
received a double B.A. with honors in English and Biological
Sciences from the University of Delaware.
Glenn P. Sblendorio
has been our Chief Financial Officer
and Senior Vice President, Finance since February 2002. From
July 2000 to February 2002, Mr. Sblendorio served as Senior
Vice President of Business Development for The Medicines
Company, a specialty pharmaceutical company. From 1998 to July
2000, Mr. Sblendorio was the Chief Executive Officer, Chief
Financial Officer and Managing Director of MPM Capital Advisors,
LLC, an investment bank specializing in healthcare related
transactions. Mr. Sblendorio's pharmaceutical
experience also includes 12 years at
Hoffmann-La Roche, Inc., a pharmaceutical company, in
a variety of senior financial positions, including Chief
Financial Officer of Roche Molecular Systems and Head of
Finance-Controller for Amgen/ Roche Europe. Mr. Sblendorio
received his B.A. in Accounting from Pace University and his
M.B.A. in Finance from Fairleigh Dickinson University.
Anthony P.
Adamis, M.D.
is a scientific
pioneer of our company and has been our Chief Scientific Officer
and Senior Vice President, Research since July 2002.
Dr. Adamis has served as a member of our Scientific
Advisory Board since February 2002 and was our Director of
Preclinical Research from February 2000 to June 2002. From
January 1998 to June 2002, Dr. Adamis was an Associate
Professor of Ophthalmology at Harvard Medical School. From 1992
to June 2002, Dr. Adamis served as Director of Residency
Training in Ophthalmology at the Massachusetts Eye and Ear
Infirmary, a teaching affiliate of Harvard Medical School. From
2000 to 2002, he also served as a principal investigator and
co-director of the Retina Research Institute for Diabetic
Retinopathy and Macular Degeneration at the Massachusetts Eye
and Ear Infirmary. From January 2001 to December 2001,
Dr. Adamis also served as President of the Medical Staff
and from January 2001 to December 2001 was a member of the board
of directors of the Massachusetts Eye and Ear Infirmary.
Dr. Adamis is a specialist in ocular vascular disease and
ocular drug delivery. He co-discovered the role that VEGF plays
in new blood vessel growth and blood vessel leakage related to
various diseases of the eye. Dr. Adamis received his M.D.
with Honors from the University of Chicago Pritzker School of
Medicine and his undergraduate degree from the University of
Illinois, Urbana. Dr. Adamis completed his ophthalmology
residency training at the University of Michigan.
Dr. Adamis is the author of more than 100 scientific
articles concerning ophthalmic diseases.
Douglas H. Altschuler
has been our Senior Vice President,
Legal, General Counsel and Secretary since May 2003. From
September 2001 to May 2003, Mr. Altschuler was the General
Counsel of Nektar Therapeutics, a provider of drug delivery
technology. From December 2000 through November 2001, he was the
General Counsel of AXYS Pharmaceuticals, a company that
researched and developed new therapeutics. AXYS Pharmaceuticals
merged with Celera Genomics in November 2001. From 1996 to
October 2000, Mr. Altschuler was the Vice President/General
Counsel and Compliance Officer of Mentor Corporation, a medical
device company. Mr. Altschuler received his J.D. from the
University of Arizona School of Law and a B.S. in chemistry and
biology from the University of Arizona.
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Srinivas
Akkaraju, M.D., Ph.D.
has
been a director since July 2001. Since April 2001,
Dr. Akkaraju has been a principal of the Life Sciences team
in the Healthcare Group at JPMorgan Partners, LLC, formerly
Chase Capital Partners, a global private equity company
affiliated with J.P. Morgan Chase & Co. From
October 1998 to April 2001, he was in the Business and Corporate
Development group at Genentech, Inc., most recently as
senior manager, where he was responsible for worldwide
partnering activities including technology access deals,
in-licensing of early and late-stage therapeutics, and
out-licensing of Genentech development projects. In addition to
his business development role, he also served for the last year
as project team leader for one of Genentech's clinical
development products. During this time, Dr. Akkaraju was
also a founding member of BioStreet, an online marketplace for
biotech opportunities. Prior to joining Genentech in 1998,
Dr. Akkaraju was a graduate student at Stanford University.
Dr. Akkaraju is a director of Seattle Genetics, Inc.,
a biotechnology company. Dr. Akkaraju received his
undergraduate degrees in Biochemistry and Computer Science from
Rice University and his M.D. and Ph.D. in Immunology from
Stanford University.
Marty Glick
is a
co-founder of our company and has been a director since February
2000. Mr. Glick has served as Executive Vice President and
Chief Financial Officer of Theravance Inc., a biopharmaceutical
company, since July 1998. From 1988 to October 1997,
Mr. Glick held various positions at Genentech, Inc.,
including serving as Vice President of Finance from 1995 to
October 1997. Mr. Glick is the chair of the Biotechnology
Industry Organization's Tax and Finance Committee.
Mr. Glick received his M.B.A. in Finance from the Kellogg
School of Management at Northwestern University. Mr. Glick
is also a Certified Public Accountant and a Chartered Accountant
(Canada).
Michael G. Mullen, CFA
has been a director since October
2002. Since 1999, Mr. Mullen has been a member of the
Bellevue Group of Switzerland, which focuses on investing in
public and private biotechnology companies in the United States
and Europe. He currently serves as President of Bellevue
Research, Inc., the United States research arm of the
Bellevue Group. From 1990 to September 1999, Mr. Mullen
held various positions at SG Cowen Securities, formerly
Cowen & Co, including partner, managing director and
senior research analyst in medical technology. Mr. Mullen
is also a member of the Board of Directors of Theravance Inc.
Mr. Mullen received his M.B.A. in Finance from the Kelley
School of Business at Indiana University, Bloomington. He is
also a Chartered Financial Analyst and a member of the
Association for Investment Management and Research.
Samir
Patel, M.D.
is a co-founder of
our company and has been a director since February 2000 and a
consultant since November 2001. From 1992 to December 2003,
Dr. Patel served as the Director of the Retina Service at
the University of Chicago, where he is an Associate Professor.
His main area of research at the University of Chicago was
focused on age-related macular degeneration. Dr. Patel
served as the Residency Program Director at the University of
Chicago from 1992 until July 2000. Dr. Patel received his
M.D. from the University of Massachusetts Medical School and was
an ophthalmology resident at the University of Chicago.
Dr. Patel completed his fellowship training in retinal
surgery at the Massachusetts Eye and Ear Infirmary, a teaching
affiliate of Harvard Medical School.
Edward
Penhoet, Ph.D.
has been a
director since July 2001. Dr. Penhoet is the Chief Program
Officer for Science and Higher Education Programs at the Gordon
and Betty Moore Foundation and is a Professor of Health Policy
and Management at the School of Public Health at the University
of California, Berkeley. Dr. Penhoet was the Dean of the
School of Public Health and Professor of Public Health and of
Molecular and Cell Biology at University of California, Berkeley
from 1999 until June 2002. Since 1981, Dr. Penhoet has also
served as a director of Chiron Corporation, a biotechnology
company. Dr. Penhoet served as Chiron's President and
Chief Executive Officer from the time he co-founded the company
in 1981 until April 1998. From March 1997 to December 1998,
Dr. Penhoet was a chairperson of the California Healthcare
Institute. He is a member of the Boards of Directors of the Bay
Area Council, the Oakland Museum Foundation, the UC System
Biotech Advisory Committee, Kaiser Permanente, and the Advisory
board for the Lester Center for Entrepreneurship and Innovation
at UC Berkeley. He is also a director of Alta Partners, a
venture capital firm, and a member of the boards of
ZymoGenetics, Inc., a biopharmaceutical company, and Chiron
Corporation.
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Henry Simon
has been
a director since July 2001. Since 1987, Mr. Simon has held
various positions with Schroder Ventures in London, a global
private equity group, serving as the Chief Executive Officer of
the life sciences team until 1997, its Chairman from April 1997
to December 2001 and a Special Partner since January 2002.
Mr. Simon has been Chairman of Leica Microsystems AG since
1998, Chairman of Zarlink Semiconductors since 1994 and a
director of Gyros AB since September 2002. From 1988 to 1997, he
was the Chairman of Shire Pharmaceuticals and from 1993 to 1996
also served as the Chairman of Chiroscience. Prior to joining
Schroder Ventures, Mr. Simon was President of Technicon
Corporation, a diagnostics manufacturer, and prior to that Group
Executive and Vice President of ITT Europe. Mr. Simon
started his career at Bell Laboratories in 1959 after graduating
from the Institute of Technology in Munich, Germany and the
Royal Institute of Technology in Stockholm, Sweden.
Damion E.
Wicker, M.D.
has been a director
since July 2001. Dr. Wicker is currently co-head of Life
Sciences and Healthcare Infrastructure of JPMorgan Partners,
LLC. Since December 1996, Dr. Wicker has been a partner
with JPMorgan Partners. Prior to joining JPMorgan Partners in
1993, Dr. Wicker was President of Adams Scientific, a
medical diagnostics company, and held various positions with MBW
Venture Partners, a venture capital firm. Dr. Wicker was
also a Commonwealth Fund Medical Fellow for the National
Institute of Health. He is currently a member of the NVCA Life
Science Group Board and the Board of Trustees of the
New York Academy of Medicine. Dr. Wicker is also a
Director of several privately held companies. Dr. Wicker
received a B.S. with honors from M.I.T., an M.D. from The Johns
Hopkins University School of Medicine, and an M.B.A. from The
Wharton School of the University of Pennsylvania.
Denis
O'Shaughnessy, Ph.D.
has
been our Senior Vice President, Clinical Development since
August 2000. From November 1990 to July 2000,
Dr. O'Shaughnessy held various clinical research and
management roles with Hoffmann-La Roche Inc., including
Senior Manager responsible for overseeing global clinical
research programs. Dr. O'Shaughnessy received his
Ph.D. from Royal Post-Graduate Medical School in the United
Kingdom and his undergraduate degree from London University.
Arda Ural
has been
our Senior Vice President, Marketing and Sales since September
2002. From 1992 to August 2002, Mr. Ural held various
positions at Pfizer Inc. in which he had marketing, sales and
business development responsibilities in several therapeutic
areas. More specifically, from January 2002 until September
2002, Mr. Ural was a Director/ Team Leader for
Pfizer's Celebrex® U.S. Team, from August 2000
until December 2001, Mr. Ural was a Director/ Team Leader
for Pfizer's Cardura/ XL Worldwide Team and from September
1998 until August 2000, Mr. Ural was a Marketing Director
for Pfizer's Viagra® U.S. team. Mr. Ural
received B.Sc. and M.Sc. degrees in mechanical engineering from
Bosporus University in Istanbul, Turkey. He has also received an
M.B.A. from Marmara University in Istanbul.
Board Committees
The Board has established three standing
committees — Audit, Compensation, and Governance and
Nominations — each of which operates under a charter
that has been approved by the Board.
The Board has determined that all of the members
of each of the Board's three standing committees are
independent as defined under the new rules of the Nasdaq Stock
Market applicable to us, including, in the case of all members
of the Audit Committee, the independence requirements
contemplated by Rule 10A-3 under the Securities and
Exchange Act of 1934 (the "Exchange Act").
Audit Committee
The Audit Committee's responsibilities
include:
•
appointing, approving the compensation of, and
    assessing the independence of our independent auditor;
•
overseeing the work of our independent auditor,
    including through the receipt and consideration of certain
    reports from our independent auditors;
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•
reviewing and discussing with management and the
    independent auditors our annual and quarterly financial
    statements and related disclosures;
•
monitoring our internal control over financial
    reporting, disclosure controls and procedures and code of
    business conduct and ethics;
•
overseeing our internal audit function;
•
discussing our risk management policies;
•
establishing policies regarding hiring employees
    from the independent auditor and procedures for the receipt and
    retention of accounting related complaints and concerns;
•
meeting independently with our internal
    accounting staff, independent auditors and management; and
•
preparing the audit committee report required by
    SEC rules.
The members of the Audit Committee are
Mr. Simon, the chairman of the committee, and
Messrs. Glick and Mullen.
Compensation Committee
The Compensation Committee's
responsibilities include:
•
annually reviewing and approving corporate goals
    and objectives relevant to CEO compensation;
•
determining the CEO's compensation;
•
reviewing and approving, or making
    recommendations to the Board with respect to, the compensation
    of our other executive officers;
•
overseeing an evaluation of our senior executives;
•
overseeing and administering our cash and equity
    incentive plans; and
•
reviewing and making recommendations to the Board
    with respect to director compensation.
The members of the Compensation Committee are
Dr. Penhoet, the chairman of the committee, and
Dr. Akkaraju and Mr. McLaughlin.
Governance and Nominations
    Committee
The Governance and Nominations Committee's
responsibilities include:
•
identifying individuals qualified to become Board
    members;
•
recommending to the Board the persons to be
    nominated for election as directors and to each of the
    Board's committees;
•
reviewing and making recommendations to the Board
    with respect to management succession planning;
•
developing and recommending to the Board
    corporate governance principles; and
•
overseeing evaluation of the Board.
The members of the Governance and Nominations
Committee are Dr. Wicker, the chairman of the committee,
and Mr. Simon and Mr. McLaughlin.
Compensation Committee Interlocks and Insider
Participation
None of our executive officers serves as a member
of the board of directors or compensation committee, or other
committee serving an equivalent function, or of any other entity
that has one or more
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of its executive officers serving as a member of
our board of directors or compensation committee. None of the
members of our compensation committee has ever been our employee.
Election of Directors
Our board of directors is divided into three
classes, each of whose members serve for staggered three year
terms. Drs. Patel, Penhoet and Wicker serve in the class of
directors whose terms expire at our 2005 annual meeting;
Mr. Glick, Dr. Guyer and Mr. Simon serve in the
class of directors whose terms expire at our 2006 annual
meeting; and Mr. McLaughlin, Dr. Akkaraju and
Mr. Mullen were re-elected at our 2004 annual meeting to
serve for another three year term that will expire at the 2007
annual meeting. Upon expiration of the term of a class of
directors, directors in that class will be eligible to be
elected for a new three-year term at the annual meeting of
stockholders in the year in which their term expires.
Director Compensation
We reimburse each member of our Board for
reasonable travel and other expenses in connection with
attending meetings of the Board. Dr. Guyer, our Chief
Executive Officer, does not receive any separate compensation
for his Board activities.
In 2002, we granted to each of our board members
other than Dr. Guyer options to purchase 30,000 shares
of our common stock at an exercise price of $1.44 per
share. These options are immediately exercisable. However, the
shares purchasable upon exercise of these options are subject to
our right of repurchase that, subject to the director's
continued service on our board, lapses monthly over the
four-year period from the date of grant.
In September 2003, our Board approved a program
under our 2003 stock incentive plan in which each non-employee
director is eligible to receive an option to purchase
30,000 shares of our common stock upon his or her
appointment to our Board. One-quarter of these options will vest
on the first anniversary of the grant date and then in 36 equal
monthly installments, subject to the recipient's continued
service as a director. Each non-employee director is also
eligible to receive an annual grant of an option to purchase
7,500 shares of our common stock at each year's annual
meeting after which he or she will continue to serve as a
director. These options will vest in 48 monthly
installments beginning one month after the grant date, subject
to the recipient's continued service as a director. Each
non-employee director stock option will terminate on the earlier
of 10 years from the date of grant and 90 days after
the recipient ceases to serve as a director, except in the case
of death or disability, in which event the option will terminate
three months from the date of the director's death or
disability. The exercise price of all of these options will
equal the fair market value of our common stock on the date of
grant.
Scientific Advisory Board
We have established a scientific advisory board
made up of leading experts in the field of retinal disease.
Members of our scientific advisory board consult with us
regularly on matters relating to:
•
our research and development programs;
•
the design and implementation of our clinical
    trials;
•
market opportunities from a clinical perspective;
•
new technologies relevant to our research and
    development programs; and
•
scientific and technical issues relevant to our
    business.
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The current members of our scientific advisory
board are:
Name
Professional Affiliation
Anthony P. Adamis, M.D.
Senior Vice President, Research and Chief
    Scientific Officer, Eyetech Pharmaceuticals, Inc.
Mark Blumenkranz, M.D.
Professor and Chairman of Ophthalmology, Stanford
    University
Evangelos S. Gragoudas, M.D.
Acting Chairman Emeritus, Department of
    Ophthalmology and Professor of Ophthalmology, Harvard Medical
    School; Director of Retina Service, Massachusetts Eye and Ear
    Infirmary
Morton F. Goldberg, M.D.
Professor and Chairman, Emeritus, of
    Ophthalmology, Johns Hopkins University School of Medicine
Dennis Henner, Ph.D.
General Partner, MPM Capital Partners
Joan W. Miller, M.D.
Professor and Chair of Ophthalmology,
    Massachusetts Eye and Ear Infirmary, Harvard Medical School
Steven Schwartz, M.D.
Chief of Retina Division, Doris Stein Eye
    Research Center, University of California, Los Angeles Medical
    School
Lawrence Singerman, M.D.
Clinical Professor of Ophthalmology, Case Western
    Reserve University School of Medicine; Ophthalmologist, Retina
    Associates of Cleveland; Founder, Macula Society
Lawrence A. Yannuzzi, M.D.
Professor of Clinical Ophthalmology, Columbia
    University
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Executive Compensation
The following table sets forth the compensation
paid or accrued during the years ended December 31, 2002
and 2003 to our chief executive officer and to our four other
most highly compensated executive officers whose salary and
bonus are expected to exceed $100,000 for the year ended
December 31, 2003. We refer to these officers collectively
as our named executive officers.
Summary Compensation Table
Long-Term Compensation
Annual Compensation
Shares Underlying
All Other
Name and Principal Position
Year
Salary
Bonus
Options(#)
Compensation
David R. Guyer, M.D.
2003
$
338,304
$
135,378
—
—
Chief Executive Officer
2002
325,481
255,060
—
—
Paul G. Chaney(1)
2003
95,192
49,500
275,000
$
4,500
(2)
Chief Operating Officer
2002
—
—
—
—
Glenn P. Sblendorio(3)
2003
232,814
64,041
—
—
Chief Financial Officer
2002
192,121
132,750
200,000
—
Anthony P. Adamis, M.D.(4)
2003
275,000
82,500
(5)
—
—
Senior Vice President, Research
2002
137,710
91,250
(6)
225,000
87,500
(7)
Douglas H. Altschuler(8)
2003
165,385
70,069
(9)
200,000
—
Senior Vice President, Legal
2002
—
—
—
—
(1)
Mr. Chaney joined our company in August 2003.
(2)
Represents automobile allowance.
(3)
Mr. Sblendorio joined our company in
    February 2002.
(4)
Dr. Adamis joined our company in July 2002.
(5)
Represents guaranteed bonus in accordance with
    Dr. Adamis' employment agreement.
(6)
Includes a $50,000 signing bonus paid to
    Dr. Adamis in July 2002.
(7)
Represents consulting fees paid to
    Dr. Adamis during 2002 before he joined our company as an
    employee in July 2002.
(8)
Mr. Altschuler joined our company in May
    2003.
(9)
Includes a signing bonus paid to
    Mr. Altschuler in May 2003.
Stock Options
The following table contains information
regarding grants of options to purchase shares of our common
stock to our named executive officers during the fiscal year
ended December 31, 2003.
Amounts in the following table represent
potential realizable gains that could be achieved for the
options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation
are calculated based on the requirements of the Securities and
Exchange Commission and do not represent an estimate or
projection of our future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of
our common stock from the fair market value on the date of
grant. Actual gains, if any, on stock option exercises depend on
the future
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performance of the common stock and overall stock
market conditions. The amounts reflected in the following table
may not necessarily be achieved.
Option Grants in Last Fiscal Year
Potential Realizable Value at
Number of
Percentage of
Assumed Annual Rates of
Securities
Total Options
Stock Price Appreciation for
Underlying
Granted to
Exercise
Option Term(2)
Options
Employees in
Price Per
Expiration
Name
Granted(#)(1)
Fiscal Year
Share
Date
5%($)
10%($)
David R. Guyer, M.D.
—
—
—
—
—
—
Paul G. Chaney
275,000
18
%
$
3.50
8/11/2013
$
8,444,366
$
14,016,363
Glenn P. Sblendorio
—
—
—
—
—
—
Anthony P. Adamis, M.D
—
—
—
—
—
—
Douglas H. Altschuler
200,000
13
%
3.50
7/7/2013
6,141,357
10,193,718
(1)
The options that we granted to our executive
    officers and other employees in January 2003 prior to our
    initial public offering typically were exercisable as of the
    date of grant. However, the shares purchasable upon exercise of
    these options are subject to our right of repurchase that,
    subject to continued employment on the applicable dates, lapses
    with respect to 25% of the shares on the first anniversary of
    the date of grant and thereafter in thirty-six monthly
    installments.
(2)
The dollar amounts under these columns are the
    result of calculations at rates set by the Securities and
    Exchange Commission and, therefore, are not intended to forecast
    possible future appreciation, if any, in the price of the
    underlying common stock. The potential realizable values are
    calculated using the initial public offering price of
    $21.00 per share and assuming that the market price
    appreciates from this price at the indicated rate for the entire
    term of each option and that each option is exercised and sold
    on the last day of its term at the assumed appreciated price.
Option Exercises and Year-End Option
    Values
The following table provides information about
the number of shares issued upon option exercises by our named
executive officers during the year ended December 31, 2003,
and the value realized by our named executive officers. The
table also provides information about the number and value of
options held by our named executive officers at
December 31, 2003.
Aggregated Option Exercises in Last Fiscal
Year and
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Options
Value of Unexercised
at
In-the-Money Options at
Shares
December 31, 2003
December 31, 2003
Acquired on
Value
Name
Exercise(#)
Realized
Exercisable(1)
Unexercisable
Exercisable
Unexercisable
David R. Guyer, M.D.
—
—
—
—
—
—
Paul G. Chaney
—
—
275,000
—
$
4,812,500
—
Glenn P. Sblendorio
—
—
200,000
—
3,928,000
—
Anthony P. Adamis, M.D
—
—
225,000
—
4,419,000
—
Douglas H. Altschuler
—
—
200,000
—
3,500,000
—
(1)
The options that we granted to our executive
    officers, including Messrs. Chaney, Sblendorio and
    Altschuler and Dr. Adamis, were exercisable as of the date
    of grant. However, the shares purchasable upon exercise of these
    options are subject to our right of repurchase that, subject to
    continued employment on the applicable dates, lapses with
    respect to 25% of the shares on the first anniversary of the
    date of grant and thereafter in thirty-six monthly installments.
    As of December 31, 2003, our right of repurchase had lapsed
    with respect to 91,667 of the shares underlying the options held
    by
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Mr. Sblendorio and 79,688 of the shares
    underlying the options held by Dr. Adamis. Our right of
    repurchase has not lapsed with respect to any of the shares
    underlying the options held by Messrs. Chaney and
    Altschuler.
There was no public trading market for our common
stock as of December 31, 2003. Accordingly, as permitted by
the rules of the Securities and Exchange Commission, we have
calculated the value of unexercised in-the-money options at
fiscal year-end on the basis of an assumed fair market value of
our common stock as of December 31, 2003 equal to the
initial public offering price of $21.00 per share, less the
aggregate exercise price.
Employment Agreements
Dr. Guyer.
Pursuant to an employment agreement effective April 12,
2000 and amended August 25, 2003, we are employing
Dr. Guyer as our Chief Executive Officer. Under the amended
agreement, Dr. Guyer receives an annual base salary of
$308,275, subject to increases upon an annual review by our
board of directors. The amended agreement provides for a
discretionary annual bonus based on Dr. Guyer's
performance and our company's business results as
determined by our board of directors.
Under the amended agreement, either we or
Dr. Guyer may terminate his employment at any time, subject
to continuation of salary payment and benefits for
18 months if we terminate Dr. Guyer's employment
without cause or if Dr. Guyer terminates his employment for
good reason. If we terminate Dr. Guyer's employment
without cause or if he terminates his employment for good reason
within three months before or 12 months following a change
in control of our company, we are obligated to pay
Dr. Guyer a lump sum payment equal to two years of his then
current base salary and reimburse Dr. Guyer for the costs
of medical and dental benefits for up to 18 months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr. Guyer's unvested
equity rights in our company will immediately vest, and if we
terminate Dr. Guyer's employment without cause or if
he terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Dr. Guyer's unvested equity rights in our company
will immediately vest.
Mr. Chaney.
Pursuant to an employment agreement dated August 25, 2003,
we are employing Mr. Chaney as our Chief Operating Officer.
Under the agreement, Mr. Chaney receives an annual base
salary of $275,000, subject to increases upon an annual review
by our board of directors. The agreement also provides for a
monthly automobile allowance of $900 and that Mr. Chaney is
eligible to receive additional incentive compensation of up to
35% of his base salary at the sole discretion of our board of
directors.
Under the agreement, either we or Mr. Chaney
may terminate his employment at any time, subject to
continuation of salary payment and benefits for one year if we
terminate Mr. Chaney's employment without cause or if
Mr. Chaney terminates his employment for good reason. If we
terminate Mr. Chaney's employment without cause or if
he terminates his employment for good reason within three months
before or 12 months following a change in control of our
company, we are obligated to pay Mr. Chaney a lump sum
payment equal to 15 months of his then current base salary
and reimburse Mr. Chaney for the costs of medical and
dental benefits for up to 15 months. The agreement also
provides that upon any change in control of our company, 50% of
all of Mr. Chaney's unvested equity rights in our
company will immediately vest, and if we terminate
Mr. Chaney's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Mr. Chaney's unvested equity rights in our company
will immediately vest.
Mr. Sblendorio.
Pursuant to an employment agreement dated February 1, 2002
and amended October 17, 2003, we are employing
Mr. Sblendorio as our Chief Financial Officer. Under the
amended agreement, Mr. Sblendorio receives an annual base
salary of $225,000, subject to increases upon an annual review
by our board of directors. The amended agreement provides for:
•
a guaranteed bonus for Mr. Sblendorio's
    first year of employment with us equal to 20% of his base
    salary, which was paid in April 2003;
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•
an additional discretionary annual bonus based on
    Mr. Sblendorio's performance and our business results
    as determined by our board of directors or our senior management
    upon the recommendation of our Chief Executive Officer; and
•
the grant of stock options to purchase
    200,000 shares of common stock, which grant was made in
    February 2002.
Under the amended agreement, either we or
Mr. Sblendorio may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr. Sblendorio's employment
without cause or if Mr. Sblendorio terminates his
employment for good reason. If we terminate
Mr. Sblendorio's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following a change in control of our
company, we are obligated to pay Mr. Sblendorio a lump sum
payment equal to 15 months of his then current base salary
and reimburse Mr. Sblendorio for the costs of medical and
dental benefits for up to 15 months. The amended agreement
also provides that upon any change in control of our company,
50% of all of Mr. Sblendorio's unvested equity rights
in our company granted after the amendment of his employment
agreement will immediately vest, and if we terminate
Mr. Sblendorio's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Mr. Sblendorio's unvested equity rights in our
company granted after the amendment of his employment agreement
will immediately vest.
Dr. Adamis.
Pursuant to an employment agreement dated April 12, 2002
and amended October 20, 2003, we are employing
Dr. Adamis as our Chief Scientific Officer and Senior Vice
President, Research. Under the amended agreement,
Dr. Adamis receives an annual base salary of $275,000,
subject to increases upon an annual review by our board of
directors. The amended agreement provides for:
•
a signing bonus of $50,000, which was paid in
    2002;
•
a guaranteed bonus equal to 30% of his base
    salary;
•
an additional discretionary annual bonus based on
    Dr. Adamis' performance and our company's
    business results as determined by our board of directors;
•
the grant of stock options to purchase
    225,000 shares of common stock, which grant was made in
    July 2002; and
•
the sale of an additional 75,000 shares of
    fully vested stock at a price of $1.36 per share, which
    shares were purchased by Dr. Adamis in February 2003.
Under the amended agreement, either we or
Dr. Adamis may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Dr. Adamis' employment without
cause or if Dr. Adamis terminates his employment for good
reason. If we terminate Dr. Adamis' employment without
cause or if he terminates his employment for good reason within
three months before or 12 months following a change in
control of our company, we are obligated to pay Dr. Adamis
a lump sum payment equal to 15 months of his then current
base salary and reimburse Dr. Adamis for the costs of
medical and dental benefits for up to 15 months. The
amended agreement also provides that upon any change in control
of our company, 50% of all of Dr. Adamis' unvested
equity rights in our company granted after the amendment of his
employment agreement will immediately vest, and if we terminate
Dr. Adamis' employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Dr. Adamis' unvested equity rights in our company
granted after the amendment of his employment agreement will
immediately vest.
Mr. Altschuler.
Pursuant to an employment agreement dated August 25, 2003,
we are employing Mr. Altschuler as our General Counsel.
Under the agreement, Mr. Altschuler receives an annual base
salary of $250,000, subject to increases upon an annual review
by our board of directors. The agreement also provides that
Mr. Altschuler is eligible to receive additional incentive
compensation of up to 35% of his base salary at the sole
discretion of our board of directors.
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Under the agreement, either we or
Mr. Altschuler may terminate his employment at any time,
subject to continuation of salary payment and benefits for one
year if we terminate Mr. Altschuler's employment
without cause or if Mr. Altschuler terminates his
employment for good reason. If we terminate
Mr. Altschuler's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following a change in control of our
company, we are obligated to pay Mr. Altschuler a lump sum
payment equal to 15 months of his then current base salary
and reimburse Mr. Altschuler for the costs of medical and
dental benefits for up to 15 months. The agreement also
provides that upon any change in control of our company, 50% of
all of Mr. Altschuler's unvested equity rights in our
company will immediately vest, and if we terminate
Mr. Altschuler's employment without cause or if he
terminates his employment for good reason within three months
before or 12 months following the change in control, 100%
of Mr. Altschuler's unvested equity rights in our
company will immediately vest.
Stock Option and Other Compensation
Plans
2001 Stock Plan
Our 2001 stock plan, as amended, was adopted by
our board of directors and approved by our stockholders in 2001.
The plan provides for the grant of incentive stock options,
non-statutory stock options and restricted stock awards. A
maximum of 8,175,000 shares of common stock are authorized
for issuance under our 2001 stock plan.
In accordance with the terms of the 2001 stock
plan, our board of directors has authorized our compensation
committee to administer the 2001 stock plan.
If a change in control of our company occurs, an
option or other award under the 2001 stock plan will become
fully exercisable and fully vested if the option or award is not
assumed by the surviving corporation or its parent or if the
surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 2001 stock
plan. A change in control under the 2001 stock plan includes:
•
a merger or consolidation after which our
    stockholders own less than 50% of the surviving corporation or
    its parent company; or
•
the sale of all or substantially all of our
    assets.
This accelerated vesting provision shall not
apply, however, to a transaction if its sole purpose is to
change the jurisdiction of our incorporation or to create a
holding company owned by our stockholders in substantially the
same proportions in which they owned our shares prior to the
transaction.
If we become a party to a merger or
consolidation, the agreement of merger or consolidation shall
provide the following for our outstanding options:
•
continuation of the options by us, if we are the
    surviving corporation;
•
assumption of the options by the surviving
    corporation or its parent;
•
replacement of the options by comparable options
    by the surviving corporation or its parent;
•
accelerated vesting of the options, followed by
    their cancellation; or
•
cancellation for a cash payment.
As of March 31, 2004, there were options to
purchase 4,701,004 shares of common stock outstanding under
the 2001 stock plan and options to purchase
1,611,648 shares of common stock had been exercised. Since
the effective date of the 2003 stock incentive plan described
below, we have granted no further stock options or other awards
under the 2001 stock plan.
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2003 Stock Incentive Plan
On September 10, 2003, our Board of
Directors approved our 2003 Stock Incentive Plan. The 2003 Stock
Incentive Plan, which was approved by stockholders in December
2003, became effective on January 29, 2004. The plan
provides for the grant of incentive stock options, non-statutory
stock options, restricted stock awards and other stock-based
awards. Upon effectiveness, 4,400,000 shares of common
stock were reserved for issuance under the 2003 stock incentive
plan. In addition, the 2003 stock incentive plan contains an
"evergreen provision" that allows for an annual
increase in the number of shares available for issuance under
the plan on the first day of each of our fiscal years during the
period beginning in fiscal year 2005 and ending on the second
day of fiscal year 2013. The annual increase in the number of
shares shall be equal to the lowest of:
•
2,500,000 shares;
•
5% of our outstanding shares on the first day of
    the fiscal year; and
•
an amount determined by our board of directors.
Under this provision, no annual increase shall be
made to the extent that the number of shares of common stock
available for issuance under the 2003 stock incentive plan and
all other employee or director equity incentive plans, including
our 2003 employee stock purchase plan, would exceed 30% of our
outstanding shares on the first day of the applicable fiscal
year.
In accordance with the terms of the 2003 stock
incentive plan, our board of directors has authorized our
compensation committee to administer the 2003 stock incentive
plan. In accordance with the provisions of the 2003 stock
incentive plan, our compensation committee will select the
recipients of awards and determine:
•
the number of shares of common stock covered by
    options and the dates upon which the options become exercisable;
•
the exercise price of options;
•
the duration of options;
•
the method of payment of the exercise
    price; and
•
the number of shares of common stock subject to
    any restricted stock or other stock-based awards and the terms
    and conditions of such awards, including conditions for
    repurchase, issue price and repurchase price.
In addition our board of directors or any
committee to which the board of directors delegates authority
has the authority, with the consent of the affected plan
participants, to reprice or otherwise amend outstanding options.
Upon a merger or other reorganization event under
our 2003 stock incentive plan, our board of directors shall
provide that all of our outstanding options shall be assumed or
substituted by the successor corporation. However, if the
succeeding corporation does not agree to assume, or substitute
for, outstanding options, then our board of directors shall
provide that all unexercised options will become exercisable in
full prior to the completion of the reorganization event and
that these options will terminate upon the completion of the
reorganization event if not previously exercised. Our board of
directors may also provide for a cash payment equal to the value
of any outstanding options. If the reorganization event also
constitutes a change in control event under our 2003 stock
incentive plan, any assumed or substituted option will become
immediately exercisable in full if on or prior to the date that
is six months after the reorganization event an option
holder's employment with us or our succeeding corporation
is terminated by us or the succeeding corporation without cause,
as defined in our 2003 stock incentive plan. In addition, upon a
change in control event that is not also a reorganization event
under our 2003 stock incentive plan, each option will continue
to vest according to its original vesting schedule, except that
an option will become immediately exercisable in full if on or
prior to the date that is six months after the change in
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control event an option holder's employment
with us or the succeeding corporation is terminated by us or the
succeeding corporation without cause. Our 2003 stock incentive
plan provides similar change in control vesting provisions for
restricted stock and other awards under the plan.
As of March 31, 2004, there were options to
purchase 1,028,660 shares of common stock outstanding under
the 2003 incentive stock plan, and no options under the 2003
stock plan had been exercised. In addition, 37,501 shares
of restricted common stock granted under the 2003 stock
incentive plan had not been issued as of March 31, 2004.
2003 Employee Stock Purchase
    Plan
On September 10, 2003, our Board of
Directors approved our 2003 Employee Stock Purchase Plan. The
2003 Purchase Plan, which was approved by stockholders in
December 2003, became effective on January 29, 2004. The
plan provides for the issuance of up to 500,000 shares of
our common stock to participating employees.
All of our employees, including directors who are
employees, and all employees of any participating subsidiaries:
•
whose customary employment is more than
    20 hours per week for more than five months in a calendar
    year;
•
who were employed by us for at least 90 days
    prior to enrolling; and
•
who are employed on the first day of a designated
    payroll deduction offering period
are eligible to participate in the 2003 employee
stock purchase plan.
Employees who would immediately after the grant
of an option under the 2003 employee stock purchase plan own 5%
or more of the total combined voting power or value of our stock
or the stock of any of our subsidiaries are not eligible to
participate in the purchase plan.
We will make one or more offerings to our
employees to purchase stock under the 2003 employee stock
purchase plan. Offerings will begin on each February 1 and
August 1, except that our first offering commencement date
will begin on the date on which trading of our common stock
commences on the Nasdaq National Market in connection with this
offering. Each offering commencement date will begin a six-month
period during which payroll deductions will be made and held for
the purchase of our common stock at the end of the purchase plan
period.
On the first day of a designated payroll
deduction period, or offering period, we will grant to each
eligible employee who has elected to participate in the purchase
plan an option to purchase shares of our common stock as
follows: the employee may authorize up to 10% of his or her base
pay to be deducted by us during the offering period. On the last
day of the offering period, the employee is deemed to have
exercised the option, at the option exercise price, to the
extent of accumulated payroll deductions. Under the terms of the
purchase plan, the option exercise price is an amount equal to
85% of the lower of the closing price of our common stock on the
first day or the last day of the offering period. For purposes
of the first offering period under the purchase plan, the
closing price of our common stock on the first day of such
period is deemed to equal the initial public offering price per
share in this offering.
In no event may an employee purchase in any one
offering period a number of shares which exceeds the number of
shares determined by dividing:
•
the product of $2,083 and the number of full
    months in the offering period, by
•
the closing price of a share of our common stock
    on the commencement date of the offering period.
Our board of directors may, in its discretion,
choose a different offering period for each subsequent offering.
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An employee who is not a participant on the last
day of the offering period is not entitled to exercise any
option, and the employee's accumulated payroll deductions
will be refunded. An employee's rights under the purchase
plan terminate upon voluntary withdrawal from the purchase plan
at any time, or when the employee ceases employment for any
reason, except that upon termination of employment because of
death, the balance in the employee's account will be paid
to the employee's beneficiary.
Because participation in the purchase plan is
voluntary, we cannot now determine the number of shares of our
common stock to be purchased by any particular current executive
officer, by all current executive officers as a group or by
non-executive employees as a group.
Limitation of Liability and Indemnification of
Officers and Directors
Our certificate of incorporation limits the
personal liability of directors for breach of fiduciary duty to
the maximum extent permitted by the Delaware General Corporation
Law. Our certificate of incorporation provides that no director
will have personal liability to us or to our stockholders for
monetary damages for breach of fiduciary duty or other duty as a
director. However, these provisions do not eliminate or limit
the liability of any of our directors:
•
for any breach of their duty of loyalty to us or
    our stockholders;
•
for acts or omissions not in good faith or which
    involve intentional misconduct or a knowing violation of law;
•
for voting or assenting to unlawful payments of
    dividends or other distributions; or
•
for any transaction from which the director
    derived an improper personal benefit.
Any amendment to or repeal of these provisions
will not eliminate or reduce the effect of these provisions in
respect of any act or failure to act, or any cause of action,
suit or claim that would accrue or arise prior to any amendment
or repeal or adoption of an inconsistent provision. If the
Delaware General Corporation Law is amended to provide for
further limitations on the personal liability of directors of
corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the
Delaware General Corporation Law.
In addition, our certificate of incorporation
provides that we must indemnify our directors and officers and
we must advance expenses, including attorneys' fees, to our
directors and officers in connection with legal proceedings,
subject to very limited exceptions.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt
written plans, known as Rule 10b5-1 plans, in which they
will contract with a broker to buy or sell shares of our common
stock on a periodic basis. Under a Rule 10b5-1 plan, a
broker executes trades pursuant to parameters established by the
director or officer when entering into the plan, without further
direction from them. The director or officer may amend or
terminate the plan in some circumstances. Our directors and
executive officers may also buy or sell additional shares
outside of a Rule 10b5-1 plan when they are not in
possession of material nonpublic information.
Drs. Guyer, Adamis and Patel and
Messrs. Sblendorio and Altschuler have adopted
Rule 10b5-1 plans. The sale of any shares under such plans
are subject to lock-up agreements with the underwriters expiring
90 days after the date of this prospectus, except that
sales under the Rule 10b5-1 plan of Mr. Altschuler are
subject to a lock-up agreement that will expire on July 28,
2004.
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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Since our incorporation in February 2000, we have
engaged in the following transactions with our directors and
officers and holders of more than 5% of our voting securities
and affiliates of our directors, officers and 5% stockholders:
Stock Issuances
Issuance of Common Stock to
    Founders
In March 2000, in connection with our formation,
we issued common stock at a price per share of $0.01 to the
following directors:
Number of Shares of
Aggregate
Name
Common Stock
Purchase Price
David R. Guyer
1,500,000
$
15,000
Marty Glick
500,000
5,000
John P. McLaughlin
500,000
5,000
Samir Patel
500,000
5,000
Issuance of Series A Convertible
    Preferred Stock
In March 2000, we issued 120,000 shares of
our series A convertible preferred stock at a price per share of
$1.25 to the following directors:
Number of Shares of
Aggregate
Name
Series A Preferred Stock
Purchase Price
Marty Glick
40,000
$
50,000
John P. McLaughlin
40,000
50,000
Samir Patel
40,000
50,000
All shares of our series A convertible preferred
stock automatically converted into an aggregate of
120,000 shares of our common stock upon the consummation of
our initial public offering.
Issuance of Series B Convertible
    Preferred Stock
In April 2000 and January 2001, we issued an
aggregate of 5,786,998 shares of our series B convertible
preferred stock at a price per share of $6.00 for a total
purchase price of $34.7 million. We also issued warrants to
purchase an aggregate of 1,142,902 shares of series B
convertible preferred stock at an exercise price of
$6.00 per share in connection with our series B financing.
The following table sets forth the number of series B shares and
warrants sold to our 5% stockholders and their affiliates.
Number of Shares
Number of Shares
of Series B
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
1,666,667
333,334
$
10,000,002
Lakeview EyeTech, L.P.
1,500,000
300,000
9,000,000
Merrill Lynch Entities
833,333
166,667
4,999,998
All shares of our series B convertible preferred
stock automatically converted into an aggregate of
5,786,998 shares of our common stock upon the consummation
of our initial public offering. All warrants issued as part of
our series B Financing were exercised prior to completion of our
initial public offering.
Issuance of Series C Convertible
    Preferred Stock
In July and August 2001, we issued an aggregate
of 7,964,229 shares of our series C-1 convertible
preferred stock at a price per share of $6.80 for a total
purchase price of $54.2 million. We also issued warrants to
purchase an aggregate of 1,592,846 shares of
series C-1 convertible preferred stock at an
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exercise price of $6.80 per share in
connection with this portion of our series C financing. The
following table sets forth the number of
series C-1 shares and warrants sold to our 5%
stockholders and their affiliates in July and August 2001.
Number of Shares
Number of Shares
of Series C-1
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
735,291
147,058
$
4,999,979
Lakeview EyeTech II, L.P.
257,352
51,470
1,749,994
Merrill Lynch Entities
735,294
147,059
4,999,999
JPMorgan Partners (BHCA), LP
1,838,235
367,647
12,499,998
Biotech Growth N.V.
1,470,580
294,117
9,999,944
MPM Capital, LP
1,176,468
235,293
7,999,982
All shares of our series C-1 convertible
preferred stock converted into an aggregate of
7,964,229 shares of common stock upon the consummation of
our initial public offering. All warrants were exercised prior
to completion of our initial public offering.
In August 2002, we issued an aggregate of
7,521,777 shares of our series C-2 convertible
preferred stock at a price per share of $7.20 for a total
purchase price of $54.2 million. We also issued warrants to
purchase an aggregate of 1,504,354 shares of
series C-2 convertible preferred stock at an exercise price
of $7.20 per share in connection with this portion of our
series C financing. The following table sets forth the
number of series C-2 shares and warrants sold to our
5% stockholders and their affiliates in August 2002.
Number of Shares
Number of Shares
of Series C-2
Underlying
Aggregate
Name
Preferred Stock
Warrants
Purchase Price
Schroder Ventures Entities
694,444
138,889
$
4,999,997
Lakeview EyeTech II, L.P.
243,056
48,611
1,750,003
Merrill Lynch Entities
694,444
138,889
4,999,997
JPMorgan Partners (BHCA), LP
1,736,111
347,222
12,499,999
Biotech Growth N.V.
1,388,888
277,777
9,999,994
MPM Capital, LP
1,111,111
222,223
7,999,999
All shares of our series C-2 convertible
preferred stock converted into an aggregate of
7,521,777 shares of common stock upon the consummation of
our initial public offering. All warrants were exercised prior
to completion of our initial public offering.
Issuance of Series D Convertible
    Preferred Stock
In February 2003, in connection with our Pfizer
collaboration, we issued an aggregate of 2,747,253 shares
of our series D convertible preferred stock to an affiliate
of Pfizer at a price per share of $9.10 for a total purchase
price of $25.0 million. All shares of our series D
convertible preferred stock automatically converted into an
aggregate of 2,747,253 shares of common stock upon the
consummation of our initial public offering.
Certain Relationships
Pfizer Collaboration
In February 2003, we entered into collaboration,
license and related agreements with Pfizer to collaboratively
develop, manufacture and commercialize Macugen for the
prevention and treatment of diseases of the eye and related
conditions. These agreements are discussed above under the
heading "Business — Collaboration with
Pfizer."
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Consulting Agreement with Samir
    Patel
From October 2001 through December 2003, we were
party to a consulting agreement with Samir Patel, one of our
founders and a member of our Board, under which Dr. Patel
provided consulting services to us relating to our development,
clinical investigation and commercialization of Macugen. Under
the terms of the agreement, Dr. Patel provided at least
40 hours per month of consulting services to us in exchange
for annual compensation of $85,000.
We have agreed to extend Dr. Patel's
consulting arrangement with us through September 2004. Under
such arrangement, Dr. Patel provides us with consulting
services as defined in his agreement and will be paid a monthly
consultancy fee of $22,650. He is also eligible for a
discretionary bonus of up to 25% of such consultancy fee. In
addition, Dr. Patel has received payment from January 2004
based on his current consultancy rate for providing services for
us since the end of his prior arrangement with us in December
2003.
Loan to Executive Officer
On July 1, 2002, we provided a loan to
Anthony P. Adamis, our Chief Scientific Officer and Senior
Vice President, Research, that is evidenced by a promissory note
in the aggregate principal amount of $102,000. The note bears
interest at a fixed annual rate of 4.71%, with the interest
payable at maturity, and matures in July 2008. Dr. Adamis
used the proceeds from the loan to acquire 75,000 shares of
our common stock. Dr. Adamis has pledged those shares to
secure the loan. As of March 31, 2004, the total amount
outstanding under the loan was approximately $110,000 including
accrued interest.
Director Compensation
Please see "Management — Director
Compensation" for a discussion of options granted to our
non-employee directors.
Executive Compensation and Employment
    Agreements
Please see "Management — Executive
Compensation" and "— Stock Options" for
additional information on compensation of our executive
officers. Information regarding employment agreements with
several of our executive officers is set forth under
"Management — Employment Agreements."
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with
respect to the beneficial ownership of our common stock as of
March 23, 2004, by:
•
each of our directors;
•
each of our named executive officers;
•
each person, or group of affiliated persons, who
    is known by us to beneficially own more than 5% of our common
    stock;
•
all of our directors and executive officers as a
    group; and
•
each of our selling stockholders participating in
    this offering.
The number of shares beneficially owned by each
entity, person, director or executive officer is determined
under the rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has the sole or shared voting
power or investment power and also any shares that the
individual has the right to acquire as of May 22, 2004,
60 days after March 23, 2004, through the exercise of
any stock option or other right. Unless otherwise indicated,
each person has sole investment and voting power, or shares such
powers with his or her spouse, with respect to the shares set
forth in the following table. The percentage of shares owned
before and after the offering is based on 39,660,272 shares
outstanding on March 23, 2004.
The information in the table-below with respect
to each selling stockholder has been obtained from that selling
stockholder. When we refer to the "selling
stockholders" in this prospectus, we mean those persons
listed in the table below as offering shares as well as the
pledgees, donees, assignees, transfees, successors and others
who may hold any of the selling stockholders' interest.
Except as otherwise set forth below, the street
address of the beneficial owner is c/o Eyetech
Pharmaceuticals, Inc., 3 Times Square, New York,
New York 10036.
Before the Offering
After the Offering
Percentage
Number of
Percentage
of Shares
Number of
Shares
of Shares
Number of Shares
Beneficially
Shares
Beneficially
Beneficially
Name and Address of Beneficial Owner
Beneficially Owned
Owned
Offered(1)
Owned
Owned
5% Stockholders
J.P. Morgan Partners (BHCA), L.P.(2)
4,111,119
10.2
%
810,224
3,300,895
8.3
%
1221 Avenue of the Americas
New York, NY 10020
BB Biotech AG(3)
3,431,362
8.7
%
—
3,431,322
8.7
%
Vodergasse 3
CH-8300 Schaffhausen, Switzerland
Schroder Ventures Entities(4)
2,714,973
6.8
%
531,959
2,183,014
5.5
%
22 Church Street
Hamilton, Bermuda HM 11
Pfizer Inc.(5)
3,223,443
8.1
%
—
3,223,443
8.1
%
235 E. 42nd Street
New York, NY 10017
MPM Capital, LP(6)
2,745,095
6.9
%
—
2,745,095
6.9
%
111 Huntington Avenue, 31st Floor
Boston, MA 02199
Merrill Lynch Entities(7)
2,572,826
6.4
%
504,108
2,068,718
5.2
%
95 Greene Street, 7th Floor
Jersey City, NJ 07302
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Table of Contents
Before the Offering
After the Offering
Percentage
Number of
Percentage
of Shares
Number of
Shares
of Shares
Number of Shares
Beneficially
Shares
Beneficially
Beneficially
Name and Address of Beneficial Owner
Beneficially Owned
Owned
Offered(1)
Owned
Owned
Lakeview EyeTech(8)
2,281,440
5.8
%
447,015
1,834,425
4.6
%
125 S. Wacker Drive, Suite 1675
Chicago, IL 60606
Directors and Executive Officers
John P. McLaughlin(9)
595,000
1.5
%
—
595,000
1.5
%
David R. Guyer
1,470,000
3.7
%
220,500
1,249,500
3.2
%
Paul G. Chaney(10)
275,000
*
—
275,000
*
Glenn P. Sblendorio(11)
200,000
*
—
200,000
*
Anthony P. Adamis(12)
287,440
*
43,116
244,324
*
Douglas H. Altschuler(13)
200,000
*
—
200,000
*
Srinivas Akkaraju(14)
4,081,119
10.2
%
810,224
3,270,895
8.3
%
Marty Glick(15)
598,625
1.5
%
59,863
538,762
1.4
%
Michael Mullen(16)
3,461,362
8.7
%
—
3,461,362
8.7
%
Samir Patel(17)
545,000
1.3
%
81,750
463,250
1.2
%
Edward Penhoet(18)
1,279,356
3.2
%
244,793
1,034,563
2.6
%
Henry Simon(19)
30,000
*
—
30,000
*
Damion E. Wicker(20)
4,081,119
10.2
%
810,224
3,270,895
8.3
%
All directors and executive officers as a group
    (13 persons)(21)
13,090,310
32.0
%
1,460,246
11,630,064
28.4
%
Other Selling Stockholders
Alta BioPharma Partners II, L.P.(22)
1,249,356
3.2
%
244,793
1,004,563
2.5
%
Gilead Sciences, Inc.
646,841
1.6
%
646,841
—
—
International Biotechnology Trust plc(23)
810,222
2.0
%
158,751
651,471
1.6
%
Arthur J. Remillard Jr.(24)
719,624
1.8
%
141,000
578,624
1.5
%
Denis O'Shaughnessy(25)
255,000
*
38,250
216,750
*
Loni DaSilva(26)
155,000
*
23,250
131,750
*
Evelyn Harrison(27)
155,000
*
23,250
131,750
*
Emmett Cunningham(28)
120,000
*
18,000
102,000
*
Alta Embarcadero BioPharma Partners II,
    LLC(28)
37,408
*
7,330
30,078
*
*
Less than 1%.
(1)
Assumes that the underwriters do not exercise
    their over-allotment option. In the event that the
    over-allotment option is exercised, certain of the selling
    stockholders will sell additional shares of common stock to
    cover overallotments as set forth in the footnotes below.
(2)
The number of shares beneficially owned includes
    4,051,119 shares held by J.P. Morgan Partners
    (BHCA) LP and also includes 60,000 shares of common
    stock issuable upon exercise of stock options exercisable within
    60 days of March 23, 2004 granted to Dr. Akkaraju
    and Dr. Wicker. Drs. Akkaraju and Wicker are obligated
    to transfer any shares issued upon exercise of these stock
    options to J.P. Morgan Partners (BHCA), L.P. The general
    partner of J.P. Morgan Partners (BHCA), L.P. is JPMP Master
    Fund Manager, L.P., the general partner of which is JPMP Capital
    Corp., a wholly owned subsidiary of J.P. Morgan
    Chase & Co., a publicly traded company. Each of JPMP
    Master Fund Manager, L.P., JPMP Capital Corp. and
    J.P. Morgan Chase & Co. may be deemed beneficial
    owners of the shares held by J.P. Morgan Partners (BHCA),
    L.P., however, each disclaims beneficial ownership except to the
    extent of its pecuniary interest therein. Dr. Wicker, a
    member of our Board, is a Partner with J.P. Morgan
    Partners, LLC, an affiliate of J.P. Morgan Partners (BHCA),
    L.P., and an executive officer of JPMP Capital Corp., and may be
    deemed to hold voting and dispositive power for these shares.
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Table of Contents
(3)
The number of shares beneficially owned consists
    of 3,431,362 shares held by Biotech Growth, N.V., a wholly
    owned subsidiary of BB Biotech AG. Mr. Mullen, a member of
    our Board, is President of Bellevue Research, Inc., a
    wholly owned subsidiary of Asset Management N.V., which is the
    asset manager for BB Biotech's portfolios, and may be
    deemed to hold voting and dispositive power for these shares.
(4)
The number of shares beneficially owned includes
    1,590,733 shares held by Schroder Ventures International
    Life Sciences Fund II, LP1, 311,681 of which are being sold
    in this offering; 677,484 shares held by Schroder Ventures
    International Life Sciences Fund II, LP2, 132,743 of which
    are being sold in this offering; 180,544 shares held by
    Schroder Ventures International Life Sciences Fund II, LP3,
    35,375 of which are being sold in this offering;
    24,539 shares held by Schroder Ventures International Life
    Sciences Fund II Strategic Partners LP, 4,808 of which are
    being sold in this offering; 39,551 shares held by SITCO
    Nominees Ltd VCO 1903, 7,749 of which are being sold in this
    offering; 6,194 shares held by Schroder Ventures
    International Life Sciences Fund II Group Co-Investment
    Scheme, 1,214 of which are being sold in this offering;
    195,928 shares held by SV (Nominees) Limited as nominee for
    Schroder Ventures Investments Limited, 38,389 of which are being
    sold in this offering. Schroder Venture Managers Limited is the
    fund manager for the Schroder entities. The investment committee
    of Schroder Venture Managers Limited consists of Nichola Walker,
    Gary Carr, Deborah Speight, Douglas Mello and Peter Everson, all
    of whom share voting and dispositive power over these shares.
    The number of shares offered does not include the following
    maximum number of additional shares that each of the Schroder
    entities has agreed to sell, in each case to cover
    overallotments: Schroder Ventures International Life Sciences
    Fund II, LP1 - 91,898 shares; Schroder Ventures
    International Life Sciences Fund II, LP2 -
    39,139 shares; Schroder Ventures International Life
    Sciences Fund II, LP3 - 10,430 shares; Schroder
    Ventures International Life Sciences Fund II Strategic
    Partners LP - 1,418 shares; SITCO Nominees Ltd VCO 1903 -
    2,285 shares; Schroder Ventures International Life Sciences
    Fund II Group Co-Investment Scheme - 358 shares;
    and SV (Nominees) Limited as nominee for Schroder Ventures
    Investments Limited - 11,319 shares.
(5)
Shares are held by Pfizer Overseas
    Pharmaceuticals, an affiliate of Pfizer.
(6)
The number of shares beneficially owned includes
    165,940 shares held by MPM BioVentures II, L.P.;
    1,503,730 shares held by MPM BioVentures II-QP, L.P.;
    529,494 shares held by MPM BioVentures GmbH & Co.
    Parallel-Beteiligungs KG; 31,225 shares held by MPM Asset
    Management Investors 2001 LLC; and 514,706 shares held by
    MPM BioEquities Master Fund, LP. MPM Capital, LP and Medical
    Portfolio Management LLC, its general partner, are direct or
    indirect parent entities of MPM Asset Management LLC and MPM
    BioEquities Adviser, LLC, funds managed or advised by them
    (including MPM BioVentures II, L.P., MPM
    BioVentures II-QP., MPM BioVentures GmbH & Co.
    Parallel-Beteiligungs KG, MPM Asset Management Investors 2001
    LLC and MPM BioEquities Master Fund, L.P.) and the general
    partners of such funds, and may be deemed to beneficially hold
    the securities owned by such funds, however, each disclaim
    beneficial ownership except to the extent of its pecuniary
    interest.
(7)
The number of shares beneficially owned includes
    700,952 shares held by Merrill Lynch KECALP L.P. 1999,
    137,341 of which are being sold in this offering;
    60,952 shares held by KECALP Inc., as nominee for Merrill
    Lynch KECALP International L.P. 1999, 11,943 of which are being
    sold in this offering; and 1,810,922 shares held by Merrill
    Lynch Ventures L.P. 2001, 354,824 of which are being sold in
    this offering. Merrill Lynch KECALP L.P. 1999, Merrill Lynch
    KECALP International L.P. 1999 and Merrill Lynch Ventures L.P.
    2001 are affiliates of Merrill Lynch, Pierce, Fenner &
    Smith Incorporated, one of the underwriters of our initial
    public offering and this offering. The number of shares offered
    does not include up to 40,495, 3,521 and 104,619 shares
    that Merrill Lynch KECALP L.P. 1999, KECALP Inc., as nominee for
    Merrill Lynch KECALP International L.P. 1999 and Merrill Lynch
    Ventures L.P. 2001, respectively, have agreed to sell, in each
    case, to cover overallotments.
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Table of Contents
(8)
The number of shares beneficially owned includes
    1,714,285 shares held by Lakeview EyeTech, L.P., 335,889 of
    which are being sold in this offering; and 567,155 shares
    held by Lakeview EyeTech II, L.P., 111,126 of which are
    being sold in this offering. The general partner of Lakeview
    Eyetech, L.P. and Lakeview Eyetech II, L.P. is Private
    Capital Investors, L.L.C. The managing partner of Private
    Capital Investors, L.L.C. is Thomas Elden, who disclaims
    beneficial ownership of the shares held by Lakeview Eyetech,
    L.P. or Lakeview Eyetech II, L.P., except to the extent of
    his pecuniary interest therein. The number of shares offered
    does not include up to 99,036 shares that Lakeview
    EyeTech, L.P. and 32,765 shares that Lakeview
    EyeTech II, L.P. has agreed to sell, in each case, to cover
    overallotments.
(9)
The number of shares beneficially owned includes
    105,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 85,625 shares will
    have lapsed within 60 days of March 23, 2004.
(10)
The number of shares beneficially owned consists
    of 275,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004. Our right to repurchase will not have lapsed within
    60 days of March 23, 2004 with respect to any of the
    shares underlying the options held by Mr. Chaney.
(11)
The number of shares beneficially owned consists
    of 200,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 112,500 shares will
    have lapsed within 60 days of March 23, 2004.
(12)
The number of shares beneficially owned includes
    225,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 103,125 shares will
    have lapsed within 60 days of March 23, 2004.
(13)
The number of shares beneficially owned consists
    of 200,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004 of which our right to repurchase 50,001 shares will
    have lapsed within 60 days of March 23, 2004.
(14)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004; also
    includes the shares described in Note (2) above.
    Dr. Akkaraju is obligated to transfer any shares issued
    upon exercise of the stock options granted to him to
    J.P. Morgan Partners (BHCA), L.P. As discussed in Note
    (2) above, Dr. Akkaraju may be deemed to hold voting
    and dispositive power of the shares described in Note (2).
    However, Dr. Akkaraju disclaims beneficial ownership of the
    shares held by J.P. Morgan Partners (BHCA), L.P., except to
    the extent of his pecuniary interest therein. Please see
    Note (2) for information regarding the sale of shares by
    J.P. Morgan Partners (BHCA), L.P.
(15)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004.
(16)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004; also
    includes the shares described in Note (3) above.
    Mr. Mullen disclaims beneficial ownership of the shares
    held by Biotech Growth N.V., except to the extent of his
    pecuniary interest therein.
(17)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004.
(18)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004. This
    number also includes 1,249,356 shares held by Alta
    BioPharma Partners II, LP. Mr. Penhoet is a director
    of Alta BioPharma Management II, LLC, which is the general
    partner of Alta BioPharma Partners II, L.P.
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and a limited partner of Alta BioPharma Partners,
    L.P. Mr. Penhoet disclaims beneficial ownership of all such
    shares held by the Alta BioPharma Partners II, L.P, except
    to the extent of his proportionate pecuniary interests therein.
    Alta BioPharma Partners II, L.P. is selling the 244,793
    shares and may sell up to an additional 72,176 shares to
    cover overallotments.
(19)
The number of shares beneficially owned consists
    of 30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004.
    Mr. Simon is a special partner of Schroder Ventures Life
    Sciences Advisors, Inc., an affiliate of the Schroder
    entities described in Note (4) above, but does not have
    beneficial ownership of the shares held by those entities under
    Section 13(d) of the Exchange Act and the rules and
    regulations of the SEC thereunder because he does not have
    voting or investment power over those shares. Please see
    Note (4) for information regarding the sale of shares by
    the Schroder entities.
(20)
The number of shares beneficially owned includes
    30,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 10,625 shares will
    have lapsed within 60 days of March 23, 2004; also
    includes the shares described in Note (2) above.
    Dr. Wicker is obligated to transfer any shares issued upon
    exercise of the stock options granted to him to J.P. Morgan
    Partners (BHCA), L.P. As discussed in Note (2) above,
    Dr. Wicker may be deemed to hold voting and dispositive
    power of the shares described in Note (2). However,
    Dr. Wicker disclaims beneficial ownership of the shares
    held by J.P. Morgan Partners (BHCA), L.P., except to the
    extent of his pecuniary interest therein. Please see
    Note (2) for information regarding the sale of shares by
    J.P. Morgan Partners (BHCA), L.P.
(21)
The number of shares beneficially owned includes
    1,215,000 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 425,626 shares will
    have lapsed within 60 days of March 23, 2004. This
    number also includes the shares described in Notes (2),
    (3) and (18).
(22)
The number of shares offered does not include up
    to 72,176 shares that Alta BioPharma Partners II, L.P. has
    agreed to sell to cover overallotments.
(23)
The number of shares offered does not include up
    to 46,807 shares that International Biotechnology Trust plc
    has agreed to sell to cover overallotments.
(24)
The number of shares offered does not include
    41,573 shares that Mr. Remillard has agreed to sell to
    cover overallotments.
(25)
Dr. O'Shaughnessy has been Senior Vice
    President, Clinical of Eyetech since August 2000. The number of
    shares beneficially owned consists of 255,000 shares of
    common stock issuable upon exercise of stock options exercisable
    within 60 days of March 23, 2004, of which our right
    to repurchase 239,375 shares will have lapsed within
    60 days of March 23, 2004.
(26)
Ms. daSilva has been Vice President,
    Regulatory of Eyetech since October 2000. The number of shares
    beneficially owned consists of 155,000 shares of common
    stock issuable upon exercise of stock options exercisable within
    60 days of March 23, 2004, of which our right to
    repurchase 142,500 shares will have lapsed within
    60 days of March 23, 2004.
(27)
Ms. Harrison has been Vice President,
    Clinical Development of Eyetech since August 2000. The number of
    shares beneficially owned consists of 155,000 shares of
    common stock issuable upon exercise of stock options exercisable
    within 60 days of March 23, 2004, of which our right
    to repurchase 145,625 shares will have lapsed within
    60 days of March 23, 2004.
(28)
Dr. Cunningham has been Vice President,
    Clinical and Research Development and Licensing of Eyetech since
    April 2002. The number of shares beneficially owned includes
    117,110 shares of common stock issuable upon exercise of
    stock options exercisable within 60 days of March 23,
    2004, of which our right to repurchase 47,100 shares will
    have lapsed within 60 days of March 23, 2004.
(29)
The number of shares offered does not include
    2,161 shares that Alta Embarcadero BioPharma Partners II, LLC
    has agreed to sell to cover overallotments.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock
and provisions of our certificate of incorporation and bylaws
are summaries and are qualified by reference to the certificate
of incorporation and the bylaws currently in effect. Copies of
these documents have been filed with the Securities and Exchange
Commission.
As of March 31, 2004, our authorized capital
stock consisted of 125,000,000 shares of common stock, par
value $0.01 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share, all of which
preferred stock has not been designated.
As of March 31, 2004, we had issued and
outstanding 40,337,109 shares of common stock, held by 269
stockholders of record.
Common Stock
Holders of common stock are entitled to one vote
for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of common stock are
entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential
dividend rights of outstanding preferred stock.
In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to receive
proportionately our net assets available after the payment of
all debts and other liabilities and subject to the prior rights
of any outstanding preferred stock. Holders of common stock have
no preemptive, subscription, redemption or conversion rights.
The rights, preferences and privileges of holders of common
stock are subject to and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock
that we may designate and issue in the future.
Preferred Stock
Under the terms of our certificate of
incorporation, our board of directors is authorized to issue
shares of preferred stock in one or more series without
stockholder approval. Our board of directors has the discretion
to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation
preferences of each series of preferred stock.
The purpose of authorizing our board of directors
to issue preferred stock and determine its rights and
preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock,
while providing flexibility in connection with possible
acquisitions, future financings and other corporate purposes,
could have the effect of making it more difficult for a third
party to acquire, or could discourage a third party from seeking
to acquire, a majority of our outstanding voting stock. There
are no shares of preferred stock outstanding and we have no
present plans to issue any shares of preferred stock.
Options
As of March 31, 2004, options to purchase
5,729,664 shares of common stock at a weighted average
exercise price of $7.49 per share were outstanding.
Antitakeover Provisions
We are subject to Section 203 of the General
Corporation Law of the State of Delaware. Subject to certain
exceptions, Section 203 prevents a publicly held Delaware
corporation from engaging in a "business combination"
with any "interested stockholder" for three years
following the date that the person became an interested
stockholder, unless the interested stockholder attained such
status with the approval of our board of directors or unless the
business combination is approved in a prescribed manner. A
"business
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combination" includes, among other things, a
merger or consolidation involving us, and the interested
stockholder and the sale of more than 10% of our assets. In
general, an "interested stockholder" is any entity or
person beneficially owning 15% or more of our outstanding voting
stock and any entity or person affiliated with or controlling or
controlled by such entity or person. The restrictions contained
in Section 203 are not applicable to any of our existing
stockholders.
Our certificate of incorporation and our bylaws
divide our board of directors into three classes with staggered
three-year terms. In addition, our certificate of incorporation
and our bylaws provide that directors may be removed only for
cause and only by the affirmative vote of the holders of 75% of
our shares of capital stock present in person or by proxy and
entitled to vote. Under our certificate of incorporation and
bylaws, any vacancy on our board of directors, including a
vacancy resulting from an enlargement of our board of directors,
may be filled only by vote of a majority of our directors then
in office. The classification of our board of directors and the
limitations on the ability of our stockholders to remove
directors and fill vacancies could make it more difficult for a
third party to acquire, or discourage a third party from seeking
to acquire, control of our company.
Our certificate of incorporation and our bylaws
provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of
stockholders may only be taken if it is properly brought before
such meeting and may not be taken by written action in lieu of a
meeting. Our certificate of incorporation and our bylaws also
provide that, except as otherwise required by law, special
meetings of the stockholders can only be called by our chairman
of the board, our chief executive officer or our board of
directors. In addition, our bylaws establish an advance notice
procedure for stockholder proposals to be brought before an
annual meeting of stockholders, including proposed nominations
of candidates for election to our board of directors.
Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before
the meeting by or at the direction of our board of directors or
by a stockholder of record on the record date for the meeting,
who is entitled to vote at the meeting and who has delivered
timely written notice in proper form to our secretary of the
stockholder's intention to bring such business before the
meeting. These provisions could have the effect of delaying
until the next stockholder meeting stockholder actions that are
favored by the holders of a majority of our outstanding voting
securities.
The General Corporation Law of the State of
Delaware provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of
incorporation or bylaws, unless a corporation's certificate
of incorporation or bylaws, as the case may be, requires a
greater percentage. Our bylaws may be amended or repealed by a
majority vote of our board of directors or by the affirmative
vote of the holders of at least 75% of the votes which all our
stockholders would be entitled to cast in any annual election of
directors. In addition, the affirmative vote of the holders of
at least 75% of the votes which all our stockholders would be
entitled to cast in any election of directors is required to
amend or repeal or to adopt any provisions inconsistent with any
of the provisions of our certificate of incorporation described
in the prior two paragraphs.
Registration Rights
Upon completion of this offering, holders of an
aggregate of
approximately            million
shares (or
approximately            million
shares, if the underwriters exercise their overallotment option
in full) of our common stock have the right to require us to
register these shares under the Securities Act under specific
circumstances.
Demand Registration
Rights.
Beginning August 4, 2004,
subject to specified limitations, these stockholders may require
that we register all or part of these securities for sale under
the Securities Act. Until we are entitled to register our shares
on Form S-3, a short form registration statement, these
holders may only make three demands for registration of their
securities. Once we are entitled to use Form S-3, holders
of these shares may make demands for registrations on
Form S-3 on up to two occasions during any 12-month period.
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Incidental Registration
Rights.
If we register any of our
common stock, either for our own account or for the account of
other security holders, these stockholders are entitled to
notice of the registration and to include their shares of common
stock in the registration.
Limitations and
Expenses.
Other than in a demand
registration, with specified exceptions, a holder's right
to include shares in a registration is subject to the right of
the underwriters to limit the number of shares included in the
offering. We will pay all fees, costs and expenses of any demand
or incidental registrations, and the holders of the securities
being registered will pay all selling expenses.
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock is American Stock Transfer & Trust Company.
Nasdaq National Market
Our common stock is quoted on the Nasdaq National
Market under the symbol "EYET."
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UNDERWRITERS
Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated and Bear, Stearns &
Co. Inc. are acting as representatives, have severally agreed to
purchase, and the selling stockholders have agreed to sell to
them, severally, the number of shares indicated below:
Number of
Underwriter
Shares
Merrill Lynch, Pierce, Fenner &
    Smith
Incorporated
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc
Total
The underwriters are offering the shares of
common stock subject to their acceptance of the shares from the
selling stockholders and subject to prior sale. The underwriting
agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of
common stock offered by this prospectus are subject to the
approval of specified legal matters by their counsel and to
other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered by this prospectus
if any such shares are taken. However, unless the underwriters
exercise their option, the underwriters are not required to take
or pay for the shares covered by the underwriters'
over-allotment option described below.
The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$          a
share under the public offering price. Any underwriter may
allow, and such dealers may reallow, a concession not in excess
of
$           a
share on sales to other underwriters or to certain dealers.
After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be
varied by the representatives.
The selling stockholders have granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to an aggregate
of                     additional
shares of common stock at the public offering price listed on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional shares of common stock as the number listed next to
the underwriter's name in the preceding table bears to the
total number of shares of common stock listed next to the names
of all underwriters in the preceding table. If the
underwriters' option is exercised in full, the total price
to the public would be
$          ,
the total underwriters' discounts and commissions would be
$          and
the total proceeds to the selling stockholders would be
$          .
In connection with this offering, we have agreed
that, without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. Incorporated, on behalf of the
underwriters, we will not, during the period ending 90 days
after the date of this prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
•
file any registration statement with the
    Securities and Exchange Commission relating to the offering of
    any shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
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•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
•
the sale of shares pursuant to this prospectus;
•
our issuance of shares of common stock upon the
    exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus that is
    described in this prospectus or of which the underwriters have
    been advised in writing;
•
our issuance of shares or options to purchase
    shares of common stock pursuant to our stock incentive and
    employee stock purchase plans, provided that the recipient of
    the shares agrees to be subject to the restrictions described in
    this paragraph;
•
our issuance of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph; or
•
our issuance of shares of common stock to Pfizer
    or affiliates of Pfizer pursuant to the preferred stock purchase
    agreement we entered into with Pfizer in December, 2002,
    provided that the recipient of the shares agrees to be subject
    to the restrictions described in this paragraph.
In connection with this offering, our directors
and officers, the selling stockholders and certain of our other
stockholders have agreed that, without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Morgan Stanley & Co. Incorporated, on behalf of the
underwriters, they will not, during the period ending
90 days after the date of this prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
•
make any demand for or exercise any right with
    respect to, the registration of any shares of common stock or
    any securities convertible into or exercisable or exchangeable
    for common stock; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock;
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
•
the sale of shares pursuant to this prospectus;
•
transactions relating to shares of common stock
    or other securities acquired in open market transactions after
    the completion of this offering; or
•
transfers by gift, will or intestacy, or to
    immediate family members, stockholders or limited partners,
    provided that the transferee agrees to be bound by such
    restrictions and the transfer does not require a filing with the
    Securities and Exchange Commission other than filing a
    Form 5 after the termination of the 90-day period.
In addition, these restrictions shall not apply
to sales of common stock pursuant to the sales plan of one of
our executive officers, Mr. Altschuler, established in
accordance with Rule 10b5-1 of the Exchange Act and
outstanding on the date hereof.
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Notwithstanding the foregoing restrictions
applicable to us, our directors and officers, the selling
stockholders and certain other stockholders, if:
•
during the last 17 days of the 90-day
    restricted period, we issue an earnings release or a material
    event relating to us occurs; or
•
prior to the expiration of the 90-day restricted
    period, we announce that we will release earnings results during
    the 16-day period beginning on the last day of the 90-day period,
these restrictions will continue to apply until
the expiration of the 18-day period beginning on the issuance of
the earnings release or the occurrence of the material event.
In addition, in connection with our initial
public offering, we, each of our directors and officers and
holders of substantially all of our outstanding stock prior to
the initial public offering agreed that, without the prior
written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Morgan Stanley & Co.
Incorporated, on behalf of the underwriters of our initial
public offering, we and they will not, during the period ending
July 28, 2004:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend or
    otherwise transfer or dispose of directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock; or
•
enter into any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of the common stock,
whether any transaction described above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. These restrictions do not apply to:
•
the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding as of January 29, 2004 that was
    described in the prospectus for the initial public offering or
    of which the underwriters of the initial public offering were
    advised in writing;
•
the issuance by us of shares or options to
    purchase shares of common stock pursuant to our stock incentive
    and employee stock purchase plans, provided that the recipient
    of the shares agrees to be subject to the restrictions described
    in this paragraph;
•
the issuance by us of shares of common stock in
    connection with acquisition, licensing, collaboration or similar
    strategic arrangements, provided that the recipient of the
    shares agrees to be subject to the restrictions described in
    this paragraph;
•
transactions by Biotech Growth, N.V., a wholly
    owned subsidiary of BB Biotech AG and one of our principal
    stockholders, involving any shares of common stock that they
    acquired in the initial public offering;
•
transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after completion of the initial public
    offering; or
•
transfers by any person other than us by gift,
    will or intestacy, or to immediate family members, stockholders
    or limited partners, provided that the transferee agrees to be
    bound by such restrictions and the transfer does not require a
    filing under the Exchange Act other than filing a Form 5
    after the termination of the 180-day period.
In connection with this offering, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. Incorporated, on behalf of the
underwriters of the initial public offering, intend to waive
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these restrictions to the extent necessary to
permit the offer and sale of shares by the selling stockholders
contemplated by this prospectus.
The following table shows the underwriting
discounts and commissions that the selling stockholders are to
pay to the underwriters in connection with this offering. These
amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of
our common stock from those selling stockholders.
Paid by Selling Stockholders
No Exercise
Full Exercise
Per share
$
$
Total
$
$
In addition, we estimate that the expenses of
this offering payable by us will be approximately
$          .
In order to facilitate this offering of the
common stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in this offering. In addition, to stabilize the price of the
common stock, the underwriters may bid for, and purchase, shares
of common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the common stock in
this offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate
short positions or to stabilize the price of the common stock.
Any of these activities may stabilize or maintain the market
price of the common stock above independent market levels. The
underwriters are not required to engage in these activities, and
may end any of these activities at any time.
Each of Merrill Lynch KECALP L.P. 1999, Merrill
Lynch KECALP International L.P. 1999 and Merrill Lynch Ventures
L.P. 2001, are selling stockholders in this offering and are
affiliates of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, one of the underwriters in this offering. Prior to
the offering, these entities beneficially own in the aggregate
2,572,826 shares, or 6.4%, of our outstanding common stock.
Immediately following the offering, these entities will
beneficially own in the aggregate 2,068,718 shares, or 5.2%
of our outstanding common stock (assuming no exercise of the
underwriters overallotment option).
We, the selling stockholders and the underwriters
have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the
validity of the shares of common stock offered hereby will be
passed upon for us by Morrison & Foerster, LLP,
New York, New York. Ropes & Gray LLP, Boston,
Massachusetts has acted as counsel for the underwriters in
connection with certain legal matters related to this offering.
EXPERTS
Ernst & Young LLP, independent auditors,
have audited our consolidated financial statements at
December 31, 2001, 2002 and 2003 and for each of the three
years in the period ended December 31, 2003, as set forth
in their report. We have included our financial statements in
the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange
Commission a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock
offered by the selling stockholders. This prospectus, which
constitutes part of the registration statement, does not include
all of the information contained in the registration statement.
You should refer to the registration statement and its exhibits
for additional information. Whenever we make reference in this
prospectus to any of our agreements or other documents, the
references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for copies
of the actual agreement or other document. We also file annual,
quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. These
documents are publicly available, free of charge, on our website
at
www.eyetech.com
as soon as reasonably practicable
after filing such documents with the Securities and Exchange
Commission.
You can read the registration statement and our
filings with the Securities and Exchange Commission, over the
Internet at the Securities and Exchange Commission's web
site at
http://www.sec.gov.
You may also read and copy
any document that we file with the Securities and Exchange
Commission at its public reference room at 450 Fifth
Street, N.W., Washington, DC 20549.
You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of
the Securities and Exchange Commission at 450 Fifth Street,
NW, Washington, DC 20549. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference room.
96
Table of Contents
EYETECH PHARMACEUTICALS, INC.
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent
    Auditors
F-2
Consolidated Balance Sheets
    as of December 31, 2002 and 2003
F-3
Consolidated Statements of
    Operations for Years Ended December 31, 2001, 2002 and
    2003.
F-4
Consolidated Statements of
    Stockholders' (Deficit) Equity for the Years Ended
    December 31, 2001, 2002 and 2003
F-5
Consolidated Statements of
    Cash Flows for the Years Ended December 31, 2001, 2002 and
    2003.
F-6
Notes to Consolidated
    Financial Statements
F-7
Condensed Consolidated
    Balance Sheets as of December 31, 2003 and March 31,
    2004 (Unaudited)
F-25
Condensed Consolidated
    Statements of Operations for the Three Months Ended
    March 31, 2003 and 2004 (Unaudited)
F-26
Condensed Consolidated
    Statements of Cash Flows for the Three Months Ended
    March 31, 2003 and 2004 (Unaudited)
F-27
Notes to Condensed Unaudited
    Consolidated Financial Statements
F-28
F-1
Table of Contents
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Eyetech Pharmaceuticals, Inc.
We have audited the accompanying consolidated
balance sheets of Eyetech Pharmaceuticals, Inc. as of
December 31, 2002 and 2003, and the related consolidated
statements of operations, stockholders' deficit, and cash
flows for each of the three years in the period ended
December 31, 2003. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Eyetech
Pharmaceuticals, Inc. at December 31, 2002 and 2003,
and the consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
February 19, 2004
F-2
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
2003
Pro Forma
2002
2003
(Note 2)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
5,791,845
$
25,013,756
$
25,013,756
Marketable securities
63,359,128
106,360,073
106,360,073
Collaboration receivable
—
2,562,000
2,562,000
Prepaid expenses and other current assets
971,007
1,301,027
1,301,027
Total current assets
70,121,980
135,236,856
135,236,856
Property and equipment, net
3,012,001
5,867,582
5,867,582
Restricted cash
2,665,640
5,623,865
5,623,865
Other assets
789,395
2,751,375
2,751,375
Total assets
$
76,589,016
$
149,479,678
$
149,479,678
LIABILITIES AND STOCKHOLDERS'
    (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
7,442,478
$
14,308,103
$
14,308,103
Deferred license fee revenue, current portion
—
5,000,000
5,000,000
Capital lease obligations, current portion
560,128
618,350
618,350
Deferred rent liability, current portion
149,840
171,856
171,856
Total current liabilities
8,152,446
20,098,309
20,098,309
Deferred license fee revenue, net of current
    portion
—
65,416,663
65,416,663
Capital lease obligations, net of current portion
1,656,629
1,038,279
1,038,279
Other liabilities, net of current portion
492,636
425,761
425,761
Redeemable convertible preferred
    stock — $.01 par value; 29,093,695 shares
    authorized; 21,273,004, 25,062,278 and no shares issued and
    outstanding at December 31, 2002, 2003 and pro forma,
    respectively, liquidation preference of $252,053,310 as of
    December 31, 2003
144,323,381
185,506,532
—
Stockholders' (deficit) equity:
Convertible preferred stock —
    $.01 par value; 120,000 shares authorized, issued and
    outstanding at December 31, 2002 and 2003 and no shares pro
    forma, liquidation preference of $225,000 as of
    December 31, 2003
150,000
150,000
—
Common stock — $.01 par value;
    60,000,000 shares authorized; 4,162,000 issued and
    3,737,000 outstanding at December 31, 2002; 4,527,736
    issued and 4,102,736 outstanding at December 31, 2003; and
    29,710,014 issued and 29,285,014 outstanding pro forma
41,620
45,277
297,100
Additional paid-in capital
11,125,808
28,804,713
214,209,422
Loans to stockholders
(397,000
)
(430,666
)
(430,666
)
Deferred compensation
(1,299,163
)
(13,956,265
)
(13,956,265
)
Treasury stock, at cost
(255,000
)
(255,000
)
(255,000
)
Accumulated other comprehensive income
232,788
130,831
130,831
Accumulated deficit
(87,635,129
)
(137,494,756
)
(137,494,756
)
Total stockholders' (deficit) equity
(78,036,076
)
(123,005,866
)
62,500,666
Total liabilities and stockholders'
    (deficit) Equity
$
76,589,016
$
149,479,678
$
149,479,678
See accompanying notes.
F-3
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Year Ended December 31,
2001
2002
2003
Collaboration revenue:
License fees
$
—
$
—
$
4,583,337
Reimbursement of development costs
—
—
36,835,829
Total collaboration revenue
—
—
41,419,166
Operating expenses:
Research and development
22,156,808
39,663,303
70,931,916
Sales and marketing
—
—
4,598,588
General and administrative
4,338,401
5,286,707
6,822,949
Total operating expenses
26,495,209
44,950,010
82,353,453
Loss from operations
(26,495,209
)
(44,950,010
)
(40,934,287
)
Interest income
1,815,279
1,808,727
2,171,226
Interest expense
—
(32,179
)
(248,184
)
Loss before income taxes
(24,679,930
)
(43,173,462
)
(39,011,245
)
Provision for income taxes
—
—
(1,688,000
)
Net loss
(24,679,930
)
(43,173,462
)
(40,699,245
)
Preferred stock accretion
(2,494,312
)
(5,096,282
)
(9,160,382
)
Net loss attributable to common stockholders
$
(27,174,242
)
$
(48,269,744
)
$
(49,859,627
)
Historical — Basic and diluted net loss
    attributable to common stockholders per share
$
(7.43
)
$
(13.06
)
$
(12.62
)
Weighted average shares outstanding —
    historical basic and diluted
3,659,422
3,697,192
3,950,481
Pro forma basic and diluted net loss attributable
    to common stockholders per share (Note 2)
$
(1.77
)
Pro forma weighted average shares
    outstanding — basic and diluted (Note 2)
28,094,165
See accompanying notes.
F-4
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
For the Years Ended December 31, 2001 and
2002 and 2003
Series A Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Loans to
Deferred
Shares
Amount
Shares
Amount
Capital
Stockholders
Compensation
Balance at December 31, 2000
120,000
$
150,000
3,000,000
$
30,000
$
1,895,718
$
—
$
—
Warrants issued in connection with the issuance
    of Series C-1
2,134,414
Deferred compensation related to stock options,
    net of cancellations
321,000
(321,000
)
Amortization of deferred compensation
118,000
Exercise of stock options
1,152,000
11,520
679,680
(600,000
)
Options granted to nonemployees
264,000
Repurchase of common stock
300,000
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized appreciation on marketable securities
Comprehensive loss
Balance at December 31, 2001
120,000
150,000
4,152,000
41,520
5,294,812
(300,000
)
(203,000
)
Warrants issued in connection with the issuance
    of Series C-2
3,384,794
Deferred compensation related to stock options,
    net of cancellations
1,334,763
(1,334,763
)
Amortization of deferred compensation
238,600
Exercise of stock options
10,000
100
5,900
Loan to purchase restricted stock
57,000
(102,000
)
Repayment of loan to purchase restricted stock
5,000
Options granted to nonemployees
1,048,539
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2002
120,000
150,000
4,162,000
41,620
11,125,808
(397,000
)
(1,299,163
)
Deferred compensation related to stock options,
    net of cancellations
15,001,255
(15,001,255
)
Amortization of deferred compensation
2,344,153
Exercise of stock options
365,736
3,657
280,496
(34,416
)
Repayment of loan to purchase restricted stock
750
Options granted to nonemployees
2,397,154
Preferred stock accretion
Net loss
Other comprehensive loss:
Unrealized depreciation on marketable securities
Comprehensive loss
Balance at December 31, 2003
120,000
$
150,000
4,527,736
$
45,277
$
28,804,713
$
(430,666
)
$
(13,956,265
)
[Additional columns below]
[Continued from above table, first column(s) repeated]
Other
Treasury Stock
Comprehensive
Income
Accumulated
Stockholders'
Shares
Amount
(Loss)
Deficit
Deficit
Balance at December 31, 2000
—
$
—
$
54,035
$
(12,191,143
)
$
(10,061,390
)
Warrants issued in connection with the issuance
    of Series C-1
2,134,414
Deferred compensation related to stock options,
    net of cancellations
—
Amortization of deferred compensation
118,000
Exercise of stock options
91,200
Options granted to nonemployees
264,000
Repurchase of common stock
500,000
(300,000
)
—
Preferred stock accretion
(2,494,312
)
(2,494,312
)
Net loss
(24,679,930
)
(24,679,930
)
Other comprehensive loss:
Unrealized appreciation on marketable securities
300,660
300,660
Comprehensive loss
(24,379,270
)
Balance at December 31, 2001
500,000
(300,000
)
354,695
(39,365,385
)
(34,327,358
)
Warrants issued in connection with the issuance
    of Series C-2
3,384,794
Deferred compensation related to stock options,
    net of cancellations
—
Amortization of deferred compensation
238,600
Exercise of stock options
6,000
Loan to purchase restricted stock
(75,000
)
45,000
—
Repayment of loan to purchase restricted stock
5,000
Options granted to nonemployees
1,048,539
Preferred stock accretion
(5,096,282
)
(5,096,282
)
Net loss
(43,173,462
)
(43,173,462
)
Other comprehensive loss:
Unrealized depreciation on marketable securities
(121,907
)
(121,907
)
Comprehensive loss
(43,295,369
)
Balance at December 31, 2002
425,000
(255,000
)
232,788
(87,635,129
)
(78,036,076
)
Deferred compensation related to stock options,
    net of cancellations
—
Amortization of deferred compensation
2,344,153
Exercise of stock options
249,737
Repayment of loan to purchase restricted stock
750
Options granted to nonemployees
2,397,154
Preferred stock accretion
(9,160,382
)
(9,160,382
)
Net loss
(40,699,245
)
(40,699,245
)
Other comprehensive loss:
Unrealized depreciation on marketable securities
(101,957
)
(101,957
)
Comprehensive loss
(40,801,202
)
Balance at December 31, 2003
425,000
$
(255,000
)
$
130,831
$
(137,494,756
)
$
(123,005,866
)
See accompanying notes.
F-5
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Year Ended December 31,
2001
2002
2003
Operating activities
Net loss
$
(24,679,930
)
$
(43,173,462
)
$
(40,699,245
)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
Depreciation and amortization
92,743
316,728
891,177
Loss on disposal of assets
—
—
31,268
Noncash stock-based compensation
382,000
1,287,134
4,741,307
Noncash license expense
—
—
—
Gain on sale of marketable securities
(142,803
)
(333,235
)
(16,077
)
Changes in operating assets and liabilities:
Collaboration receivable
—
—
(2,562,000
)
Prepaid expenses and other current assets
(79,907
)
(43,073
)
77,643
Other assets
—
—
(260,757
)
Accounts payable and accrued expenses
5,105,096
1,626,614
6,865,625
Deferred license fee revenue
—
—
70,416,663
Other liabilities
54,025
498,212
(44,859
)
Net cash provided by (used in) operating
    activities
(19,268,776
)
(39,821,082
)
39,440,745
Investing activities
Purchases of property and equipment
(192,840
)
(582,330
)
(3,778,026
)
Purchase of marketable securities
(289,359,394
)
(136,447,734
)
(400,556,838
)
Proceeds from sale of marketable securities
255,017,214
126,796,094
357,470,013
Increase in restricted cash
(980,561
)
(1,084,543
)
(2,958,225
)
Repayment of loan to stockholders
—
255,000
750
Increase in prepaid expenses and other current
    assets
(370,779
)
(39,538
)
(407,663
)
Increase in other assets
(300,000
)
(839,395
)
(1,701,223
)
Net cash (used in) provided by investing
    activities
(36,186,360
)
(11,942,446
)
(51,931,212
)
Financing activities
Proceeds from issuance of common stock
91,200
6,000
249,737
Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
53,585,050
54,154,200
32,022,769
Repayment of capital lease obligations
—
(127,184
)
(560,128
)
Net cash provided by (used in) financing
    activities
53,676,250
54,033,016
31,712,378
Net increase (decrease) in cash and cash
    equivalents
(1,778,886
)
2,269,488
19,221,911
Cash and cash equivalents at beginning of period
5,301,243
3,522,357
5,791,845
Cash and cash equivalents at end of period
$
3,522,357
$
5,791,845
$
25,013,756
Noncash financing and investing
    activities
Repurchase of restricted common stock
$
300,000
$
—
$
—
Fixed assets capitalized using capital leases
$
—
$
2,355,686
$
—
Loans to stockholders in connection with exercise
    of stock options and stock purchase
$
600,000
$
102,000
$
34,416
Supplemental disclosures of cash flow
    information
Cash paid during the period for:
Interest
$
—
$
32,179
$
248,184
Income taxes paid
$
—
$
—
$
1,709,890
See accompanying notes.
F-6
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2003
1.
Organization and Description of
    Business
Eyetech Pharmaceuticals, Inc. and its wholly
owned subsidiary (collectively, "Eyetech" or the
"Company"), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company's
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company's most advanced
product candidate is Macugen
TM
(pegaptanib sodium),
which it is developing for the treatment of both the wet form of
age-related macular degeneration, known as AMD, and for the
treatment of diabetic macular edema, known as DME, which is a
complication of diabetic retinopathy. In the second half of
2001, the Company initiated two phase 2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. Based on the
results from the first year of these trials, the Company plans
to prepare and file in 2004 a new drug application with the Food
and Drug Administration seeking marketing approval of Macugen
for the treatment of wet AMD. The Company is also currently
conducting a phase 2 clinical trial for the use of Macugen
in the treatment of DME.
The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when it entered into several concurrent agreements with
Pfizer Inc. ("Pfizer") (see Note 11).
On February 4, 2004, the Company
successfully completed an initial public offering (IPO) of
its common stock. The IPO consisted of the sale of
6,500,000 shares of common stock at a price of
$21.00 per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000 shares within 30 days of the IPO to cover
over-allotments. This option was exercised in tandem with the
IPO. In addition, 476,190 shares of common stock were
purchased concurrently with the IPO by Pfizer for $10,000,000 as
part of its commitment under Pfizer's collaboration with
the Company. (Note 11)
Net proceeds of the IPO, including the sale of
stock to Pfizer, after deducting underwriter's discounts
and commission and offering expenses are estimated to be
$152,870,000. An additional $2,600,000 was received for the
issuance of 469,360 shares of preferred stock in connection
with the exercise of preferred stock warrants. An additional
1,867,124 shares of preferred stock were issued on a
cashless basis to the holders of 2,728,661 preferred stock
warrants, who will surrender 861,567 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, automatically converted to common shares upon the
completion of the IPO.
2.
Basis of Presentation and Significant
    Accounting Policies
Consolidation
The accompanying consolidated financial
statements include the accounts of Eyetech
Pharmaceuticals, Inc. and its wholly owned subsidiary. All
intercompany significant account balances and transactions have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts
F-7
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents
The Company considers all highly liquid
investments with an original maturity of three months or less to
be cash equivalents. At December 31, 2003 the Company has
substantially all of its cash and cash equivalents deposited
with one financial institution.
Marketable Securities
Marketable securities are classified as
"available-for-sale" and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders' deficit.
Restricted Cash
Restricted cash of $5,600,000 at
December 31, 2003 collateralizes $5,600,000 of outstanding
letters of credit associated with the leases of the
Company's office and laboratory facilities. The funds are
invested in certificates of deposit. (Notes 13 and 16)
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allows the Company to manage risk.
Fair Value of Financial
    Instruments
The carrying amounts of the Company's
financial instruments, which include cash and cash equivalents,
accounts payable and accrued expenses, approximate their fair
values. The estimated fair value of the redeemable convertible
preferred stock at December 31, 2002 is approximately
$194,000,000, based on the February 2003 preferred stock sales
price of $9.10 per share and at December 31, 2003 is
approximately $526,000,000, based on the IPO common stock value
of $21.00 per share.
Property and Equipment
Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which range from three to
seven years. Leasehold improvements are amortized over the
estimated useful lives of the assets or related lease terms,
whichever is shorter.
Impairment of Long-Lived
    Asset
Effective January 1, 2002, the Company
assesses impairment of long-lived assets in accordance with
SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". Assessments of the
recoverability of long-lived assets are conducted when events or
changes in circumstances occur that indicate that the carrying
value of the asset may not be recoverable. The assessment of
possible impairment is based upon the ability to recover the
asset from the expected future undiscounted cash flows of
related operations. No events have been identified that caused
an evaluation of the recoverability of the long-lived assets for
the years ended December 31, 2001, 2002 and 2003.
F-8
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Revenue Recognition
Revenues associated with the Company's
collaboration with Pfizer consist of non-refundable, up-front
license fees and reimbursement of development expenses.
The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" and
Emerging Issues Task Force ("EITF") Issue 00-21
"Revenue Arrangements with Multiple Deliverables"
("EITF 00-21"). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue 99-19 "Reporting Revenue
Gross as a Principal Versus Net as an Agent"
("EITF 99-19"), and EITF Issue 01-14
"Income Statement Characterization of Reimbursements
Received For "Out-of-Pocket" Expenses Incurred"
("EITF 01-14"). According to the criteria
established by these EITF Issues, in transactions where the
Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
Research and Development
    Costs
Research and development costs are expensed as
incurred.
Stock-Based Compensation
In December 2002, SFAS No. 148,
"Accounting for Stock-Based Compensation —
Transition and Disclosure — an amendment of FASB
Statement No. 123" ("SFAS 148") was
issued. SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation from the
intrinsic value-based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). In addition,
SFAS 148 amends the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company
adopted the disclosure requirements of SFAS 148 effective
December 31, 2002. As allowed by SFAS 123, the Company
has elected to continue to apply the intrinsic value-based
method of accounting prescribed in APB 25 and, accordingly,
does not recognize compensation expense for stock option grants
made at an exercise price equal to or in excess of the fair
market value of the stock at the date of grant.
F-9
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Had compensation cost for the Company's
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS 123, the Company's net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
Year Ended December 31,
2001
2002
2003
Net loss attributable to common stockholders, as
    reported
$
(27,174,242
)
$
(48,269,744
)
$
(49,859,627
)
Add: Non-cash employee compensation as reported
118,000
238,600
2,344,153
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
(216,155
)
(350,877
)
(2,450,510
)
SFAS 123 pro forma net loss
$
(27,272,397
)
$
(48,382,021
)
$
(49,965,984
)
Basic and diluted loss attributable to common
    stockholders per share, as reported
$
(7.43
)
$
(13.06
)
$
(12.62
)
Basic and diluted loss attributable to common
    stockholders per share, SFAS 123 pro forma
$
(7.45
)
$
(13.09
)
$
(12.65
)
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note 2),
    SFAS 123 pro forma
$
(1.78
)
SFAS 123 pro forma information regarding net
loss is required by SFAS 123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS 123. The fair value of the options was estimated at
the date of grant using the minimum value pricing model since
the Company did not complete its IPO until February 4,
2004, with the following assumptions:
Year Ended December 31,
2001
2002
2003
Risk-free interest rate
5.0%
3.5%-5.0%
2.8%-4.2%
Dividend yield
0%
0%
0%
Expected life
7 years
7 years
5 years
The effects of applying SFAS 123 in this pro
forma disclosure are not indicative of future amounts. Pro forma
compensation related to stock option grants is expensed over
their respective vesting periods.
The Company accounts for options issued to
nonemployees under SFAS 123 and EITF Issue 96-18
"Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services" ("EITF 96-18"). As such,
the value of such unvested options is periodically remeasured
and income or expense is recognized during their vesting terms.
Comprehensive Loss
The Company reports comprehensive loss in
accordance with SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130").
SFAS 130 establishes rules for the reporting and display of
comprehensive loss and its components. SFAS 130 requires
unrealized gains on available-for-sale securities to be included
in other comprehensive loss.
Income Taxes
The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting
F-10
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
and tax basis of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation
allowance is provided when it is more likely than not that some
portion or all of a deferred tax asset will not be realized.
Net Loss Per Share
The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards 128, "Earnings per Share"
("SFAS No. 128"). Under the provisions of
SFAS 128, basic net loss per common share ("Basic
EPS") is computed by dividing net loss by the
weighted-average number of common shares outstanding. Diluted
net loss per common share ("Diluted EPS") is computed
by dividing net loss by the weighted-average number of common
shares and dilutive common shares equivalents then outstanding.
Common equivalent shares consist of the incremental common
shares issuable upon the conversion of preferred stock, shares
issuable upon the exercise of stock options and the conversion
of preferred stock upon the exercise of warrants. Diluted EPS is
identical to Basic EPS since common equivalent shares are
excluded from the calculation, as their effect is anti-dilutive.
Pro Forma Information
    (Unaudited)
The pro forma balance sheet as of
December 31, 2003 reflects the automatic conversion of all
outstanding shares of the Company's convertible preferred
stock into an aggregate of 25,182,278 shares of common
stock upon completion of the Company's IPO. The pro forma
balance sheet as of December 31, 2003 does not include the
exercise of 4,031,414 outstanding warrants exercisable for
shares of the Company's redeemable convertible preferred
stock, which in turn automatically converted into shares of the
Company's common stock effective upon the closing of the
Company's IPO. The warrants were exercised by paying the
exercise price in cash or pursuant to a cashless exercise
feature based on the IPO price. Upon completion of the
Company's IPO, 469,360 warrants were exercised for cash and
1,867,124 were exercised under the cashless exercise provision
through the exchange of 861,597 warrants. The pro forma balance
sheet as of December 31, 2003 also does not include the
exercise of outstanding warrants to purchase 833,333 shares
of the Company's redeemable convertible preferred stock,
which became exercisable into the Company's common stock
effective upon the closing of the Company's IPO.
Pro forma basic and diluted net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock into
shares of the Company's common stock effective upon the
closing of the Company's IPO, as if such conversion had
occurred at the date of the original issuance. Accordingly, pro
forma basic and diluted net loss per common share has been
calculated assuming the preferred stock was converted as of the
original date of issuance of the preferred stock. Pro forma
common shares outstanding of 28,094,165 is based on the weighted
average conversion of 24,143,684 shares of our convertible
preferred stock as of December 31, 2003.
Reclassification
Certain prior period amounts have been
reclassified to conform to current year presentation.
Recently Issued Accounting
    Pronouncements
During the year ended December 31, 2003, the
Financial Accounting Standards Board ("FASB") issued
various accounting standards and interpretations, including FASB
Statement No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity" ("SFAS 150"), Interpretation
No. 46 ("FIN 46"), "Consolidation of
Variable Interest Entities, an interpretation of ARB 51"
and Interpretation No. 46-R "Consolidation of Variable
Interest Entities"
F-11
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
("FIN 46-R"). Adoption of these
standards and interpretations has not had a material effect on
the Company's financial condition, results of operations or
liquidity.
3.
Available for Sale Investments
Available for sale investments consist primarily
of federal agency notes, asset backed securities, mortgage
backed securities, corporate debt, United States treasury notes
and municipal bonds at December 31, 2002 and 2003.
The following is a summary of available for sale
investments as of December 31, 2002 and 2003:
Gross
Gross
Unrealized
Unrealized
Cost
Gains
Losses
Fair Value
December 31, 2002
Maturities within one year:
Corporate notes
$
6,143,763
$
25,819
$
(600
)
$
6,168,982
Federal agency notes
27,621,016
44,137
—
27,665,153
Mortgage backed securities
639,453
—
(1,738
)
637,715
Asset backed securities
11,953,435
51,860
(37
)
12,005,258
46,357,667
121,816
(2,375
)
46,477,108
Maturities between one to five years:
Federal agency notes
10,909,462
61,094
—
10,970,556
Mortgage backed securities
2,937,396
24,356
—
2,961,752
Asset backed securities
1,423,950
13,341
—
1,437,291
United States treasury notes
1,497,865
14,556
—
1,512,421
16,768,673
113,347
—
16,882,020
Total
$
63,126,340
$
235,163
$
(2,375
)
$
63,359,128
F-12
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Gross
Gross
Unrealized
Unrealized
Cost
Gains
Losses
Fair Value
December 31, 2003
Maturities within one year:
Corporate notes
$
24,386,443
$
9,725
$
(7,720
)
$
24,388,448
Federal agency notes
23,951,489
10,670
(1,695
)
23,960,464
Mortgage backed securities
—
—
—
—
Asset backed securities
32,023,764
100,669
(2,463
)
32,121,970
80,361,696
121,064
(11,878
)
80,470,882
Maturities between one to five years:
Corporate notes
16,316,113
12,833
(3,658
)
16,325,288
Federal agency notes
6,909,507
1,031
(14,664
)
6,895,874
Mortgage backed securities
730,202
8,486
—
738,688
Asset backed securities
—
—
—
—
Municipal bonds
1,911,724
17,617
—
1,929,341
25,867,546
39,967
(18,322
)
25,889,191
Total
$
106,229,242
$
161,031
$
(30,200
)
$
106,360,073
4.
Property and Equipment
Property and equipment consists of the following:
December 31,
2002
2003
Furniture and office equipment
$
479,660
$
562,826
Computer equipment
688,877
1,728,918
Laboratory equipment
1,828,771
4,348,071
Leasehold improvements
454,857
559,108
3,452,165
7,198,923
Accumulated depreciation and amortization
(440,164
)
(1,331,341
)
$
3,012,001
$
5,867,582
Included in property and equipment are assets
recorded under capital leases with a cost of approximately
$2,355,686 at December 31, 2002 and December 31, 2003.
There were no assets under capital leases prior to 2002.
Amortization of the assets recorded under capital leases is
included with depreciation expense. The accumulated amortization
related to these assets under capital leases was approximately
$196,000 and $649,000 at December 31, 2002 and
December 31, 2003, respectively.
F-13
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
5.
Accounts Payable and Accrued
    Expenses
Accounts payable and accrued expenses consist of
the following:
December 31,
2002
2003
Clinical development expenses
$
3,418,016
$
3,862,646
Manufacturing expenses
278,751
2,469,740
Payroll and related expenses
1,438,809
2,483,688
Professional fees
825,424
1,876,267
Collaboration payable
—
715,000
Other expenses
1,481,478
2,900,762
$
7,442,478
$
14,308,103
6.
Redeemable Convertible Preferred Stock and
    Stockholders' Deficit
Common Stock
As of December 31, 2003, the Company is
authorized to issue 60,000,000 shares of common stock. Each
holder of common stock is entitled to one vote for each share of
common stock held of record on all matters on which stockholders
generally are entitled to vote.
As of December 31, 2003, the Company had
reserved shares of common stock for issuance as follows:
Common stock options
9,049,250
Conversion of Series A preferred stock
120,000
Conversion of Series B preferred stock
5,790,331
Conversion of Series C-1 and C-2 preferred
    stock
16,524,694
Conversion of Series D preferred stock
2,747,253
Exercise of warrants to purchase Series B,
    C-1 and C-2 preferred stock
4,031,414
38,262,942
On September 10, 2003, the Company's
Board of Directors approved a Restated Certificate of
Incorporation. The Restated Certificate of Incorporation, which
was approved by stockholders in December 2003 and became
effective upon the consummation of the Company's IPO in
February 2004, increased the Company's authorized common
stock to 125,000,000 shares and authorized
5,000,000 shares of preferred stock, issuable in one or
more series to be designated by the Company's Board of
Directors.
During 2001, employees and nonemployees exercised
options to purchase 1,152,000 shares of the Company's
common stock for total consideration of $691,200. Of this
amount, the Company loaned $600,000 to one of the purchasers of
the stock pursuant to a full recourse note (see Note 10).
Of those shares purchased, 1,075,000 were restricted, and
generally vest over a four-year period. In connection with the
termination of an executive, 500,000 shares vested
immediately and 500,000 shares were cancelled. At December
2003, 6,250 shares remain restricted. Unvested shares are
subject to the Company's repurchase at the option's
exercise price. During 2002, one nonemployee exercised an option
to purchase 10,000 shares of the Company's common
stock in exchange for $6,000 in cash. During 2003 employees and
nonemployees exercised options to purchase 365,736 shares
of the Company's common stock in exchange for cash of
$250,000 and a full recourse note of $34,000. Included in these
purchases were 8,917 shares purchased by employees and
18,750 shares purchased by a nonemployee that had not yet
vested. At
F-14
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
December 31, 2003, 8,292 shares
purchased by employees and 13,542 shares purchased by
nonemployees remain restricted.
Convertible Preferred Stock
During March 2000, the Company sold
120,000 shares of Series A convertible preferred stock
("Series A") for $150,000. During April 2000, the
Company sold 5,766,332 shares of Series B redeemable
convertible preferred stock ("Series B") and
warrants to purchase 1,142,902 shares of Series B for
approximately $34,473,000, net of issuance costs. The
Company's estimate of the fair value of the warrants was
determined to be $1,040,000. The warrants had an exercise price
of $6.00.
During January 2001, the Company sold
20,666 shares of Series B for $124,000.
During July and August 2001, the Company sold
7,964,229 shares of Series C-1 redeemable convertible
preferred stock ("Series C-1") and warrants to
purchase 1,592,846 shares of Series C-1 for
approximately $53,461,000, net of issuance costs. The
Company's estimate of the fair value of the warrants was
determined to be approximately $2,134,000. The warrants had an
exercise price of $6.80.
Upon the completion of certain defined events,
the Company sold and issued to the purchasers of the
Series C-1, 7,521,777 shares of Series C-2
redeemable convertible preferred stock
("Series C-2") and warrants to purchase
1,504,354 shares of Series C-2 for approximately
$54,157,000, net of issuance costs, in August 2002. The
Company's estimate of the fair value of the warrants was
determined to be approximately $3,385,000. The warrants had an
exercise price of $7.20.
In 2002, the Company authorized the issuance of
2,747,253 shares of Series D convertible preferred
stock ("Series D"). Concurrent with the closing
in February 2003 of the agreements with Pfizer to jointly
develop and commercialize Macugen, the Company sold
2,747,253 shares of Series D to Pfizer for
$24,736,944, net of issuance costs.
In 2003, certain holders of warrants to purchase
Series B, Series C-1 and Series C-2 redeemable
convertible preferred stock exercised warrants to purchase
3,333, 531,825 and 506,863 shares of Series B,
Series C-1 and Series C-2 redeemable convertible
preferred stock, respectively. Proceeds from these exercises
were $7,286,000. In addition, through December 31, 2003 the
Company received notification of exercise, conditional upon
completion of the IPO, from warrant holders to purchase 16,667,
22,053 and 34,861 shares of Series B, Series C-1
and Series C-2 redeemable convertible preferred stock,
respectively. Proceeds of $501,000 have been received by the
Company and are classified as short-term liabilities at
December 31, 2003, pending completion of the IPO.
In connection with the Pfizer agreements, the
Company has also agreed to sell, and Pfizer has agreed to
purchase, up to $25,000,000 worth of additional capital stock
upon the completion of certain milestones at the then current
market price. Concurrent with the completion of the IPO, the
Company sold to Pfizer $10,000,000 worth of common stock.
Accordingly, after the IPO, Pfizer's remaining commitment
to purchase capital stock has been reduced to $15,000,000.
Preferred Stock Warrants
The Company issued warrants in connection with
the sale of Series B, Series C-1 and Series C-2
preferred stock. Concurrent with the completion of the IPO in
February 2004, warrant holders exercised warrants to purchase
129,566, 134,256 and 131,957 shares of Series B,
Series C-1 and Series C-2 stock, respectively.
Proceeds from these exercises aggregated $2,640,000. In
addition, other warrant holders exercised warrants, utilizing
the cashless exercise provisions of the warrant agreements, to
purchase 709,517, 611,746 and 545,861 shares of the
Series B, Series C-1 and Series C-2 stock,
respectively. These exercises resulted in the exchange of
283,819, 292,966 and 284,812 warrants as payment for the purchase
F-15
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
of Series B, Series C-1 and
Series C-2 stock, respectively. The exchange price of the
warrants was the IPO price of $21.00 per share. At
completion of the IPO, 833,333 warrants to purchase
Series B redeemable convertible preferred stock
automatically converted into warrants to purchase
833,333 shares of common stock. These warrants remain
outstanding after completion of the IPO.
Voting
Preferred stockholders are entitled to the number
of votes equal to the number of shares of common stock into
which each share of preferred stock is convertible.
Dividends
The holders of Series A, Series B,
Series C-1, Series C-2 and Series D were entitled
to annual non-cumulative dividends when, and if, declared, prior
and in preference to any dividends payable on common stock, at a
rate of $0.10 per share, $0.48 per share,
$0.54 per share, $0.58 per share and $0.73 per
share, respectively. As of December 31, 2003, no dividends
had been declared. In connection with the conversion of
preferred stock into common stock upon the completion of the
IPO, all dividend rights ceased.
Liquidation
In the event of a defined liquidation event
("Liquidation Event"), which includes a liquidation,
dissolution, winding up of the Company or a merger,
consolidation or reorganization of the Company that results in
the transfer of 50% or more of the outstanding voting power of
the Company or a sale of substantially all the assets of the
Company, the Series A, Series B, Series C-1,
Series C-2 and Series D preferred stockholders were
entitled to, prior and in preference to any other stockholders,
a liquidation preference distribution of the sum of
1.5 times the original per share purchase price paid to the
Company, plus all declared and unpaid dividends, or if greater,
the amount per share as would have been payable had each share
of preferred stock been converted into the Company's common
stock prior to such Liquidation Event. The Series B,
Series C-1, Series C-2 and Series D preferred
stockholders rank senior in preference to the Series A
preferred stockholders, and share ratably on a pari passu basis
in the event of a liquidation. After payment of full
preferential amount to Series A, Series B,
Series C-1, Series C-2 and Series D preferred
stockholders, the remaining assets shall be distributed ratably
among the holders of common stock.
The following table summarizes convertible
preferred stock issued and outstanding (excluding preferred
stock warrants of 4,031,414), with liquidation preferences for
each series at December 31, 2003:
Issued and
Liquidation
Authorized Shares
Outstanding
Preference
Series A
120,000
120,000
$
225,000
Series B
7,763,233
5,790,331
52,112,979
Series C-1
9,557,077
8,496,054
86,659,751
Series C-2
9,026,132
8,028,640
86,709,312
Series D
2,747,253
2,747,253
37,500,003
29,213,695
25,182,278
$
263,207,045
In connection with the conversion of preferred
stock into common stock upon the completion of the IPO, all
liquidation rights ceased.
F-16
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Conversion
Each holder of Series A, Series B,
Series C-1, Series C-2 and Series D had the
ability to convert at any time, at its option, shares of
preferred into common stock on a one-for-one basis subject to
certain adjustments including dilutive issuances and splits, as
defined. All series of preferred stock were converted into
common shares at the completion of the IPO.
Redemption
At any time on or after July 20, 2010, at
the request of the holders of not less than 66 2/3% of the
then outstanding Series C-1, Series C-2 and a majority
of the Series D and Series B or upon a liquidation
event as defined above, the Company shall redeem for cash such
convertible preferred stock at the greater of the sum of
1.5 times the original series issue price plus declared but
unpaid dividends or the amount per share as would have been
payable had each share been converted into common stock.
Accordingly, the Company is recording and accreting the
Series B, Series C-1, Series C-2 and
Series D to its defined redemption value through
July 20, 2010. Series A is not redeemable at the
option of the holder. In connection with the conversion of
preferred stock to common upon completion of the IPO, all
redemption rights ceased.
7.
Stock Options
The Company has reserved a maximum of
8,175,000 shares under the Company's 2001 Stock Option
Plan (the "2001 Plan") and 2,747,500 shares for
stock options granted prior to the adoption of the 2001 Plan.
Stock options may be granted to employees and consultants.
Granted stock options are immediately exercisable into
restricted shares and generally vest over a four-year period
with substantially all options vesting with respect to 25% of
the shares on the first anniversary of the grant date and
thereafter in thirty-six monthly installments. Options expire
ten years from date of grant. Additionally, options that are
exercised into restricted shares of common stock continue to
vest under the original terms of the related options.
The following table summarizes option activity
for the Company:
Weighted-
Common Stock
Average
Options
Exercise Price
Outstanding at January 1, 2001
1,147,500
$
0.60
Granted
2,253,000
1.36
Exercised
(1,152,000
)
0.60
Cancelled
(265,000
)
6.94
Outstanding at December 31, 2001
1,983,500
1.24
Granted
1,885,000
1.38
Exercised
(10,000
)
0.60
Cancelled
(105,084
)
0.89
Outstanding at December 31, 2002
3,753,416
0.98
Granted
1,518,500
5.18
Exercised
(365,736
)
0.78
Cancelled
(209,264
)
2.33
Outstanding at December 31, 2003
4,696,916
$
2.30
F-17
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
The following table summarizes information about
vested stock options outstanding:
December 31,
2001
2002
2003
Vested stock options
581,250
1,210,891
1,844,793
Weighted average exercise price
$
0.60
$
0.60
$
0.87
The following table summarizes information about
stock options outstanding at December 31, 2003:
Options
Outstanding
Weighted-Average
and
Remaining
Exercise Price
Exercisable
Options Vested
Contractual Life
$ 0.60
1,482,500
1,225,304
7.01
1.00
60,000
35,416
7.86
1.36
926,916
366,802
8.36
1.44
746,500
202,953
8.91
2.91
264,500
19,318
9.26
3.50
890,500
(5,000
)
9.54
10.00
228,500
—
9.74
14.00
97,500
—
9.87
4,696,916
1,844,793
8.39
In connection with the granting of employee stock
options in 2001, 2002 and 2003, the Company recorded deferred
compensation of approximately $321,000, $1,335,000 and
$15,001,000, respectively. Deferred compensation is being
amortized over the vesting period of the options resulting in
non-cash stock-based compensation expense of approximately
$118,000, $239,000 and $2,344,000 for the years ended
December 31, 2001, 2002 and 2003, respectively.
For the years ended December 31, 2001, 2002,
and 2003, the Company granted a total of 345,500, 137,500 and
5,000, respectively, in stock options to certain consultants and
Scientific Advisory Board members. The Company has accounted for
these options in accordance with EITF 96-18 and,
accordingly, recorded non-cash expense of $264,000, $1,049,000
and $2,397,000 for the years ended December 31, 2001, 2002,
and 2003, respectively. The Company will continue to remeasure
the fair value of unvested stock options to these consultants
and Scientific Advisory Board members until vesting is complete.
On September 10, 2003, the Company's
Board of Directors approved the Company's 2003 Stock
Incentive Plan (the "2003 Incentive Plan"). The 2003
Incentive Plan, which was approved by stockholders in December
2003, became effective on February 4, 2004, the date that
the registration statement relating to the Company's IPO
was declared effective. Under the 2003 Incentive Plan,
4,400,000 shares of common stock are authorized for
issuance, subject to annual increases beginning in 2005 in
accordance with the terms of the 2003 Incentive Plan. Upon
effectiveness of the 2003 Incentive Plan, the Company will grant
no further stock options or other awards under the
Company's 2001 Plan.
On September 10, 2003, the Company's
Board of Directors approved the Company's 2003 Employee
Stock Purchase Plan (the "2003 Purchase Plan"). The
2003 Purchase Plan, which was approved by stockholders in
December 2003, became effective on February 4, 2004, the
date that the registration statement relating to the
Company's IPO was declared effective. Under the 2003
Purchase Plan, 500,000 shares of common stock are reserved
for sale to participating employees at an amount equal to 85% of
the lower of the closing price of our common stock on the first
day or the last day of the offering period.
F-18
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
8.
Loss Per Share
The following table sets forth the computation of
basic and diluted net loss attributable to common stockholders
per share.
Year Ended December 31,
2001
2002
2003
Numerator:
Net Loss
$
(24,679,930
)
$
(43,173,462
)
$
(40,699,245
)
Preferred stock accretion
(2,494,312
)
(5,096,282
)
(9,160,382
)
Numerator for basic and diluted net loss
    attributable to common stockholders per share — net
    loss attributable for common stockholders
$
(27,174,242
)
$
(48,269,744
)
$
(49,859,627
)
Denominator:
Denominator for basic and dilutive net loss
    attributable to common stockholders per share —
    weighted average shares
3,659,422
3,697,192
3,950,481
Basic and diluted net loss attributable to common
    stockholders per share
$
(7.43
)
$
(13.06
)
$
(12.62
)
Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share — weighted average shares (Note 2)
28,094,165
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share (Note 2)
$
(1.77
)
The following table shows dilutive common share
equivalents outstanding, which are not included in the above
historical calculations, as the effect of their inclusion is
anti-dilutive during each period:
Year Ended December 31,
2001
2002
2003
Preferred stock
13,871,227
21,393,004
25,182,278
Options
1,983,500
3,753,416
4,696,916
Warrants
3,569,081
5,073,435
4,031,414
19,423,808
30,219,855
33,910,608
9.
Income Taxes
At December 31, 2003, the Company has a net
operating loss for federal income tax purposes of approximately
$43,315,000, which begins to expire in 2020.
The Company has research and development tax
credit carry forwards at December 31, 2003 of approximately
$1,027,000, which will expire in 2022. The Company also has
alternative minimum tax credit carry forwards at
December 31, 2003 of approximately $833,000, which are
available for use against the Company's regular tax
liability in the future. If an ownership change, as defined
under Internal Revenue Code Section 382, occurs, the use of
these carry forwards may be subject to limitation.
F-19
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Provision for income tax at December 31,
2003 consists of:
Current Federal alternative minimum tax
$
833,000
Current State taxes
$
855,000
$
1,688,000
Deferred income taxes reflect the net effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The Company's deferred tax
assets relate primarily to net operating loss carryforwards and
deferred license fee revenue. For the year ended
December 31, 2003 the change in valuation allowance was
approximately $17,703,000. At December 31, 2002 and 2003, a
valuation allowance was recorded to fully offset the net
deferred tax asset. Significant components of the Company's
deferred tax assets are as follows:
Year Ending December 31,
2002
2003
Deferred tax assets:
Net operating loss carryforwards
$
29,864,000
$
17,326,000
Accrued bonus
505,000
—
Stock-based compensation
707,000
2,286,000
Start-up costs, net of amortization
236,000
122,000
Deferred license fee revenue
—
28,167,000
Alternative minimum tax credit
—
833,000
Research and development tax credit
—
1,027,000
Other
62,000
197,000
Total gross deferred tax assets
31,374,000
49,958,000
Deferred tax liabilities:
Depreciation
(112,000
)
(993,000
)
Total gross deferred tax liabilities
(112,000
)
(993,000
)
Valuation allowance
(31,262,000
)
(48,965,000
)
Net deferred tax assets
$
—
$
—
A reconciliation of the statutory tax rates and
the effective tax rates for the years ended December 31,
2002 and 2003 is as follows:
Year Ended
December 31,
2001
2002
2003
Statutory rate
(34
)%
(34
)%
(34
)%
State and local income taxes (net of federal tax
    benefit)
(6
)
(6
)
(4
)
Tax credits
—
—
(3
)
Change in valuation allowance
40
40
45
0
%
0
%
4
%
F-20
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
10.
Loans to Stockholders
On January 15, 2001, the Company hired a new
President and Chief Operating Officer (the
"Executive"). The employment agreement with the
Executive provided for a $600,000 loan the proceeds of which was
used to exercise 1,000,000 stock options at a per share exercise
price of $0.60. The 1,000,000 restricted common shares were to
vest over a four-year period. The loan was a full-recourse note
and was non-interest bearing. Additionally, the Company loaned
the Executive an additional $500,000. This loan was also
non-interest bearing.
On November 8, 2001, the Company and the
Executive mutually agreed to terminate the employment of the
Executive. In connection with the termination agreement, 500,000
of the 1,000,000 restricted common shares were immediately
vested, and the Company exercised its right to repurchase the
remaining 500,000 unvested shares at the original exercise price
of $0.60 or $300,000, which was credited to the $600,000 loan
principal due from the Executive. The Executive repaid $5,000 of
the loan principal during 2002. The remaining loan balance of
$295,000 is due in January 2007 and is collateralized by 500,000
restricted common shares. Additionally, the Company forgave
$250,000 of the $500,000 loan principal which was included as
additional expense. The remaining $250,000 of the loan principal
was repaid during 2002.
11.
Collaboration Agreements
In March 2000, the Company licensed the rights to
certain technology from a corporate licensor in exchange for an
up-front license fee of $7,000,000 and a warrant to purchase
833,333 shares of Series B Convertible Preferred Stock
at an exercise price of $6.00 per share. The warrant is
exercisable at any time through March 30, 2005. In
addition, the Company may be required to make additional
payments aggregating up to $25,000,000 upon the achievement of
development and commercial launch milestones specified in the
licensing agreement.
In December 2001, the Company signed a license
agreement for the nonexclusive rights to certain technology from
a corporate licensor in exchange for an initial irrevocable and
nonrefundable license fee of $2,000,000, which was paid in 2002.
Additionally, the Company may be required to make additional
payments aggregating up to $4,000,000 upon the achievement of
specified regulatory milestones with respect to the use of
Macugen for the treatment of AMD and aggregating up to
$2,750,000 upon the achievement of specified regulatory
milestones with respect to the use of Macugen for other
therapeutic indications. For the year ended December 31,
2001, the Company recorded the $2,000,000 license fee as a
research and development expense.
In February 2002, the Company entered into a
license, manufacturing and supply agreement for the use of
certain technology rights to certain patents of a component of
Macugen. The contract calls for specified pricing based on
quantities purchased. The Company paid an up-front license fee
of $1,500,000 and may be required to make additional payments
aggregating up to $4,500,000 upon the achievement of specified
development milestones with respect to Macugen. The Company may
credit a portion of its future milestones payments against a
portion of the royalty payments that it may be required to make
under this agreement. For the year ended December 31, 2002,
the Company recorded the $1,500,000 license fee as a research
and development expense.
In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February 3, 2003 when government approval
was obtained, Pfizer made initial payments of $100,000,000 which
included the purchase of 2,747,253 shares of the
Company's Series D preferred stock for $24,736,944,
net of issuance costs and a $75,000,000 initial license fee
which is being amortized over the expected term of the agreement
(estimated at 15 years). In addition, the Company has
agreed to sell to
F-21
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
Pfizer and Pfizer has agreed to purchase from the
Company, up to an additional $25,000,000 of the Company's
capital stock at the then current market price upon the
completion of certain events, including $10,000,000 of the
Company's common stock at the IPO price concurrently with
the successful completion of an IPO. Concurrent with the IPO,
Pfizer purchased 476,190 shares of common stock at
$21.00 per share.
Based on the achievement of certain specified
worldwide regulatory submission and approvals, the Company would
be eligible to receive up to an additional $195,500,000 in
milestone payments. The Company also has the potential to
receive up to an additional $450,000,000 in milestone payments,
which are contingent upon successful commercialization of
Macugen and which are based on attainment of agreed-upon sales
levels. Pfizer may terminate the collaboration relationship upon
six to twelve months' prior notice, depending on when such
notice is given.
If approved, Macugen will be co-promoted by the
Company and Pfizer in the United States where Eyetech will have
an ophthalmology sales force, maintain the inventory and book
all United States product sales. The Company and Pfizer will
share in profits and losses from the sale of Macugen products in
the United States. Outside the United States, Pfizer will market
the product exclusively under a license, for which the Company
will receive royalty income. As part of the agreement, the
Company will begin to assemble a sales force prior to commercial
launch of Macugen, which also allows for the detailing
Pfizer's Xalatan® ophthalmologic treatment in exchange
for specified royalties.
Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company's share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$36,835,829 in revenue and $3,305,552 in research and
development and marketing expenses during 2003. Through
December 31, 2003, Pfizer has made payments to the Company
of $31,683,277. Accordingly, at December 31, 2003, the
Company has recorded a collaboration receivable for the net
amount of $2,562,000 and a collaboration payable of $715,000. In
addition, the Company recognized $4,583,337 in connection with
the amortization of the $75,000,000 initial license fee paid by
Pfizer.
12.
Capital Leases
The Company leases laboratory equipment and other
equipment under capital leases that bear interest from 9.6% to
10.1% and expire in 2006. The following is a schedule of the
future minimum lease payments under these capital leases as of
December 31, 2003:
2004
$
756,000
2005
694,000
2006
438,000
Total
1,888,000
Less amount representing interest
232,000
Present value of the minimum lease payments
1,656,000
Less current portion of capital lease obligations
618,000
$
1,038,000
F-22
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
13.
Commitments
The Company leases office and laboratory space in
New York, New York, Cedar Knolls, New Jersey and
Woburn, Massachusetts. During 2002, the Company leased certain
office space in New York, New York, which expires on
July 31, 2007. Under existing lease agreements, the Company
has secured bank letters of credit totaling approximately
$2,624,000, which are fully cash collateralized and the cash is
categorized as restricted cash in the balance sheet.
Additionally, the Company has obtained a $3,000,000 secured bank
letter of credit in anticipation of entering into a leasing
commitment for operational and administrative facilities.
(Note 16)
Rent expense for the years ended
December 31, 2001, 2002 and December 31, 2003 was
approximately $482,000, $1,380,000 and $1,316,000, respectively.
Future minimum lease commitments, net of sublease income, are as
follows:
2004
$
1,556,000
2005
1,564,000
2006
1,577,000
2007
1,237,000
2008
876,000
Thereafter
1,504,000
$
8,314,000
Under certain of the Company's collaborative
agreements it is obligated to make specified payments upon
achieving specified milestones relating to the development and
regulatory approval of Macugen. These contingent payment
obligations are not included in the above table.
14.
401(k) Plan
The Company maintains a defined contribution
401(k) plan available to eligible employees. Employee
contributions are voluntary and are determined on an individual
basis, limited by the maximum amounts allowable under federal
tax regulations. The Company has discretion to make
contributions to the plan. However, to date no contributions
have been made.
F-23
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (CONTINUED)
15.
Selected Quarterly Financial Data
    (Unaudited)
Quarter Ended
March 31
June 30
September 30
December 31
2001
Net loss
$
(4,581,212
)
$
(6,041,233
)
$
(4,816,970
)
$
(9,240,515
)
Net loss attributable to common stockholders
(4,958,852
)
(6,419,327
)
(5,588,020
)
(10,208,043
)
Basic and diluted net (loss) per common share*
$
(1.65
)
$
(1.74
)
$
(1.36
)
$
(2.68
)
2002
Net loss
$
(8,747,753
)
$
(9,631,821
)
$
(10,697,851
)
$
(14,096,037
)
Net loss attributable to common stockholders
(9,833,552
)
(10,717,620
)
(11,971,922
)
(15,746,650
)
Basic and diluted net (loss) per common share*
$
(2.69
)
$
(2.93
)
$
(3.20
)
$
(4.22
)
2003 (Restated)**
License fees
$
833,334
$
1,250,001
$
1,250,001
$
1,250,001
Reimbursement of development costs
6,475,830
9,948,756
11,143,313
9,267,930
Net loss
(5,422,172
)
(9,071,789
)
(14,308,255
)
(11,897,029
)
Net loss attributable to common stockholders
(7,681,135
)
(11,330,753
)
(16,583,830
)
(14,263,909
)
Basic and diluted net (loss) per common share*
$
(2.04
)
$
(2.88
)
$
(4.12
)
$
(3.50
)
*
Per common share amounts for the quarters and
    full years have been calculated separately. Accordingly,
    quarterly amounts do not add to the annual amount because of
    differences in the weighted average common shares outstanding
    during each period principally due to the effect of the
    Company's issuing shares of its common stock during the
    year.
Diluted EPS is identical to Basic EPS since
    common equivalent shares are excluded from the calculation, as
    their effect is anti-dilutive.
**
The quarterly results for the reimbursement of
    development costs for the quarters ended March 31, 2003,
    June 30, 2003 and September 30, 2003 have been
    restated due to certain reclassifications of reimbursable costs
    that were made to quarterly billings in connection with the
    Company's collaboration with Pfizer. These restatements do
    not alter the full year results or amounts receivable under the
    collaboration at December 31, 2003.
16.
Subsequent Events
Lease for New Corporate Headquarters
    Space
In January 2004, the Company entered into a
sub-sublease arrangement for additional office space in
New York, NY to be used as new corporate operational and
administrative space. Under the terms of the sub-sublease, the
Company will lease 62,000 square feet of space through 2020
at an initial rate of $45 per square foot, subject to
periodic rate increases. As security for the sublease, we have
named the sub-landlord as beneficiary under a secured bank
letter of credit in the amount of $3,000,000. (Note 13)
F-24
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
December 31,
March 31,
2003
2004
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
25,013,756
$
128,648,696
Marketable securities
106,360,073
138,266,452
Collaboration receivable
2,562,000
4,502,000
Prepaid expenses and other current assets
1,301,027
3,017,675
Total current assets
135,236,856
274,434,823
Property and equipment, net
5,867,582
7,331,813
Restricted cash
5,623,865
5,623,865
Other assets
2,751,375
1,087,688
Total assets
$
149,479,678
$
288,478,189
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
    EQUITY
Current liabilities:
Accounts payable and accrued expenses
$
14,308,103
$
9,606,981
Deferred revenue, current portion
5,000,000
5,214,871
Capital lease obligations, current portion
618,350
633,826
Deferred rent liability, current portion
171,856
171,857
Total current liabilities
20,098,309
15,627,535
Deferred revenue, net of current portion
65,416,663
65,457,791
Capital lease obligations, net of current portion
1,038,279
873,900
Other liabilities, net of current portion
425,761
949,234
Redeemable convertible preferred
    stock — $.01 par value; 29,093,695 shares
    authorized; 25,062,278 and none issued and outstanding at
    December 31, 2003 and March 31, 2004, respectively,
    liquidation preference of $252,053,310 as of December 31,
    2003
185,506,532
—
Stockholders' (deficit) equity:
Convertible preferred stock —
    $.01 par value; 120,000 and none authorized, issued and
    outstanding at December 31, 2003 and March 31, 2004,
    respectively; liquidation preference of $225,000 as of
    December 31, 2003
150,000
—
Preferred stock $.01 par value;
    5,000,000 shares authorized, none issued and outstanding at
    December 31, 2003 and March 31, 2004
—
—
Common stock $.01 par value; 60,000,000 and
    125,000,000 shares authorized; 4,527,736 issued and
    4,102,736 outstanding at December 31, 2003; 40,762,109
    issued and 40,337,109 outstanding at March 31, 2004
45,277
407,621
Additional paid-in capital
28,804,713
373,844,810
Loans to stockholders
(430,666
)
(430,666
)
Deferred compensation
(13,956,265
)
(14,840,850
)
Treasury stock, at cost
(255,000
)
(255,000
)
Accumulated other comprehensive income
130,831
166,327
Accumulated deficit
(137,494,756
)
(153,322,513
)
Total stockholders' (deficit) equity
(123,005,866
)
205,569,729
Total liabilities and stockholders'
    (deficit) equity
$
149,479,678
$
288,478,189
See accompanying notes.
F-25
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended March 31,
2003
2004
(Unaudited)
(Unaudited)
Collaboration revenue:
License fees
$
833,334
$
1,250,000
Reimbursement of development costs
6,475,830
10,462,600
Total collaboration revenue
7,309,164
11,712,600
Operating expenses:
Research and development
11,616,643
21,930,892
Sales and marketing
568,443
3,799,229
General and administrative
1,103,146
1,642,661
Total operating expenses
13,288,232
27,372,782
Loss from operations
(5,979,068
)
(15,660,182
)
Interest income
618,476
694,708
Interest expense
(61,580
)
(46,271
)
Net loss
(5,422,172
)
(15,011,745
)
Preferred stock accretion
(2,258,963
)
(816,012
)
Net loss attributable to common stockholders
$
(7,681,135
)
$
(15,827,757
)
Basic and diluted net loss attributable to common
    stockholders per share
$
(2.04
)
$
(0.57
)
Weighted average shares outstanding —
    basic and diluted
3,760,796
27,529,863
Pro forma basic and diluted net loss attributable
    to common stockholders per share
$
(0.29
)
$
(0.44
)
Weighted average shares outstanding —
    pro forma basic and diluted
26,863,202
35,782,390
See accompanying notes.
F-26
Table of Contents
EYETECH PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
Three Months Ended March 31,
2003
2004
(Unaudited)
(Unaudited)
Operating activities
Net loss
$
(5,422,172
)
$
(15,011,745
)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
Depreciation and amortization
181,191
551,726
Noncash stock-based compensation
—
1,945,605
(Gain) loss on sale of marketable securities
—
6,937
Changes in operating assets and liabilities:
Collaboration receivable
(5,945,954
)
(434,000
)
Prepaid expenses and other current assets
301,009
(1,379,572
)
Other assets
(144,980
)
(37,537
)
Accounts payable and accrued expenses
(1,422,261
)
(4,200,158
)
Deferred revenue
74,166,666
(1,250,000
)
Other liabilities
(105,974
)
523,473
Net cash provided by (used in) operating
    activities
61,607,525
(19,285,271
)
Investing activities
Purchases of property and equipment
(907,763
)
(2,015,957
)
Purchase of marketable securities
(52,639,104
)
(1,822,600,498
)
Proceeds from sale of marketable securities
22,956,901
1,790,722,677
Repayment of loan to stockholders
750
—
Increase in prepaid expenses and other current
    assets
(24,108
)
(337,076
)
Net cash (used in) investing activities
(30,613,324
)
(32,529,631
)
Financing activities
Proceeds from issuance of common stock, net
39,333
152,659,541
Proceeds from issuance of redeemable convertible
    preferred stock and warrants, net
24,994,988
2,640,427
Repayment of capital lease obligations
(135,191
)
(148,903
)
Net cash provided by financing activities
24,899,130
155,449,842
Net increase in cash and cash equivalents
55,893,331
103,634,940
Cash and cash equivalents at beginning of period
5,791,845
25,013,756
Cash and cash equivalents at end of period
$
61,685,176
$
128,648,696
Noncash financing and investing
    activities
Loans to stockholders in connection with exercise
    of stock options and stock purchase
$
34,416
$
—
Supplemental disclosures of cash flow
    information
Cash paid during the period for:
Interest
$
61,580
$
46,271
Issuance of redeemable preferred stock on
    conditional exercise of warrants
$
—
$
500,964
Conversion of redeemable and convertible
    preferred stock to common stock
$
—
$
189,613,935
Expenses in connection with initial public
    offering of common stock reclassified to additional paid in
    capital
$
—
$
1,701,223
See accompanying notes.
F-27
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2004
1.
Organization and Description of
    Business
Eyetech Pharmaceuticals, Inc., together with
its wholly owned subsidiary ("Eyetech" or the
"Company"), is a biopharmaceutical company that
specializes in the development and commercialization of novel
therapeutics to treat diseases of the eye. The Company's
initial focus is on diseases affecting the back of the eye,
particularly the retina. The Company's most advanced
product candidate is Macugen
TM
(pegaptanib sodium
injection), which it is developing in a collaboration with
Pfizer Inc. ("Pfizer") for the treatment of both the
wet form of age-related macular degeneration, known as AMD, and
for the treatment of diabetic macular edema, known as DME, which
is a complication of diabetic retinopathy. In the second half of
2001, the Company initiated two Phase 2/3 pivotal clinical
trials of Macugen for the treatment of wet AMD. Based on the
results from the first year of these trials, the Company plans
to prepare and file in 2004 a new drug application with the
United States Food and Drug Administration seeking marketing
approval of Macugen for the treatment of wet AMD. The Company is
also currently conducting a Phase 2 clinical trial for the
use of Macugen in the treatment of DME and recently announced
preliminary data from this ongoing study.
The Company formed a wholly owned subsidiary in
Ireland in 2002. There has been no activity in this company
since inception in 2002. The Company operates in a single
business segment.
Prior to February 2003, the Company operated as a
development-stage company and did not generate any revenue.
Effective February 2003, the Company exited the development
stage when its several concurrent agreements with Pfizer became
effective.
On February 4, 2004, the Company
successfully completed an initial public offering of its common
stock. The initial public offering consisted of the sale of
6,500,000 shares of common stock at a price of
$21.00 per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000 shares within 30 days of the initial public
offering to cover over-allotments. This option was exercised in
full in February 2004. Net proceeds from the initial public
offering after deducting underwriters' discounts and
expenses were $142.9 million. In addition,
476,190 shares of common stock were purchased concurrently
with the initial public offering by Pfizer for $10 million
as part of its commitment under Pfizer's collaboration with
the Company.
We issued 5,073,435 warrants in connection with
original issuances of preferred stock from April 2000 to August
2002 and the in-licensing of Macugen in April 2000. Prior to the
closing of our initial public offering, 1,511,381 shares of
preferred stock were issued in connection with warrant exercises
providing $10.4 million in aggregate proceeds during the
quarter ended March 31, 2004. Included in this amount were
73,581 shares issued pursuant to conditional exercises
received during the quarter ended December 31, 2003 for
proceeds of $0.5 million. An additional
1,867,124 shares of preferred stock were issued on a
cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333 shares
of Series B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March 31, 2004 on a
cashless basis, resulting in the issuance of 680,509 shares
of common stock in exchange for the surrender of warrants to
purchase 152,824 shares of common stock. No warrants remain
outstanding at March 31, 2004.
F-28
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
2.
Summary of Significant Accounting
    Policies
Basis of Presentation
The accompanying condensed consolidated 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. Accordingly, they do not include all the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, the accompanying
financial statements include all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair
presentation of the Company's financial position, results
of operations, and cash flows for the periods presented.
The results of operations for the three-month
period ended March 31, 2004 are not necessarily indicative
of the results that may be expected for the entire fiscal year
ending December 31, 2004. These condensed consolidated
financial statements should be read in conjunction with the
audited financial statements included in the Company's
Annual Report on Form 10-K for the year ended
December 31, 2003 filed with the Securities and Exchange
Commission.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Reclassification
Certain reclassifications have been made to the
prior year's information to conform to the 2004
presentation.
Cash Equivalents
The Company considers all highly-liquid
investments with an original maturity of three months or less to
be cash equivalents. At March 31, 2004, the Company had
substantially all of its cash and cash equivalents deposited
with one financial institution.
Marketable Securities
Marketable securities are classified as
"available-for-sale" and are carried at market value
with unrealized gains and losses reported as other comprehensive
income or loss, which is a separate component of
stockholders' deficit.
Restricted Cash
Restricted cash of $5.6 million at
March 31, 2004 collateralizes $5.6 million of
outstanding letters of credit associated with the leases of the
Company's office and laboratory facilities. The funds are
invested in certificates of deposit.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to a concentration of credit risk consist of cash
equivalents and marketable securities. The Company has
established guidelines relating to diversification and
maturities that allow the Company to manage risk.
F-29
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
Revenue Recognition
Revenues associated with the Company's
collaboration with Pfizer consist of non-refundable, up-front
license fees, reimbursement of development expenses and costs
associated with the validation of the manufacturing process. The
Company expects to record revenues and expenses in future
periods related to equipment purchased which, under the terms of
our agreement, Pfizer will reimburse to the Company a portion of
the total cost of the equipment which will be recognized over
the life of the equipment.
The Company uses revenue recognition criteria
outlined in Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" and
Emerging Issues Task Force ("EITF") Issue 00-21,
"Revenue Arrangements with Multiple Deliverables"
("EITF 00-21"). Accordingly, revenues from
licensing agreements are recognized based on the performance
requirements of the agreement. Non-refundable up-front fees,
where the Company has an ongoing involvement or performance
obligation, are generally recorded as deferred revenue in the
balance sheet and amortized into license fees in the statement
of operations over the term of the performance obligation.
Revenues derived from reimbursements of costs
associated with the development of Macugen are recorded in
compliance with EITF Issue 99-19, "Reporting Revenue
Gross as a Principal Versus Net as an Agent"
("EITF 99-19"), and EITF Issue 01-14,
"Income Statement Characterization of Reimbursements
Received For "Out-of-Pocket" Expenses Incurred"
("EITF 01-14"). According to the criteria
established by these EITF Issues, in transactions where the
Company acts as a principal, with discretion to choose
suppliers, bears credit risk and performs part of the services
required in the transaction, the Company has met the criteria to
record revenue for the gross amount of the reimbursements.
Research and Development
    Costs
Research and development costs are expensed as
incurred.
Stock-Based Compensation
In December 2002, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial
Accounting Standard No. 148, "Accounting for
Stock-Based Compensation — Transition and
Disclosure — an amendment of FASB Statement
No. 123" ("SFAS 148"). SFAS 148
provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based employee compensation from the intrinsic value-based
method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). In addition,
SFAS 148 amends the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company
adopted the disclosure requirements of SFAS 148 effective
December 31, 2002. As allowed by SFAS 123, the Company
has elected to continue to apply the intrinsic value-based
method of accounting prescribed in APB 25 and, accordingly,
does not recognize compensation expense for stock option grants
made at an exercise price equal to or in excess of the fair
market value of the stock at the date of grant.
F-30
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
Had compensation cost for the Company's
outstanding employee stock options been determined based on the
fair value at the grant dates for those options consistent with
SFAS 123, the Company's net loss and basic and diluted
net loss per share, would have been changed to the following pro
forma amounts:
Three Months Ended March 31,
2003
2004
Net loss attributable to common stockholders, as
    reported
$
(7,681,135
)
$
(15,827,757
)
Add: Non-cash employee compensation as reported
—
1,141,528
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards
(166,477
)
(1,777,981
)
SFAS 123 pro forma net loss
$
(7,847,612
)
$
(16,464,210
)
Basic and diluted loss attributable to common
    stockholders per share, as reported
$
(2.04
)
$
(0.57
)
Basic and diluted loss attributable to common
    stockholders per share, SFAS 123 pro forma
$
(2.09
)
$
(0.60
)
SFAS 123 pro forma information regarding net
loss is required by SFAS 123, and has been determined as if
the Company had accounted for its stock-based employee
compensation under the fair value method prescribed in
SFAS 123. The fair value of the options prior to completion
of the Company's initial public offering was estimated at
the date of grant using the minimum value pricing model. Upon
completion of the initial public offering in February, 2004, the
Company began using the Black-Scholes model to estimate fair
value. The following assumptions were utilized for the
calculations during each period:
Three Months Ended
March 31,
2003
2004
Risk-free interest rate
2.80%
3.86%
Dividend yield
0%
0%
Expected life
7 years
5 years
Volatility
N/A
76%
The effects of applying SFAS 123 in this pro
forma disclosure are not indicative of future amounts. Pro forma
compensation related to stock option grants is expensed over
their respective vesting periods.
The Company accounts for options issued to
nonemployees under SFAS 123 and EITF Issue 96-18
"Accounting for Equity Investments that are Issued to Other
than Employees for Acquiring or in Conjunction with Selling
Goods or Services" ("EITF 96-18"). As such,
the value of such unvested options is periodically remeasured
and income or expense is recognized during their vesting terms.
Income Taxes
The Company utilizes the asset and liability
method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets
and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is provided when it is more
likely than not that some portion or all of a deferred tax asset
will not be realized.
F-31
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
Recently Issued Accounting
    Pronouncements
In June 2002, the FASB issued
SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities"
"SFAS No. 146"). This standard addresses
financial accounting and reporting for costs associated with an
exit or disposal activities and requires companies to recognize
costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or
disposal plan. This standard nullifies EITF Issue 94-3,
"Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring." This Standard is
effective for exit or disposal activities initiated after
December 31, 2002. The adoption of this statement did not
have a material effect on the Company's results of
operations, cash flows or financial position during the quarter
ended March 31, 2004.
During 2003, the FASB issued various accounting
standards and interpretations, including SFAS No. 150,
"Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity"
("SFAS 150"), Interpretation No. 46
("FIN 46"), "Consolidation of Variable
Interest Entities, an interpretation of ARB 51" and
Interpretation No. 46-R "Consolidation of Variable
Interest Entities" ("FIN 46-R"). Adoption of
these standards and interpretations has not had a material
effect on the Company's financial condition, results of
operations or liquidity. There have been no other accounting
pronouncements made through March 31, 2004 that the Company
expects will have a material effect on its results of
operations, cash flows or financial position.
3.
Net Loss Per Share
The Company computes net loss per share in
accordance with Statement of Financial Accounting
Standards 128, "Earnings per Share"
("SFAS No. 128"). Under the provisions of
SFAS 128, basic net loss per common share ("Basic
EPS") is computed by dividing net loss by the
weighted-average number of common shares outstanding. Diluted
net loss per common share ("Diluted EPS") is computed
by dividing net loss by the weighted-average number of common
shares and dilutive common share equivalents then outstanding.
Common equivalent shares consist of the incremental common
shares issuable upon the conversion of preferred stock, shares
issuable upon the exercise of stock options and the conversion
of preferred stock upon the exercise of warrants. Diluted EPS is
identical to Basic EPS since common equivalent shares are
excluded from the calculation, as their effect is anti-dilutive.
F-32
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
The following table sets forth the computation of
basic and diluted net loss per share for the three-month period
ended March 31, 2003 and 2004:
Three Months Ended March 31,
2003
2004
Numerator:
Net Loss
$
(5,422,172
)
$
(15,011,745
)
Preferred stock accretion
(2,258,963
)
(816,012
)
Numerator for basic and diluted net loss
    attributable to common stockholders per share — net
    loss attributable to common stockholders
$
(7,681,135
)
$
(15,827,757
)
Denominator:
Denominator for basic and dilutive net loss
    attributable to common stockholders per share —
    weighted-average shares
3,760,796
27,529,863
Basic and diluted net loss attributable to common
    stockholders per share
$
(2.04
)
$
(0.57
)
Denominator for unaudited pro forma basic and
    diluted net loss attributable to common stockholders per
    share — weighted average shares
26,863,202
35,782,390
Unaudited pro forma basic and diluted net loss
    attributable to common stockholders per share
$
(0.29
)
$
(0.44
)
Pro forma basic and diluted net loss per share is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of all outstanding convertible preferred stock into
shares of the Company's common stock effective upon the
closing of the Company's initial public offering, as if
such conversion had occurred at the date of the original
issuance. Accordingly, pro forma basic and diluted net loss per
common share has been calculated assuming the preferred stock
was converted as of the original date of issuance of the
preferred stock
The following table shows dilutive common share
equivalents outstanding on a weighted average basis, which are
not included in the above historical calculations, as the effect
of their inclusion is anti-dilutive during each period:
Three Months Ended
March 31,
2003
2004
Preferred stock
23,102,406
8,252,526
Options
3,553,000
5,717,164
Warrants
5,073,435
1,845,521
31,728,841
15,815,211
4.
Comprehensive Loss
Comprehensive losses are primarily comprised of
net losses, unrealized gains and losses on available for sales
securities and currency translation adjustments. Comprehensive
losses for the three months ended March 31, 2003 and 2004
were $5.4 million and $15.0 million, respectively.
F-33
Table of Contents
EYETECH PHARMACEUTICALS, INC.
NOTES TO CONDENSED UNAUDITED
CONSOLIDATED
FINANCIAL
STATEMENTS — (CONTINUED)
5.
Stockholders' Equity
On February 4, 2004, the Company
successfully completed an initial public offering of its common
stock. The initial public offering consisted of the sale of
6,500,000 shares of common stock at a price of
$21.00 per share. As part of the offering, the Company
granted to the underwriters an option to purchase an additional
975,000 shares within 30 days of the initial public
offering to cover over-allotments. This option was exercised in
February 2004. Net proceeds from our initial public offering
after deducting underwriter's discounts and expenses were
$142.9 million. In addition, 476,190 shares of common
stock were purchased concurrently with the initial public
offering by Pfizer for $10 million as part of its
commitment under our collaboration with Pfizer.
Prior to the closing of the Company's
initial public offering, 469,360 shares of preferred stock
were issued in connection with warrant exercises providing
$2.6 million in proceeds during the quarter ended
March 31, 2004. Included in this amount were
73,581 shares issued pursuant to conditional exercises
received during the quarter ended December 31, 2003 for
proceeds of $0.5 million. An additional
1,867,124 shares of preferred stock were issued on a
cashless basis to the holders of 2,728,721 preferred stock
warrants, who surrendered 861,597 preferred stock warrants as
payment for those shares. All outstanding shares of preferred
stock, including those shares issued in connection with warrant
exercises, were automatically converted to an equivalent number
of shares of common stock upon the closing of our initial public
offering. Additionally, warrants to purchase 833,333 shares
of Series B preferred stock converted to an equal number of
warrants to purchase an equal number of shares of common stock
upon the closing of the initial public offering. These warrants
were exercised during the quarter ended March 31, 2004 on a
cashless basis, resulting in the issuance of 680,509 shares
of common stock in exchange for the surrender of warrants to
purchase 152,824 shares of common stock. No warrants remain
outstanding at March 31, 2004.
6.
Pfizer Collaboration
In December 2002, Pfizer and the Company entered
into several concurrent agreements to jointly develop and
commercialize Macugen. Under the terms of the agreement, which
became effective February 3, 2003 when government approval
was obtained, Pfizer made initial payments of $100 million
which included the purchase of 2,747,253 shares of the
Company's Series D preferred stock for
$24.7 million, net of issuance costs and a $75 million
initial license fee which is being amortized over the expected
term of the agreement (estimated at 15 years). In addition,
the Company has agreed to sell to Pfizer and Pfizer has agreed
to purchase from the Company, up to an additional
$25 million of the Company's capital stock at the then
current market price upon the completion of certain events.
Pursuant to this agreement, concurrent with the initial public
offering, Pfizer purchased 476,190 shares of common stock
at $21.00 per share, resulting in gross proceeds to the
Company of approximately $10 million.
Under the terms of the agreement, both parties
will expend funds related to the co-promotion and development of
Macugen. Pfizer will generally fund a majority of the ongoing
development costs incurred pursuant to an agreed upon
development plan covering the development of Macugen for AMD,
DME, retinal vein occlusion and other agreed upon ophthalmic
indications. In certain instances, the Company will reimburse
Pfizer for the Company's share of costs that Pfizer incurs.
This funding resulted in the recognition by the Company of
$6.5 million in revenue during the three month period ended
March 31, 2003 and $10.5 million in revenue and
$0.7 million in research and development and marketing
expenses during the three month period ended March 31,
2004. At March 31, 2004, the Company has recorded a
collaboration receivable in the amount of $4.5 million. In
addition, the Company recognized $0.8 million and
$1.3 million in connection with the amortization of the
$75 million initial license fee paid by Pfizer for the
three month periods ending March 31, 2003 and 2004,
respectively.
F-34
Table of Contents
PART II
Item 13.
Other Expenses of Issuance and
    Distribution
The following table indicates the expenses to be
incurred in connection with the offering described in this
Registration Statement, other than underwriting discounts and
commissions, all of which will be paid by the Registrant. All
amounts are estimated except the Securities and Exchange
Commission registration fee and the National Association of
Securities Dealers Inc. filing fee.
Securities and Exchange Commission registration
    fee
$
National Association of Securities Dealers Inc.
    fee
Accountants' fees and expenses
Legal fees and expenses
Blue Sky fees and expenses
Transfer Agent's fees and expenses
Printing and engraving expenses
Miscellaneous
Total
$
Item 14.
Indemnification of Directors and
    Officers
Section 102 of the General Corporation Law
of the State of Delaware permits a corporation to eliminate the
personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good
faith, engaged in intentional misconduct or knowingly violated a
law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an
improper personal benefit. The Registrant's certificate of
incorporation provides that no director of the Registrant shall
be personally liable to it or its stockholders for monetary
damages for any breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability,
except to the extent that the General Corporation Law of the
State of Delaware prohibits the elimination or limitation of
liability of directors for breaches of fiduciary duty.
Section 145 of the General Corporation Law
of the State of Delaware provides that a corporation has the
power to indemnify a director, officer, employee, or agent of
the corporation and certain other persons serving at the request
of the corporation in related capacities against expenses
(including attorneys' fees), judgments, fines and amounts
paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which
he is or is threatened to be made a party by reason of such
position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful, except that, in the case of actions brought by or in
the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or
other adjudicating court determines that, despite the
adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The Registrant's certificate of
incorporation provides that the Registrant will indemnify each
person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
(other than an action by or in the right of the Registrant) by
reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Registrant, or is or was
serving, or has agreed to serve, at the Registrant's
request as a director, officer, partner, employee or trustee of,
or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise(all such
II-1
Table of Contents
persons being referred to as an
"Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding and any appeal
therefrom, if such Indemnitee acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed
to, the Registrant's best interests, and, with respect to
any criminal action or proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful. The
Registrant's certificate of incorporation provides that the
Registrant will indemnify any Indemnitee who was or in a party
to an action or suit by or in the right of the Registrant to
procure a judgment in its favor by reason of the fact that the
Indemnitee is or was, or has agreed to become, a director or
officer of the Registrant, or is or was serving, or has agreed
to serve, at the Registrant's request as a director,
officer, partner, employee or trustee of, or in a similar
capacity with, another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to
have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent
permitted by law, amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the Registrant,
except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant, unless a court
determines that, despite such adjudication but in view of all of
the circumstances, he or she is entitled to indemnification of
such expenses. Notwithstanding the foregoing, to the extent that
any Indemnitee has been successful, on the merits or otherwise,
he or she will be indemnified by the Registrant against all
expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith. Expenses must be
advanced to an Indemnitee under certain circumstances.
Item 15.
Recent Sales of Unregistered
    Securities
Set forth below is information regarding shares
of common stock and preferred stock issued, and options and
warrants granted, by the Registrant within the past three years.
Also included is the consideration, if any, received by the
Registrant for such shares, options and warrants and information
relating to the section of the Securities Act, or rule of the
Securities and Exchange Commission, under which exemption from
registration was claimed.
(a) Issuances of Capital Stock
1. In July and August 2001, the Registrant
    issued an aggregate of 7,964,229 shares of series C-1
    convertible preferred stock at a price per share of $6.80,
    together with warrants to purchase an aggregate of
    1,592,846 shares of series C-1 convertible preferred
    stock at an exercise price of $6.80 per share to individual
    and institutional investors, including J.P. Morgan Partners
    (BHCA), L.P., Biotech Growth, N.V. (BB Biotech), MPM
    Capital, LP, Merrill Lynch Entities, Lakeview
    EyeTech II, L.P. and Schroder Ventures Entities for
    aggregate cash proceeds of approximately $54,160,000.
2. In August 2002, the Registrant issued an
    aggregate of 7,521,777 shares of series C-2
    convertible preferred stock at a price per share of $7.20,
    together with warrants to purchase an aggregate of
    1,504,354 shares of series C-2 convertible preferred
    stock at an exercise price of $7.20 per share to existing
    investors, including J.P. Morgan Partners
    (BHCA), L.P., Biotech Growth, N.V. (BB Biotech), MPM
    Capital, LP, Merrill Lynch Entities, Lakeview
    EyeTech II, L.P. and Schroder Ventures Entities for
    aggregate cash proceeds of approximately $54,160,000.
3. In February 2003, the Registrant issued
    2,747,253 shares of series D convertible preferred
    stock to an affiliate of Pfizer Inc. at a price per share
    of $9.10 for aggregate cash proceeds of approximately
    $25.0 million.
4. In September, October, November and
    December 2003, upon the exercise of warrants, the Registrant
    issued an aggregate of 532,560 shares of series C-1
    convertible preferred stock at a price
II-2
Table of Contents
per share of $6.80 to MPM Capital, LP,
    Biotech Growth N.V. and individual investors for aggregate
    cash proceeds of approximately $3,620,000.
5. In September, October, November and
    December 2003, upon the exercise of warrants, the Registrant
    issued an aggregate of 507,557 shares of series C-2
    convertible preferred stock at a price per share of $7.20 to MPM
    Capital, LP, Biotech Growth, N.V. and individual
    investors for aggregate cash proceeds of approximately
    $3,650,000.
6. In October 2003, upon the exercise of a
    warrant, the Registrant issued an aggregate of 3,333 shares
    of series B convertible preferred stock at a price per
    share of $6.00 to an individual investor for aggregate cash
    proceeds of approximately $20,000.
7.     In February 2004,
    the Registrant issued 476,190 shares of common stock to an
    affiliate of Pfizer Inc. at a price per share of $21.00 for
    aggregate cash proceeds of approximately $10.0 million.
8.     In January 2004,
    upon the exercise of warrants for aggregate cash proceeds of
    $0.8 million, the Registrant issued 146,233 shares of
    series B redeemable convertible preferred stock at
    $6.00 per share to existing investors. Also in January
    2004, upon the cashless exercise of warrants, the Registrant
    issued 709,517 shares of series B redeemable
    convertible preferred stock to holders of 993,336 warrants to
    purchase shares of series B redeemable convertible
    preferred stock. The 709,517 shares were issued in exchange
    for the surrender of 283,819 warrants to purchase shares of
    series B redeemable convertible preferred stock.
9.     In January 2004,
    upon the exercise of warrants for aggregate cash proceeds of
    $1.1 million, the Registrant issued 156,309 shares of
    series C-1 redeemable convertible preferred stock at
    $6.80 per share to existing investors. Also in January
    2004, upon the cashless exercise of warrants, the Registrant
    issued 611,746 shares of series C-1 redeemable
    convertible preferred stock to holders of 904,712 warrants to
    purchase shares of series C-1 redeemable convertible
    preferred stock. The 611,746 shares were issued in exchange
    for the surrender of 292,966 warrants to purchase shares of
    series C-1 redeemable convertible preferred stock.
10. In January 2004, upon the exercise of
    warrants for aggregate cash proceeds of $1.2 million, the
    Registrant issued 166,818 shares of series C-2
    redeemable convertible preferred stock at $7.20 per share
    to existing investors. Also in January 2004, upon the cashless
    exercise of warrants, the Registrant issued 545,861 shares
    of series C-2 redeemable convertible preferred stock to
    holders of 830,673 warrants to purchase shares of
    series C-2 redeemable convertible preferred stock. The
    545,861 shares were issued in exchange for the surrender of
    284,812 warrants to purchase shares of series C-1
    redeemable convertible preferred stock.
11. In February and March 2004, upon the
    cashless exercise of warrants, the Registrant issued an
    aggregate of 680,509 shares of common stock to holders of
    833,333 warrants to purchase 833,333 shares of common
    stock. The 680,509 shares were issued in exchange for the
    surrender of 152,824 warrants to purchase shares of common stock.
No underwriters were involved in the foregoing
sales of securities. The securities described in this
paragraph (a) of Item 15 were issued to a combination
of foreign and U.S. investors in reliance upon the
exemption from the registration requirements of the Securities
Act, as set forth in Section 4(2) under the Securities Act
and Rule 506 of Regulation D promulgated thereunder
relative to sales by an issuer not involving any public
offering, to the extent an exemption from such registration was
required. All purchasers of shares of the Registrant's
convertible preferred stock described above represented to the
Registrant in connection with their purchase that they were
accredited investors and were acquiring the shares for
investment and not distribution, that they could bear the risks
of the investment and could hold the securities for an
indefinite period of time. The purchasers received written
disclosures that the securities had not been registered under
the Securities Act and that any resale must be made pursuant to
a registration or an available exemption from such registration.
II-3
Table of Contents
(b) Stock Option Grants
As of December 31, 2003, the Registrant had
issued to employees, directors and consultants
1,527,736 shares of common stock upon the exercise of stock
options at a weighted average exercise price of $0.64 per
share and 75,000 shares of restricted common stock at a
purchase price of $1.36 per share. In addition, options to
purchase 3,639,416 shares of common stock were outstanding
under the Registrant's 2001 Stock Plan, and options to
purchase 1,057,500 shares of common stock were outstanding
outside the Registrant's 2001 Stock Plan.
In the three months ended March 2004, the
Registrant issued to employees and consultants
83,912 shares of common stock upon the exercise of stock
options at a weighted average exercise price of $1.05 per
share. During the same period, the Registrant granted options to
purchase 1,178,660 shares of common stock at a weighted
average exercise price of $27.50 per share. In addition,
the Registrant also granted 37,501 shares of restricted
stock to employees for cash proceeds of $375.00.
The issuance of stock options and the common
stock issuable upon the exercise of such options as described in
this paragraph (b) of Item 15 were issued pursuant to
written compensatory plans or arrangements with the
Registrant's employees, directors and consultants, in
reliance on the exemption provided by Rule 701 promulgated
under the Securities Act. All recipients either received
adequate information about the Registrant or had access, through
employment or other relationships, to such information.
All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act. All
certificates representing the issued shares of common stock
described in this Item 15 included appropriate legends
setting forth that the securities had not been registered and
the applicable restrictions on transfer.
Item 16.
Exhibits
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1(6)
Amended and Restated Certificate of Incorporation
    of the Registrant
3
.3(6)
Amended and Restated Bylaws of the Registrant
4
.1(1)
Specimen Certificate evidencing shares of common
    stock
4
.2(2)
Warrant Agreement, dated as of March 31,
    2000, by and between the Registrant and Gilead
    Sciences, Inc.
4
.3(2)
Warrant Agreement Amendment, dated as of
    September 4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity
    Holdings, Inc.
4
.4†(3)
Series D Preferred Stock Purchase Agreement,
    dated as of December 17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
4
.5(2)
Amended and Restated Investors' Rights
    Agreement, dated as of February 7, 2003, by and among the
    Registrant and the parties listed therein
5
.1*
Opinion of Morrison & Foerster LLP
10
.1(2)
2001 Stock Plan, as amended
10
.2(6)
2003 Stock Incentive Plan
10
.3(6)
2003 Employee Stock Purchase Plan
10
.4†(3)
License Agreement, dated as of December 17,
    2002, by and between Pfizer Inc. and the Registrant
10
.5†(3)
Collaboration Agreement, dated as of
    December 17, 2002, by and between Pfizer Inc. and the
    Registrant
10
.6†(3)
License, Manufacturing and Supply Agreement,
    dated February 5, 2002, by and between Shearwater
    Corporation and the Registrant
10
.7†(3)
Licensing Agreement, dated as of March 30,
    2000 and amended on May 9, 2000, December 4, 2001 and
    April 12, 2002, by and between Gilead Sciences, Inc.
    and the Registrant
II-4
Table of Contents
Exhibit
Number
Description
10
.8†(3)
License Agreement, dated as of December 31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
10
.9(2)
Consulting Agreement, dated as of
    November 1, 2001, by and between the Registrant and Samir
    Patel
10
.10(2)
Executive Employment Agreement, dated as of
    April 12, 2000, by and between the Registrant and
    David R. Guyer
10
.11(2)
Amendment to Executive Employment Agreement,
    dated as of August 25, 2003, by and between the Registrant
    and David R. Guyer
10
.12(2)
Employment Agreement, dated as of August 25,
    2003, by and between Paul Chaney and the Registrant
10
.13(2)
Employment Agreement, dated as of
    February 1, 2002, by and between the Registrant and Glenn
    Sblendorio
10
.14(1)
Amendment to Employment Agreement, dated as of
    October 17, 2003, by and between the Registrant and Glenn
    Sblendorio
10
.15(2)
Employment Agreement, dated as of April 12,
    2002, by and between the Registrant and Anthony P. Adamis
10
.16(1)
Amendment to Employment Agreement, dated as of
    October 20, 2003, by and between the Registrant and Anthony
    P. Adamis
10
.17(2)
Employment Agreement, dated as of August 25,
    2003, by and between Douglas H. Altschuler and the
    Registrant
10
.18(2)
Restricted Stock Purchase Promissory Note, dated
    July 1, 2002, issued by Anthony P. Adamis to the
    Registrant
10
.19(2)
Stock Pledge Agreement, dated July 1, 2002,
    by and between Anthony P. Adamis and the Registrant
10
.20(2)
Sublease Agreement, dated as of December 19,
    2001 and amended as of February 22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
10
.21(2)
Lease Agreement, dated March 14, 2002, by
    and between First Industrial, L.P. and the Registrant
10
.22(2)
Commercial Lease, dated March 27, 2002, by
    and between Cummings Properties, LLC and the Registrant
10
.23†(3)
Manufacturing and Supply Agreement, dated as of
    November 11, 2003, by and between Raylo
    Chemicals, Inc., a subsidiary of Degussa
    Chemicals, Inc., and the Registrant.
10
.24†(4)
Letter of Understanding, effective as of
    September 1, 2003, by and between the Registrant and Raylo
    Chemicals, Inc., , a subsidiary of Degussa
    Chemicals, Inc., as Amended
10
.25†(4)
Manufacturing and Supply Agreement, dated as of
    November 26, 2003 by and between the Registrant and Gilead
    Sciences, Inc.
10
.26(5)
Sub-Sublease Agreement, dated December 19,
    2003, by and between Instinet Global Holdings, Inc. and the
    Registrant
10
.27(7)
Amendment No. 1, dated May 4, 2004, to
    Consulting Agreement, dated November 1, 2001, between the
    Registrant and Samir Patel
21
.1(6)
List of Subsidiaries
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Morrison & Foerster LLP
    (included in Exhibit 5.1)
24
.1
Powers of Attorney (included on signature page)
(1)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on October 21, 2003
II-5
Table of Contents
(2)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on September 12, 2003
(3)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on January 22, 2004
(4)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on December 18, 2003
(5)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on January 27, 2001
(6)
Incorporated by reference to the
    Registrant's Annual Report on Form 10-K for the year
    ended December 31, 2003 filed on March 24, 2004.
(7)
Incorporated by reference to the
    Registrant's Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2004, filed on May 12, 2004.
†
Confidential treatment granted as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
*
To be filed by amendment.
Item 17.
Undertakings
The undersigned registrant hereby undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any
    liability under the Securities Act, the information omitted from
    the form of prospectus filed as part of this registration
    statement in reliance upon Rule 430A and contained in the
    form of prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of the registration statement as
    of the time it was declared effective.
(2) For purposes of determining any
    liability under the Securities Act, each post-effective
    amendment that contains a form of prospectus shall be deemed to
    be a new registration statement relating to the securities
    offered therein, and the offering of such securities at that
    time shall be deemed to be the initial bona fide offering
    thereof.
II-6
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
New York, New York on May 12, 2004.
EYETECH PHARMACEUTICALS, INC.
By:
/s/ DAVID R. GUYER
David R. Guyer, M.D.
Chief Executive Officer, Director
POWER OF ATTORNEY
We, the undersigned directors and officers of
Eyetech Pharmaceuticals, Inc. hereby severally constitute
and appoint David A Guyer, Glenn P. Sblendorio and Douglas H.
Altschuler, and each of them, his/her true and lawful
attorneys-in-fact and agents, with full power of substitution
and re-substitution for him/her and in his/her name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration
Statement, and any subsequent registration statements pursuant
to Rule 462 of the Securities Act of 1933, as amended and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and
confirming all that each of said attorney-in-fact or his/her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
Signature
Title
Date
/s/ DAVID R. GUYER
David R. Guyer, M.D.
Chief Executive Officer, Director (Principal
    Executive Officer)
May 13, 2004
/s/ GLENN P. SBLENDORIO
Glenn P. Sblendorio
Chief Financial Officer (Principal Financial and
    Accounting Officer)
May 13, 2004
/s/ JOHN P. MCLAUGHLIN
John P. McLaughlin
Chairman of the Board of Directors
May 13, 2004
/s/ SRINIVAS AKKARAJU
Srinivas
    Akkaraju, M.D., Ph.D.
Director
May 13, 2004
/s/ MARTY GLICK
Marty Glick
Director
May 13, 2004
/s/ MICHAEL G. MULLEN
Michael G. Mullen, CFA
Director
May 13, 2004
/s/ SAMIR PATEL
Samir Patel, M.D.
Director
May 13, 2004
/s/ EDWARD PENHOET
Edward Penhoet, Ph.D.
Director
May 13, 2004
Table of Contents
Signature
Title
Date
/s/ HENRY SIMON
Henry Simon
Director
May 13, 2004
/s/ DAMION E. WICKER
Damion E. Wicker, M.D.
Director
May 13, 2004
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1(6)
Amended and Restated Certificate of Incorporation
    of the Registrant
3
.3(6)
Amended and Restated Bylaws of the Registrant
4
.1(1)
Specimen Certificate evidencing shares of common
    stock
4
.2(2)
Warrant Agreement, dated as of March 31,
    2000, by and between the Registrant and Gilead
    Sciences, Inc.
4
.3(2)
Warrant Agreement Amendment, dated as of
    September 4, 2003, by and among the Registrant, Gilead
    Sciences, Inc. and University License Equity
    Holdings, Inc.
4
.4†(3)
Series D Preferred Stock Purchase Agreement,
    dated as of December 17, 2002, by and between the
    Registrant, Pfizer Ireland Pharmaceuticals and Pfizer Inc.
4
.5(2)
Amended and Restated Investors' Rights
    Agreement, dated as of February 7, 2003, by and among the
    Registrant and the parties listed therein
5
.1*
Opinion of Morrison & Foerster LLP
10
.1(2)
2001 Stock Plan, as amended
10
.2(6)
2003 Stock Incentive Plan
10
.3(6)
2003 Employee Stock Purchase Plan
10
.4†(3)
License Agreement, dated as of December 17,
    2002, by and between Pfizer Inc. and the Registrant
10
.5†(3)
Collaboration Agreement, dated as of
    December 17, 2002, by and between Pfizer Inc. and the
    Registrant
10
.6†(3)
License, Manufacturing and Supply Agreement,
    dated February 5, 2002, by and between Shearwater
    Corporation and the Registrant
10
.7†(3)
Licensing Agreement, dated as of March 30,
    2000 and amended on May 9, 2000, December 4, 2001 and
    April 12, 2002, by and between Gilead Sciences, Inc.
    and the Registrant
10
.8†(3)
License Agreement, dated as of December 31,
    2001, by and between Isis Pharmaceuticals, Inc. and the
    Registrant
10
.9(2)
Consulting Agreement, dated as of
    November 1, 2001, by and between the Registrant and Samir
    Patel
10
.10(2)
Executive Employment Agreement, dated as of
    April 12, 2000, by and between the Registrant and David R.
    Guyer
10
.11(2)
Amendment to Executive Employment Agreement,
    dated as of August 25, 2003, by and between the Registrant
    and David R. Guyer
10
.12(2)
Employment Agreement, dated as of August 25,
    2003, by and between Paul Chaney and the Registrant
10
.13(2)
Employment Agreement, dated as of
    February 1, 2002, by and between the Registrant and Glenn
    Sblendorio
10
.14(1)
Amendment to Employment Agreement, dated as of
    October 17, 2003, by and between the Registrant and Glenn
    Sblendorio
10
.15(2)
Employment Agreement, dated as of April 12,
    2002, by and between the Registrant and Anthony P. Adamis
10
.16(1)
Amendment to Employment Agreement, dated as of
    October 20, 2003, by and between the Registrant and Anthony
    P. Adamis
10
.17(2)
Employment Agreement, dated as of August 25,
    2003, by and between Douglas H. Altschuler and the Registrant
10
.18(2)
Restricted Stock Purchase Promissory Note, dated
    July 1, 2002, issued by Anthony P. Adamis to the Registrant
Table of Contents
Exhibit
Number
Description
10
.19(2)
Stock Pledge Agreement, dated July 1, 2002,
    by and between Anthony P. Adamis and the Registrant
10
.20(2)
Sublease Agreement, dated as of December 19,
    2001 and amended as of February 22, 2002, by and between
    AnswerThink, Inc., successor in interest to AnswerThink
    Consulting Group, Inc., and the Registrant
10
.21(2)
Lease Agreement, dated March 14, 2002, by
    and between First Industrial, L.P. and the Registrant
10
.22(2)
Commercial Lease, dated March 27, 2002, by
    and between Cummings Properties, LLC and the Registrant
10
.23†(3)
Manufacturing and Supply Agreement, dated as of
    November 11, 2003, by and between Raylo
    Chemicals, Inc., a subsidiary of Degussa
    Chemicals, Inc., and the Registrant.
10
.24†(4)
Letter of Understanding, effective as of
    September 1, 2003, by and between the Registrant and Raylo
    Chemicals, Inc., a subsidiary of Degussa
    Chemicals, Inc., as Amended
10
.25†(4)
Manufacturing and Supply Agreement, dated as of
    November 26, 2003 by and between the Registrant and Gilead
    Sciences, Inc.
10
.26(5)
Sub-Sublease Agreement, dated December 19,
    2003, by and between Instinet Global Holdings, Inc. and the
    Registrant
10
.27(7)
Amendment No. 1, dated May 4, 2004, to
    Consulting Agreement, dated November 1, 2001, between the
    Registrant and Samir Patel
21
.1(6)
List of Subsidiaries
23
.1
Consent of Ernst & Young LLP
23
.2*
Consent of Morrison & Foerster LLP
    (included in Exhibit 5.1)
24
.1
Powers of Attorney (included on signature page)
(1)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on October 21, 2003
(2)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on September 12, 2003
(3)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on January 22, 2004
(4)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on December 18, 2003
(5)
Incorporated by reference to the
    Registrant's Registration Statement on Form S-1 (SEC
    File No. 333-108781) filed on January 27, 2004
(6)
Incorporated by reference to the
    Registrant's Annual Report on Form 10-K for the year
    ended December 31, 2003 filed on March 24, 2004.
(7)
Incorporated by reference to the
    Registrant's Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2004, filed on May 12, 2004.
†
Confidential treatment granted as to certain
    portions, which portions have been omitted and filed separately
    with the Securities and Exchange Commission.
*
To be filed by amendment.